DMI Blog

Karin Dryhurst

It’s Tax Time Again!

As a former Floridian, I have seen the grimaces around the time property tax bills go out. But it's not just Florida that struggles to balance the need for vital funds (you know for schools and the like) and the need to quell a populist tax revolt. Just ask California.

The balance has become even dicier lately--what with plummeting home values and tax revenues and 14.8 million people out of work.

The solution for many cities and counties has been to raise tax rates to avoid severe cuts in services. Leaders in Alexandria, Virginia, recently proposed an increase in the property tax rate that would mean another $103 for the average homeowner. The tax assessor in Maricopa County, Arizona, said jurisdictions there will have "little choice" but to raise rates. And Broward County officials in South Florida are considering rate hikes as they face a possible budget shortfall of $172 million.

But an old idea (think 1913) has resurfaced in Baltimore: the split-rate property tax. Already in place in some form in several cities in Pennsylvania, the policy taxes different property at different rates--usually a higher rate for land and a lower rate for improvements such as housing. In Baltimore, the idea has been tailored to the housing crisis landscape with a higher rate for abandoned buildings, something that already exists in Washington, D.C.

Advocates of a split-rate tax have detailed its effects in Pennsylvania, arguing that it has encouraged smarter development. And academics in Virginia estimate that moving to a split-rate in Roanoke would reduce taxes on residential properties and increase them for businesses.

But Baltimore--like most cities that might want a split-rate system--awaits approval from the state legislature. Oh and guess who doesn't like the idea?

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Posted at 2:40 PM, Feb 18, 2010 in Cities
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