OPINION: Vampire governments aren’t ‘revenue neutral’

So what the heck is that?

With many local tax digests falling, local governments are scrambling to find a way to make up for the lost revenue. One way some governments plan to do that is by raising the millage rate for what they term is a “revenue neutral” outcome.

For example, if a tax digest falls six percent, a local government will raise the millage rate so that it will get the same amount of money from property taxes as it currently does. Government officials call that a “neutral” outcome since they are not technically collecting more money overall.

But that’s a very misleading concept and is just a backdoor way of bleeding taxpayers. Here’s why: First, tax digest changes are not all equal. While the overall decline might be six percent, that’s just the average. Some taxpayers will see their property values decline three percent, others nine percent and some won’t see any drop in value. The person who has a nine percent decline would pay less taxes under this scheme, but the person who only lost three percent in value would pay more in taxes.

In addition, the digest’s decline is also affected by geography. Some areas saw a larger decline than others. On top of that, local businesses might take an even larger hit. Much of the decline in local property values revolves around housing. That tends to put much of the equity decline in residential properties as opposed to commercial and business properties. For many businesses, any hike in the millage rates could hit harder than for many residential properties since they didn’t see as big of a drop in values.

But there’s even a more fundamental problem with the idea of “revenue neutral” — fairness.

Property taxes were created in the time when land for agriculture was the standard measure of wealth. It has evolved over the years, but it’s still rooted in taxing people according to their wealth. A larger house reflects greater wealth thus it is taxed more than a smaller house.

So it should stand to reason that when values fall, there is less wealth (less equity) and therefore taxes should fall. But if local governments raise the millage rate under the scheme of “revenue neutral,” that means homeowners will be paying more taxes on less equity. No matter what anyone tells you, that is a tax hike.

It is also a gross perversion of how the property tax system is supposed to work. Most local governments didn’t lower the millage rate when property values were rising — they collected a tax windfall. Now that values are falling, it’s unthinkable that millage rates should rise just so governments themselves don’t have to make further cuts.

To raise the millage rate under the theory of “revenue neutral” is just another example of government double- speak.

It sure as heck isn’t “revenue neutral” for the poor homeowner who saw his equity value collapse, but he still has to pay as much tax as ever to vampire governments that want their share of his financial blood. It ain’t right.

Mike Buffington is co-publisher of the Barrow Journal. He can be reached at mike@mainstreetnews.com.