Fairness of Tax Burden

Wyn Achenbaum

[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:

  1. population growth
  2. natural amenities
  3. Barnstable's spending on schools, libraries, emergency services, public works
  4. the economic activity and presence of one's neighbors
  5. 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 Barnstable?