Thoughts on taxation as the Grinch steals Christmas
By James P. Gannon
Just when you’d like to really get in the spirit of Christmas, along comes that Grinch bearing your property-tax bill. Right in the middle of the holiday season, when you are thinking about the gifts you’d like to buy for the family, you go line up at Treasurer’s office and cough up that big check to the county. Who came up with that December 5 deadline, anyway?
This year, that “bah, humbug!” feeling is stronger than usual here in Rappahannock County, due to the sharpest rise in real estate taxes in some years. A combination of higher assessessed values for real estate, and a tax rate designed to increase county revenues, is causing many county taxpayers to grumble like Scrooge. (See our poll on property taxes in the left-hand column and cast your vote.)
We wish we had a Santa’s bag full of brilliant ideas on how to lower the tax burden on county property owners, but we don’t. The Commonwealth of Virginia so tightly restricts the taxing powers of local governments that there aren’t many other ways to raise the millions of dollars needed to fund operations of the public schools, public safety, social programs and other government services.
Still, after this year’s big increase, we are left with the feeling that the Rappahannock County Board of Supervisors has pushed the real estate tax about as far as it can go without inciting a serious political blow-up. So it is probably time, as the county begins thinking about its budget for the coming fiscal year, to seriously consider any and all ideas for capping or cutting expenses, and for finding alternative sources of revenue.
Some county residents have suggested moves that the supervisors might consider. Beverly Hunter of Amissville, for instance, wonders “why we can’t have a tax on businesses.” Many counties and cities impose a business-license tax, but Rappahannock does not. “There are an increasing number of home-based businesses….and I don’t see why they cannot be taxed,” Hunter suggested.
Monira Rifaat, who recently ran a strong but unsuccessful race for county supervisor, thinks a transfer-tax on real estate sales is an idea that should be pursued. “The high real estate market is what is hurting our locals, who have neither bought nor sold, or improved their dwellings,” she said. “Assessments keep going up. It is time the county derived some benefit from this real estate market to help the locals.” She suggests a tax on real estate transactions, similar to the 1.5% fee imposed by Virginia Beach. That probably would require enabling legislation from the Virginia legislature, which might be impossible to get, but it’s worth considering.
Another resident suggested that Rappahannock County, like some others, should collect half the year’s real-estate tax in June, and the second half in December, rather than have it all due December 5. That wouldn’t lower the overall burden, but it would ease the bite at holiday season. It might cost a bit more to collect twice, but the county could at least consider it.
There is, possibly, one Big Idea to be considered. It sits quietly, along our winding rural roads, like an improvised explosive device. Politically, it is a roadside bomb that no sane politician dares to touch. It is use-value taxation, commonly known as Land Use Taxation.
Properties in the land-use program are taxed not on their assessed valuation, but on their productive value as agricultural or forestry lands. The result is a sharp reduction in taxes for land enrolled in the program–and a consequent greater burden on properties taxed at their full market value. The system shifts the tax burden from farms to homes–often from big landowners to owners of homeowners on small lots.
Many people think the system favors the rich and is unfair to the small homeowner. And many think there’s abuse in the program by people pretending to be farmers, but who derive no significant income from farming or forestry. There’s some truth to both those contentions.
A very large portion of the county’s property gets this favorable tax treatment. According to the Commissioner of Revenue’s office, all taxable property in the county adds up to $2.1 billion worth. Of that, $579.8 million worth of value is “deferred” under the Land Use program. If the county could tax that much property at the 2006 rate of 58 cents per $100, it would collect an extra $3.3 million in revenue. Or, it could lower the tax rate for all property owners, giving much relief to small homeowners.
We’re not advocating the elimination of the Land Use taxation program at this time. There are sound arguments for the program, which is designed to encourage keeping farms and forests from being sold off, subdivided and built upon. But in all the years we’ve lived here, we have not heard any serious discussion about the pros and cons of use-valuation taxation. Who wins and who loses under this program? What would the consequences be if the county eliminated it? Are the reasons for its adoption many years ago still valid?
These are questions that deserve some public debate and discussion. We hope taxpayers in Rappahannock start asking such questions of the Board of Supervisors. And we’d like to see the supervisors do some creative thinking on how to keep the county running without pushing the property tax rate to a point where only the rich can afford to stay here.
-- James P. GannonComments
Comment from Richard Brady
Time: January 11, 2007, 11:31 am
I believe Mr. Gannon’s suggestion of seriously reviewing the land use tax valuation system has merit. This comes from one who derives benefit from this system. However, the huge increases in property taxes on the lower and moderate income residents cannot continue, if Rappahannock is be home to people of all income levels. I believe a competent tax expert could build a model, a microcosm, if you will, of the county and its tax base, and project, with some degree of accuracy, the impact of eliminating the land use tax base. While people of moderate means may seem to be deriving benefit from the current system, it just might be that if all land were taxed evenly, by acre, the tax burden might be more evenly and fairly distributed. I don’t see the harm in exploring other possibilities. Where we are headed now is for a train wreck. Having said that, in an atmosphere where the current county administration still thinks it is a good idea to tax everyone so they can pay large land owners not to develop thier land … the possibility of such a study is pretty remote.
Comment from monira
Time: January 12, 2007, 10:29 am
During my campaign for public office, I have gone on record as suggesting that it is time for our BOS to consider alternative sources of county revenue to increase the county revenue while not adding to the real estate burden on us.
Mr Brady’s suggestion is interesting : certainly it is worth examining our land use taxation system. Some years back, the BOS under the leadership of Pete Estes, commissioned a study of the land use tax by a group of county citizens, if I recall correctly they included Martin Woodard and Bill Dietel. let us re examine their recommendations.
Let us simultaneously consider other ways of increasing the county revenue, such as the real estate transfer tax that I have talked about.
It is too late for this short 2007 legislative session of the general assembly to introduce focused legislation to enable us to enact a transfer tax, but let us prepare for the 2008 session of the general assembly, we may even succeed in emulating what VA beach municipality has accomplished.
And by the way, the School budget which is just the first part of the county budget, is being prepared by the school board. The draft budget for the school year 2007-08 will be available on Feb. 13 in the morning, then will be discussed the same evening at the Feb. School board meeting. Public comment is invited in February and March at school board meetings, as well as at a dedicated public hearing on March 20; time is now to start thinking. Do I sense I lack of interest?. Those who spoke up last year in May at the County Budget public hearing, now is the time to start our effort to contain or reduce our county budget.
–Monira Rifaat
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