Friday, June 30, 2006

A Sweeping, Historic Landmark

It doesn't take much to prod us media types into adjectival overload.

In our kit bag of clichés, every reform must be sweeping, every bill a landmark, every debate historic.

It reminds me of George Bernard Shaw's observation about the failing of the media of his day – it's inability to distinguish between a bicycle accident and the collapse of western civilization.

But, I do think we had a genuine, bona fide historic moment this week when Gov. Rendell signed the property-tax reform bill.

It was the culmination of a 50-year debate over how to wean local governments off reliance on property taxes as the principal means of paying for public education.

During that half-century, there was widespread agreement – at least among political and government types – that taxes on property tended to be unfair, cumbersome to administer and unsuited to the needs of modern government. An 18th century relic in the 21st century state.

There was even agreement on what to do about it: shift from reliance on property taxes to some form of income tax or consumption tax.

This was the suggestion of study commissions and tax legislation championed by George Leader, Milton Shapp, Dick Thornburgh and, most famously, Bob Casey Sr.

Casey even got the legislature to agree to a plan to reduce property taxes by increasing local income and sales taxes.

Because it required a Constitutional amendment, it was presented to the voters, who shot it down in 1989 by a 3-1 margin.

The whys and wherefores of that defeat have been picked over for years, but I'll try to summarize.

One. Such plans tend to be complex. In theory, it is a simple transaction – resembling a seesaw – property taxes go down, while other taxes go up to an equal degree.

In reality, because of the nature of the legislative process, what usually emerges is a three-dimensional hexahedral structure resembling Crick and Watson's model for DNA.

Second. People don't like taxes. When they think taxes, they don't want shift, they want cut. They are also suspicious, and rightly so, that when politicians say shift, they really mean increase.

They look at that hexahedral structure, with its interlocking strands, and say: Screw it!

The central tension of government is that people love the services it renders and loath the taxes required to pay for them. Partisan politics feeds on that contradiction.

To quote Sen. Russell Long, the attitude of most folks is: "Don't tax you, don't tax me, tax that fellow behind the tree."

Well, Ed Rendell found someone behind the tree willing to pay the tax.

Donald Trump.

There were legislators, particularly Republican legislators, who abhorred Rendell's idea of introducing casino gambling into the state. But, they loathed raising taxes even more. In effect, they became gambling's enablers.

There were others (I'm in this group) who thought it would be cleaner, simpler and more sensible to raise the sales or income tax to pay for the property tax relief. But they had gotten nowhere for 50 years.

Rendell's gambling idea changed the debate because it had an alluring aspect for legislators in both parties: When it came to taxes, why fight over how to slice the pie, when you can bake a whole new pie? The aroma of $2 billion in slots revenue proved irresistible.

You have to give Ed Rendell credit or, conversely, you have to curse him.

He came into office saying he would do two things:

One. Increase state taxes so we can increase the state's share of paying for public education, thus relieving local government of some of its burden. He did that.

Two. Cut local property taxes by introducing casino gambling into Pennsylvania. He did that, too.

And he seems perfectly happy to stand on that record as he seeks re-election.

Come to think of it, maybe that's another sweeping, historic landmark, too. Posted by Picasa


Anonymous Anonymous said...

This is not a landmark to feel good about. In typical Pennsylvania political style, there is no decisive action to actually improve the fairness or predictability of the taxpayers' burden. The corruption inherent in the property tax systems is not cleanly excised.

Instead, a new, hideously wasteful and corrupt system of state-regulated gambling is introduced as the replacement revenue stream. And in typical Pennsylvania political class fashion, it is set up to spread the corruption around, through the regulators and the pols and the pals and the people in the know, wink wink.

Historically, this will be seen as yet another failure of effective governance by the pathetic Pennsylvania political class. And Gov. Rendell will be seen as another hapless hack in the same class as Milton Shapp.

2:08 PM  
Anonymous phillydem said...

Here's an alternative view. Property taxes are not controlled by the state. Local residents exercise a lot of control in that area. Yes, schools are the major funding requirement, but property taxes also pay for police, fire companies, trash collection, road maintenance and other things. There could well be significant savings to local taxpayers if towns, boros, townships, cities, etc, worked together to consolidate and regionalize resources like police, fire, emergency services, school administration services and so forth.

Sadly, "local control" often trumps sensible ideas for savings.
So when taxpayers grumble about property taxes, perhaps they should look in the mirror first for someone to blame.

2:46 PM  
Anonymous Pete DeCoursey said...

Tom- Rendell didn't say he would raise taxes when running for re-election. He refused to rule it out, but boasted "I wouldn't bet against me" when asked if a tax hike was inevitable. He did refuse to rule it out, but he did not say it was coming. In fact, he said he thought he would save enough money to make it only possible, not probable.

This doesn't change most of your posts, but as somebody who covered that campaign, he sure didn't say he was going to raise taxes.

Refusing to mimic GHW Bush is not the same as saying you will raise taxes.

Anyway, good blog, and this is just a small detail.

Look forward to reading more,


5:27 PM  
Anonymous Tim G. said...

Tom's point is a simple one: Rendell can accomplish what he sets out to do. If it's herding state legislators or city union officials, he's proved his mettle, without demagoging, like so many other politicians (contrast Rendell's effectiveness with Corzine).

Fast Eddie is a world class politician.

8:06 PM  
Anonymous phillydem said...

Agreed. Corzine has really stepped in it over in NJ. Can you imagine what Rendell could accomplish if Dems held the Pennsylvania legislature?

3:38 PM  
Blogger NE Suburbanite said...

By rights, property taxes should be illegal period. And in the realm of rationality they are. And the reason why is very simple: It makes no more sense to direct taxation where there's no cashflow than to attempt to satisfy one's thirst by seeking to drink water from a canteen that's bone dry.

And whenever property taxes are successfully collected, well, the taxes collected are not coming from the property that's being taxed -- the only exception being if the property is being rented or in some other way used to generate profit -- but from wherever there is cashflow.

So why can't the government just come to its senses and simply shift taxation to wherever there is cashflow, since it all comes down to this anyway? For what if after a person acquires full ownership of a property they decide at that point they want to persue other things than making money? At that point they own a property yes, but cashflow-wise what's to tax? To this the government says, "I dunno, but we're going to impose the property tax anyway, even though there's no cashflow there to speak of." Translation: "We're gonna satisfy our thirst by drinking from a bone dry canteen." But in reality you can't. To which the government seems to be saying, "What's reality got to do with it?" Well, may I suggest uh, everything....?

So kudos to John Corzine for being a tad bit more of a realist than our Fast Eddie is right now!

2:06 AM  
Anonymous Anonymous said...

So how exactly does one live, let alone live in a house, with "no cash flow"?

6:20 PM  
Blogger NE Suburbanite said...

When a person finally acquires full ownership of their property, they can also have a sizeable amount of money by that point in a savings account to cover their living expenses thereafter. But money is a savings account is not the same as cashflow. So again it's a case of, what is there to tax? Yet that money in the savings account does get taxed when the property tax is imposed. For it's not money that's getting replenished so as to keep the process going. Money in an account is not the same as income, except with regard to the interest. And a property that is not being used to make money is not the same as income. If the property is sold, and for higher than what was paid for it, yes, that can be classified as income. But if it isn't sold, and it's not being used to make money during the time of its ownership, then it makes no sense to tax it. As I say, all taxation should be directed where there's cashflow. For instance, if you're unemployed, how would you like the government to tax you anyway? For it's really the same thing when you think about it.

5:47 AM  

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