December 15, 1970
Page 41683
PROPERTY TAX REFORM
HON. PETER N. KYROS OF MAINE IN THE HOUSE OF REPRESENTATIVES
Tuesday, December 15, 1970
Mr. KYROS. Mr. Speaker, on December 12, my colleague from Maine, Senator ED MUSKIE, shared the speaker's platform with Ralph Nader at a seminar on property tax reform, a conference held at George Washington University. Senator MUSKIE raised some penetrating questions about the need for change in this often inequitable levy. I would like to share his thoughts with you and ask unanimous consent for insertion of his remarks in the RECORD.
REMARKS BY SENATOR EDMUND S. MUSKIE
Thank you very much for inviting me this morning.
Your conference on the property tax is significant. It is timely – and it is welcome. This is an issue which undoubtedly deserves a searching national inquiry.
We know these facts–
Property taxes provide at least 40 percent of all State and local government revenues;
They are assessed by some 70,000 local governmental units;
They generate more than $33 billion a year. This income-producing mechanism is second only to Federal income and social security taxes.
It is the basic revenue source of two-thirds of our cities' expenditures.
It finances 54 percent of local government costs for education, 41 percent of their costs for health care, and 30 percent of their costs for welfare.
It is the basic tax we levy on our entire housing stock.
Its very magnitude would be reason enough for a periodic examination of its effectiveness and its reliability.
But the wide variations throughout the country – in terms of taxable wealth, administrative performance, fiscal requirements – have all contributed up to now to make property taxes a matter of local, rather than national, interest.
That attitude is no longer satisfactory. Taxpayers across the Nation are beginning to ask the same fundamental questions –
Are property taxes fair?
Are they equitable? Are they sound?
These questions must be answered thoroughly and without evasion.
Congress should seek the answers – not only for the purpose of educating the public – but also for the purpose of determining how property taxes affect national programs and policies.
For example, major Federal expenditures for rehabilitation of urban housing will have little impact . . . if property tax assessments at the local base level are increased, to the extent that they make the new investment prohibitive.
Aside from its effect on current programs, the level of property taxes is directly related to the financial aid which State and local governments are presently requesting.
In all likelihood, the 92nd Congress will be asked to expand Federal grant-in-aid programs and to initiate a plan of revenue sharing.
Are we fully prepared to do either until we understand both the limitations and the potential of the property tax . . . until we adequately consider the need for reforms in the property tax structure?
It has been estimated, for example, that inequalities in local property tax assessments are resulting in a shortfall of from 20 to 50 percent of potential property tax revenues.
Mr. Nader has estimated that a fair assessment of business properties in America would increase State and local tax revenues by at least $6 billion a year – moneys that could be used to support improved health care facilities, a greater housing supply, better elementary and secondary school programs, more effective law enforcement, and cleaner air and water.
This is not to suggest that property taxes are the only answer to financial survival of our States and cities . . . or that property taxes should not be lowered whenever possible.
But is to suggest that property taxes could substantially ease the financial burden of many localities – if they were simply levied in an equitable manner on all property-owners.
The question of equity is central to this inquiry – equity as between business property and residential property ... as between houses and apartment units ... as between land which is improved and land which is unimproved.
It is wise to offer a low property tax assessment as an inducement to a new industry or business concern?
After all, the introduction of a new employer will necessarily place a new strain on available services of water and sewage, of transportation, of schooling – services which localities must find the money to support.
If they cannot find the money locally – by raising the taxes of everyone else in town – then local governments will seek relief from state and Federal Governments.
As a result, many taxpayers have already been placed in the curious position of unwittingly subsidizing a new business in another town.
With unequal assessments across the country, residential housing, the utilities and the small businessman end up paying the lion's share of the bill for community services.
The case of Anmoore, West Virginia, is very instructive. Here two Members of Mr. Nader's task force on Union Carbide succeeded in convincing the town to tax a plant on its full assessed value, with an expected revenue gain of $380,000 by 1973.
Moreover, once a property tax inducement is offered and accepted, isn't it likely to become institutionalized . . . as a continuing drain on public resources for private benefit?
Are there in fact any rational alternatives to this haphazard method of allocating our resources?
If so, shouldn't Congress help bring them to light?
We must also ask whether it is fair that our Federal tax laws – which permit homeowners to deduct property tax payments from their income tax – provide no relief at all for apartment dwellers . . whose rent is increased by their landlords as a result of those same property taxes.
More than three-and-one-half million Americans – many of them elderly ... many of them single – live in apartments where taxes account for 20 percent or more of their rental.
Should they bear a special burden of paying for schools and for welfare?
Do many of them in fact need increased Social Security benefits because of rising property taxes?
Still a more basic question is whether any property taxes should be levied against buildings and improvements . . whether they should be levied completely or primarily on land value itself.
The argument has been made–
That it is socially undesirable for the land speculator to pay substantially less property taxes than the person who builds improvements on his land;
That cities are decaying precisely because the property tax structure discourages modernization . . . and rehabilitation . . . and replacement of existing buildings;
That the absence of sensible land use planning is due in large measure to property tax structures which stimulate land speculation at the expense of coordinated land development.
What has followed is the all too familiar pattern of irregular growth, disorderly expansion, scattered development of subdivisions, shopping areas and industrial centers – often far removed from the center of urban activity, and equally far removed from needed municipal services such as water, transportation, and other utilities.
Americans have learned the final cost in terms of traveling longer distances to work and to shop at higher costs for gasoline and over clogged roads in constant need of being widened to accommodate yet the next wave of suburbanites.
They have found their water systems often so small as to be virtually uneconomic to operate – and then, at rates for service which are far out of proportion to their needs.
The have experienced – and may continue to experience – the inconvenience of gas and electric utility expansion, at substantially higher costs.
On the other hand, would a land tax alone have the effect of promoting the kind of vertical development . . of high density living . . which is the most undesirable alternative in terms of our environment?
Congress has an undeniable role to play in resolving these arguments.
And we must not avoid asking the hard questions:
Do property taxes necessarily have to absorb a higher fraction of the incomes of poor families than of families who are not poor?
Must certain industries – such as the railroads – be placed at price disadvantages, because their competition has significantly less property taxes to pay?
Can't we begin to design methods of uniform property tax assessment which are more real than imagined?
Aren't there more sensible ways for local governments to levy taxes by joining together, on a regional basis?
If these questions seem complicated, it is only because they are complicated.
The answers will be neither easy nor quick. And those of us in the Congress shall need your experience, your knowledge, and your insistence that we begin the task.
It has been written that, "if any tax could have been eliminated by adverse criticism, the general property tax should have been eliminated long ago .”
It is time all of us start examining the wisdom of that remark.