Fairness of Tax Burden
[A letter printed in the
Barnstable Patriot News, Cape Code, MA, 19 August 2005.
Reprinted from GroundSwell, July-August 2005]
You begin your article ("Fairness of Tax Burden Questioned,"
Aug. 12) with this question: "Is it fair that residential
property owners pay 89 percent of Barnstable's property tax levy?
Would it be fair to shift some of the burden to commercial property
owners?" After all, each property owner in Barnstable either
built his own buildings, or bought the property from someone who built
them, or can otherwise connect their holding of title to the person
who built each building. But none of them created Barnstable's land,
and none of them can create even one more square foot, much less
another whole lot, be it on the waterfront or in the central business
district. Similarly, no matter how many years a property owner has
owned his plot of land - commercial or residential - he cannot claim
to have created the economic value of the land. The economic value of
the land -- think of it as the annual amount the land itself would
rent for without the current building on it -- is due to factors
completely beyond the property owner's control/blame/credit:
- population growth
- natural amenities
- Barnstable's spending on schools, libraries, emergency
services, public works
- the economic activity and presence of one's neighbors
- the state and federal government's spending on Barnstable:
highways, dredging, beach restoration, bridges, etc.
I can't see any particular reason -- besides "tradition"
-- why property taxes should be based on the value of buildings,
which are inherently private. Rather, it seems to me that one's tax
bill ought to be a function of the value of the site one occupies. A
vacant lot downtown is worth exactly as much as its similarly-sized
neighbor which has a modern, well-designed building on it. Each lot
on the waterfront is far more valuable than a lot of exactly the
same size across the road, and both are worth far more than a
residential property half a mile or further away from the waterfront
without regard to whether they are occupied by a tiny summer cottage
or a year-round mansion.
If Barnstable is healthy, downtown land will be valuable, even if
some is currently underused. Taxing just the land value will
encourage the under-users to improve their properties, which will
improve Barnstable for everyone -- and taxing just the land value
will not penalize them when they've done so. Win-win situation, no?
Collecting from the folks who own waterfront their full share of the
tax burden will unburden the less well-off people who can only
afford to visit the waterfront, and who would net a great deal less
were they to sell their properties. Why should those who can only
afford the less choice sites pay as much those who occupy the
waterfront sites the market are worth many times as much?
Commercial property should be valued, not on the income approach
but on the market value of the land each occupies plus the
depreciated value of the current buildings. Otherwise, the property
tax becomes an income tax and a disincentive to improvements, not to
mention an encouragement to speculators rather than entrepreneurs. A
great way to kill the downtown, if that's what is really desired.
Residential/commercial is not the point, unless the residents
intend to kill the downtown. You might take a look at the property
taxes paid by various properties, and how much of their assessed
value is land value and how much is building value. If the
assessments on land and improvements don't make logical sense
(frequently buildings get over-valued and land undervalued,
particularly where there is waterfront involved), make sure the next
assessment values the land first, because the land's value will be
there long after the current buildings are dust.
If you question the amount various properties pay, divide the
annual property tax by 365 and see what they pay Barnstable each
day. Then consider what others pay Barnstable per day in user fees
and taxes: those who pay for a parking spot for a few hours, those
who are guests at local hotels and restaurants, those who buy beach
passes or the use of other local amenities. It may put property
taxes in a clearer light.
Much depends on your priorities: do you want to favor the wealthy
and well-situated, or do you want to promote the long-term health of