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PROPERTY TAX REFORM
Mr. MUSKIE. Mr. President, although most of us will agree that there is a growing property tax revolt in this country, we seldom see any evidence of such a citizens' uprising. Living as we do in an environment where national issues are the principal focus, it is all too easy to forget that there are important local issues which may not make the national news media but which nevertheless have an impact far beyond the bounds of a particular unit of local government.
The property tax is such an issue. Although the problem is national in scope, the poor administration and inequities of the property tax structure are felt primarily at the local level, and it is there that the rumblings of a property tax revolt are heard.
Every day my office receives news clippings, from all over the country, which attest to the growing concern over poor administration of the property tax and the demand that something be done about it. I ask unanimous consent that a selection of these clippings be printed in the RECORD.
The interest in reform, which these articles document, is encouraging. Senator PERCY and I have introduced legislation, cosponsored by 12 additional Senators, which would provide limited Federal incentives to the States to undertake relief and reform measures, and which hopefully, would maximize this local pressure for improvements in the overall structure of the property tax.
We have recently held an initial round of hearings on the bill S. 1255 – and plan to hold several additional days of hearings during this session of Congress. It is my opinion that reform of the property tax, which has been delayed for so long, is now the responsibility of all levels of government – Federal, State, and local – and that through a cooperative effort, the demand for reform can be met.
There being no objection, the material was ordered to be printed in the RECORD, as follows:
[From the Cleveland Press, May 14, 1973 ]
A NATIONWIDE TAX SCANDAL
No program of national tax reform will be completely satisfactory without sweeping changes in the way local property taxes are assessed.
States, counties and local communities get about 40% of their revenues from property taxes. Yet the imposition of these taxes often is so slipshod, so inequitable, and, in some cases, so corrupt, that angry taxpayers are demanding some basic reforms.
And well they should.
In most states, property assessors are underpaid and poorly trained. At worst, they're political hacks. At best, they're overworked civil servants who need help they're not getting.
Ten years ago the Advisory Commission on Intergovernmental Relations offered the states a list of recommendations for making their property tax systems simpler, fairer and more professional. The proposals were largely ignored.
Fewer than a dozen states have properly trained assessors. Only 14 states – including Florida and Ohio – publish lists of tax-exempt property, even though such exemptions are a major burden on home owners and businessmen who do pay property taxes.
Some of the same private assessment firms hired by counties to make mass property appraisals also work big for big industries and companies in the area, creating a possible conflict of interest.
Too often counties neglect property appraisals for years and then jolt home owners by jacking up their assessed valuations by 60 or 80% overnight.
One recent federal study found that slum property often is overtaxed – and therefore a bad investment risk – because assessors failed to consider the decline of neighborhood values.
Abuses are so common that Sen. Edmund S. Muskie (D-Me.) and Sen. Charles H. Percy (R-Ill.) have introduced a bill offering federal tax relief to the poor and the elderly in states willing to reform their property tax practices.
Needed are:
Tax districts large enough to support a competent staff of assessors. Letting every jurisdiction conduct its own property assessments is an invitation to trouble.
More involvement by the state. Wide disparities in assessments among communities only a few miles from each other simply don't make sense.
Traditionally, the property tax, which raises $42 billion a year, has been the prime source of local revenue in this country. But unless some of the inequities can be corrected, irate taxpayers will be justified in raising hell with a system so obviously out of whack.
[From the Albuquerque (N. Mex.) Tribune, May 12, 1973]
PROPERTY TAX CHANGE SUPPORT SNOWBALLING
(By Lee Stillwell)
WASHINGTON.– Public support is snowballing for Sen. Edmund S. Muskie's efforts to push property-tax reform through Congress this session.
The Senate intergovernmental relations subcommittee which Muskie, D-Maine, chairs has received appeals to probe property-tax gimmicks, loopholes and unfair assessments and exemptions in 17 states and 30 municipalities, including Pittsburgh, Denver and Columbus, Ohio.
The subcommittee has just completed hearings here on property-tax gripes and is getting floods of mail from complaining citizens. Alabama Gov. George C. Wallace endorsed efforts to give a break to low-income property owners.
Muskie believes his subcommittee's hearings bore out an earlier staff study that led him to declare it "a national outrage" that the average taxpayer is "at the mercy of inexpert local officials, arbitrary bureaucracies and privileged interests."
Muskie and his subcommittee plan to tour the nation this summer and hold hearings in several cities.
The senator is considering a trip to the Knoxville, Tenn., area to explore charges strip-mining interests are escaping taxes on reserve land because of low – or nonexistent – assessments.
A basketful of proposals for property-tax relief was dumped into Muskie's lap during his subcommittee's three days of hearings, including these:
– Property-tax breaks for the poor and elderly. A recent survey showed elderly homeowners in the northeast with annual incomes below $2,000 pay almost 30 per cent of their incomes for property taxes.
