The following was written on Friday,
December 30:
Judging by media coverage of our tax
reassessment controversy, Pittsburgh property owners will soon be
marching on city hall with torches and pitchforks. I'd like to take
a step back to see whether all this confusion and anger is really
justified.
Property values in Allegheny County
have not been reassessed since 2002. When there is a long time
between reassessments, this places an unfair burden on people whose
property values are static or declining, while unfairly benefitting
those whose property has increased in value. Since the second group
is generally more affluent than the first, failure to reassess is a
Robin-Hood-in-reverse social policy. It steals from the poor to give
to the rich.
Our politicians and the media have
stoked fears that reassessment will lead to tax increases, but it
shouldn't if our elected officials follow the law. State law
prohibits windfall profits from a reassessment. Municipalities are
required to adjust their millage rates downward to ensure the changes
are revenue neutral. The magnitude of the tax increases that our
more affluent citizens must pay should be balanced by declines in the
taxes of less affluent residents.
That doesn't mean Allegheny County's
reassessment will be completely fair. Any errors will be heavily
publicized by the media, but the appeal process is intended to remedy
them, provided they are random and not so numerous as to overwhelm
the system.
There will also be families whose
personal circumstances do not match those of their neighbors, i.e.,
people on fixed incomes living in prosperous neighborhoods. Whether
their tax increases are unfair is debatable. People benefit from
living in a nice neighborhood regardless of the value of their own
home. The homestead tax exemption is a partial solution to this
problem. We can also take perverse comfort in the fact that
Pittsburgh is highly segregated by social class, thus minimizing
these mismatches.
Both the outgoing and incoming
Allegheny County Executives, Dan Onorato and Rich Fitzgerald, have
argued that the county should not be required to reassess its
properties unless the rest of Pennsylvania is also forced to do so.
I agree that the other counties should be required to update their
assessments, since that is fairer to the residents of those counties.
However, if frequent reassessment is a beneficial social policy,
Allegheny County should do it regardless of what other counties are
doing. The only people harmed by this policy are homeowners who are
currently getting a free ride. Their taxes will be higher than if
they lived in some other county. But their taxes should be
higher. To call this unfair is a bit like saying that if Allegheny
County enforces laws against DUI but Butler County does not, this is
unfair to the drunk drivers of Allegheny County. Is this really a
compelling argument?
Our public officials, nominally members
of the Jackass Party, have wasted our time and money by refusing to
implement the reassessment. This would seem to be a clear indication
of their class loyalties. The working poor seldom make campaign
contributions. While their rhetoric is intended to mislead us into
thinking they are trying to protect poor people from losing their
homes, it is the wealthiest persons (and “corporate persons”) who
benefit from the delay.
These class loyalties would be more
obvious if the news media did a better job of presenting the issues
involved in reassessment. Unfortunately, the Pittsburgh
Post-Gazette
and the other media have added to people's confusion and anger by
framing their news stories primarily as “the looming threat of a
tax increase,” rather than using the more accurate frame of
“restoring fairness to our tax system.”
Fortunately,
I didn't post the preceding note because I hadn't yet worked out some
of the kinks in my blog. Since then, there have been several
developments that have added some nuance my opinion.
It
was announced that Pittsburgh residences have increased in value by 46% due to the reassessment. The average for commercial properties is 71%, for an overall average of 57.89%. This should give
homeowners an idea of whether their taxes will increase or decrease
and by how much. For example, my assessment went up 76%. Subtracting 58% from 76%, I should expect my taxes to increase about 18% as a result of the reassessment. Chris Briem has analyzed these changes in value and
found that approximately two-thirds of Pittsburghers will see their taxes
drop, while fewer than 5% will be hit with a tax increase of 100% (double) or more. If this is true, Pittsburghers have been hit with an epidemic of false consciousness.
There
are some indications that inconsistencies in the reassessment are not
random. Rich Lord of the Post-Gazette
analyzed the new values in three neighborhood blocks. In increasing
order of affluence, they are Sheffield Street in Manchester, Pius
Street on the South Side Slopes, and Saint James Place in Shadyside.
Contrary to what we might have expected, the assessments increased by 118% in Manchester, 66% in on the Slopes, and only 21% in Shadyside.
The average assessment exceeded the average recent sale price in
Manchester, but was lower in the other two locations.
Ruth
Ann Dailey, the P-G's
most conservative local columnist, has suggested there was social class bias in the reassessment: “I'd bet dollars to data entry
clerks that we'll find this situation holds true throughout the
city—the percentage increases in poor neighborhoods' assessments
will be much greater than the increases in the wealthier ones,
because assessors can't conceive that anyone's home could be worth so
little.”
It
is important to find out if this allegation is true. The P-G's
sample is far too small to draw a firm conclusion. Someone should analyze a much larger sample of reassessments randomly selected from
around the city. If there is evidence of social class bias, they
must be all discarded.
Ms.
Dailey's benign explanation for class discrimination is not entirely
convincing. If data entry clerks were systematically mistaken, I'd
bet dollars to campaign contribution checks that these biases were somehow transmitted down the food chain from the politicians at the top. As
Lily Tomlin said, “No matter how cynical you get, it's impossible
to keep up.”
This
morning's paper reports that Rich Fitzgerald has “thrown out” the reassessments. Our 2012 tax bills will use the old rather than the
new values, setting up a confrontation with Judge R. Stanton Wettick,
Jr., who ordered the reassessment. Fitzgerald has said he will go to
jail rather than give in. Judging from some recent reports of
conditions in our state prisons, it might be a good idea for all incoming
government officials to spend a few nights there, just to give them
an additional perspective on how some of their citizens live.
Update (1/14/12)
On Thursday, Allegheny County Executive Rich Fitzgerald faced off against Judge Stanton Wettick. Wettick blinked. The reassessment has been postponed for a year. Poor people will continue to pay more than their share of taxes while rich people and corporations will continue to benefit. Fitzgerald calls this “a great victory.” Next year, they will fight the same battle again. In Pittsburgh, nothing ever gets settled.
Update (1/14/12)
On Thursday, Allegheny County Executive Rich Fitzgerald faced off against Judge Stanton Wettick. Wettick blinked. The reassessment has been postponed for a year. Poor people will continue to pay more than their share of taxes while rich people and corporations will continue to benefit. Fitzgerald calls this “a great victory.” Next year, they will fight the same battle again. In Pittsburgh, nothing ever gets settled.
After the commercial property
assessments were released, the business community, with the help of
its friends at the Post-Gazette,
went into a front-page, full-court press. We were told that the
reassessments of the downtown skyscrapers had no rhyme or reason, and that if
corporations were forced to pay their fair share of taxes, they would leave Pittsburgh and throw the city into another recession. The
one-year delay gives their high-priced lawyers an opportunity to
appeal the reassessments. Should they win some of these battles,
reductions in the assessed values of $200 million buildings will have a significant
impact on the overall 58% increase in value of city property. If
that percentage drops, homeowners will pay more taxes.
One
helpful development is that some local journalists, notably Len Barcousky and Brian O'Neill, started to get it, and to inform their audience that the
majority of Pittsburghers would have been helped, not hurt, by the
reassessment. Blogger Chris Briem's analyses played an important role in spreading that message.
Fitzgerald
says he will use the next year to persuade state government to order
a reassessment of all the real estate in Pennsylvania. With the
Elephants in total control of every branch of state government, it's
hard to believe he's serious.
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