– Minimum qualifications for tax assessors. Twenty-eight states have no such qualifications now. Maine Gov. Kenneth M. Curtis said his state's property tax system is administered by "untrained, part-time amateurs in 496 assessment districts."
– Federal regulation of mass-appraisal firms which often are hired by local jursidictions to assess property for taxation. Some of these firms have been accused of conflicts-of-interest since they also represent private clients interested in holding down their tax assessments.
– Establishment of record-keeping procedures for tax-exempt property, which now amounts to one-third of the total area of the nation's taxable property. Only 15 states now keep such records, which would help government officials and the public recognize who benefits from such tax exemption.
– Revision and updating of property tax laws in many states which date back 50 or even 100 years.
Experts say many tax districts should be consolidated and state agencies should be created to supervise tax assessing.
– Action by Congress to outlaw the common practice of states granting property tax concessions to lure industries from other states.
State and local legislation to force mobile home owners to pay their fair share of property taxes.
– Action to require the Internal Revenue Service, as now permitted by law, to provide states with data on their residents' intangible property such as stocks and bonds. Most states do not tax intangible property because of past enforcement problems.
The Federal government should collect other data useful to local tax assessors such as corporate real estate holdings. Another way suggested to collect such data called for reinstating the nominal federal property transfer tax which expired in 1968. Collection of this tax would provide current information on real estate selling prices.
States should be wary of tax breaks on farm land.
[From the Fort Worth (Tex.) Press, May 8, 1973]
SENATE EYES TAX-EXEMPT PROPERTY
(By Lee Stillwell)
WASHINGTON.– Keeping tabs on tax-exempt property is proposed in a Senate bill to help states meet the costs of overhauling their property-assessment practices and granting low-income families tax relief.
The bill, introduced by Sens. Edmund S. Muskie, D-Maine, and Charles H. Percy, R-Ill., would require all states accepting this federal help to keep records of tax-exempt property and its value. An estimated one-third of the nation's property now is believed to be tax exempt.
The listing proposal gained support from witnesses before the Senate subcommittee on intergovernmental relations during three days of hearings recently ended.
"A major problem in most states is the failure of local governments to account for properties that have received, over time, exemptions from tax," Percy said.
Percy said many local governments don't even know the value of property they don't tax or even what those properties are.
A bill before the Illinois State Legislature would place on the tax rolls properties owned by tax-exempt charitable organizations which are leased to commercial enterprises, Percy said.
Percy said tenants on tax-exempt land would have to pay taxes as if they owned it, noting that Chicago's Continental Illinois Bank & Trust Co. would have to pay taxes on valuable downtown land owned by Northwestern University if the bill passes.
"I strongly support this legislation," Percy said. "If passed, it will result in an estimated $10.3 million in additional tax revenue for Cook County. This is the kind of reform our bill will promote in all the states.
Bernard P. Shadrawy, president of the International Assn. of Assessing Officers, said his group believes that when any exemption is granted the local government should be reimbursed for the tax loss by the agency creating the exemption.
Furthermore, he said, his group opposes any exemption created for the benefit of either privately of publicly owned organizations which provide goods or services capable of being provided by private industry.
"Tax-exempt properties which perform no significant services to the local taxing district should be required to make in-lieu payments for the police protection, fire protection and other property-related services they receive from the local community," Shadrawy said.
"Where governmental properties are involved, these in lieu payments should be provided for in the budget, so that the public is given a full accounting of the costs of these services and what use is being made of its tax money."
Shadrawy said assessment and separate public listing of tax-exempt real property is long overdue and would make taxpayers and legislators aware of how much exemptions are costing local governments.
Testimony presented by the education commission of the states indicates one-third of the potentially taxable property in the United States is tax-exempt. Exempt properties range from church cemeteries to the 77-story Chrysler Bldg. in New York, the testimony showed.
Clifford Allen, metropolitan assessor for Nashville-Davidson County, said a state granting an exemption from the common burden of taxes to any property, or class of property, should be made to reimburse the local governments for the loss of tax revenue resulting from these exemptions.
Allen said it should apply to property owned by religious, educational and charitable institutions along with property owned by the state and federal governments.
He would also ask the federal government to pay local governments a tax equivalent on all property it owns in any locality.
"It is not fair for the taxpayers of a particular community to be saddled with the entire costs of such exemptions by having their tax bills raised to make up the loss in revenue from exempt property in their community, Allen said.
Muskie's subcommittee will look further into the matter at later hearings.
According to subcommittee figures, 14 states and the District of Columbia now compile lists of tax-exempt property. The states are Arizona, California, Delaware, Florida, Georgia, Hawaii, Iowa, Maryland, New Jersey, New York, Ohio, Oregon, Rhode Island and Wisconsin.
[From the Knoxville (Tenn.) News-Sentinel, May 10, 1973]
MUSKIE MAY HOLD AREA TAX HEARINGS
(By Tim Wyngaard)
WASHINGTON, May 10.– Spurred by charges of rampant inequities in property tax assessment of coal fields, Sen. Edmund Muskie (D-Maine) may hold a tax reform hearing this summer in Central Appalachia.
Muskie's Senate subcommittee on Intergovernmental Relations is considering adding a Cumberland Mountains hearing to a list of regional meetings on property tax and governmental reform moves pending in Congress, according to committee sources.
The committee may be drawn to the coal fields in response to detailed charges of tax breaks handed coal firms by state and local assessors, compiled by J. W. Bradley of Petros, Tenn.
Bradley is president of Save Our Cumberland Mountains (SOCM), which is involved in citizen suits challenging tax assessment practices in the area.
"Nowhere is an investigation of property tax injustices more sorely needed than in Central Appalachia – the 60 or so counties in the coal-bearing mountains of Eastern Tennessee and Kentucky and parts of Virginia and West Virginia," Bradley wrote Muskie.
OWNERS AIDED?
"Beneath the apparent poverty of these mountains are found immense reserves of one of the nation's most valuable resources – coal – but the conditions on the surface scarcely reflect the wealth beneath," Bradley wrote.
The faltering war on poverty brought Federal assistance to Appalachia, but the rich coal companies of the area – mainly controlled by outside interests – pay little in the form of taxes to support on-going governmental programs ranging from local education to health and welfare, Bradley charged.
"The Federal revenues in essence picked up the property tax tab of already wealthy non- Appalachian owners of the area's coal reserves," said Bradley.
"The stance of the Federal Government thus far seems to have been one of ignoring or tacitly tolerating this tax inequity."
MOST NOT APPRAISED
The British-owned American Association Ltd., which owns 17 per cent of the land in Claiborne County, Tenn., pays $19,000 a year in property taxes – only 3 per cent of the local tax load, according to Bradley's study.
Yet the firm makes more than $400,000 a year in coal field royalties, while most of its land is assessed at only $25 an acre – less than the assessment of farm land in the poverty-stricken county, according to Bradley.
Most of the coal reserves are not appraised at all, despite a state law requiring such action – and despite an anticipated mining life of at least 25 years for the reserve fields, Bradley told Muskie.
Local residents have started legal actions to force state and local tax officials to comply with the state property tax law, and they have won the battles – but the coal wealth remains unassessed, he told Muskie.
LIKENED TO "COLONY"
Said Bradley of the American Association:
"It is like a colonialist, extracting wealth from Claiborne County and leaving behind poverty, environmental ruin, and low property tax revenues. The valley from which it derives its wealth and the county courthouse are its colony, lacking the power, money or ability to challenge the colonizer and having to depend upon the support of outside governments to run its schools, fix its roads and provide its services."
The pattern is reflected county by county and state by state throughout Central Appalachia, Bradley charged.
While Federal aid to the region increased during the war on poverty in the 1960's, the reliance of local governments in the area on the property tax for their budgets decreased, he said.
MISLEADING IMPRESSIONS
"While leaving the impression of 'aid' to Appalachia, the war on poverty revenues in essence picked up the property tax tab of the already buoyant owners of Appalachia's coal reserves."
In Kentucky, 31 people and corporations control four-fifths of the coal reserves in the state – while coal fields worth $200 to $300 an acre are often assessed at $2 an acre, if carried on the tax rolls at all, he charged.
In Tennessee, nine large corporations control 34 percent of the land in coal counties and 80 per cent of the coal wealth, but pay only 4 per cent of the property taxes in those counties.
SIMILAR PATTERNS
Similar patterns are found in Virginia and West Virginia, the report concludes.
Property taxation as now applied in the states, Bradley charged, "has failed and failed miserably."
"The area's resource is a depletable one. Every delay in remedying the inequities means a loss now and in the future.
"Coal taxation can be done and mineral taxation is being done effectively elsewhere. What seems to be lacking on the part of county and state officials in Central Appalachia is not the way but the will," Bradley told Muskie.
[From the St. Paul (Minn.) Pioneer Press, May 3, 1973]
WENDY TELLS TAX BURDEN
Gov. Wendell Anderson testified in Washington, D.C., today in support of a bill under which the federal government would help ease local property tax burdens.
The measure is sponsored by Sen. Edmund Muskie, D-Maine, and Sen. Charles Percy, R-Ill.,
Testifying before the Senate subcommittee on intergovernmental relations, Anderson said over-reliance on property taxes has become "almost a national scandal."
Anderson said states and local governments need to strengthen their tax structures in order to become more efficient partners in a better-balanced federal system.
The governor said in prepared remarks:
"First, the property tax places a shameful burden on low-income individuals, especially the elderly. Second, the local nature of property taxes creates a great disparity in educational opportunity for our nation's children, both within states and among states."
Under the Muskie-Percy bill, a federal office of property tax relief and reform would be established to help state and local governments with tax reform efforts.
Payments of up to $6 per capita would be provided to states which adopt programs of property tax relief, designed to help low income taxpayers.