Thursday, October 18, 2007

Housing Downturn Means Higher Taxes?

The New York Time has an article about one of the side effects of the downturn in the housing market. Since flattening property values means flattening tax revenues, some cities are starting to talk of raising taxes to compensate.

It seems almost certain that this problem is eventually going to touch us here in DC, too, and that makes me worry about our city's continuing struggle to improve its services. Nobody disputes that we have a long way to go in a lot of areas, including fixing the public schools, improving and enlarging MPD, and continuing to work on revitalizing our neighborhoods through things like the 14th Street Transportation and Streetscape work; and in some of those areas, we've continued to struggle despite throwing more and more money and resources at the problem.

But if we haven't been able to achieve success in these areas during a time of massively increasing year-over-year revenues for the city, how can we hope to succeed when those revenues inevitably take a dip? Are our leaders prepared for this scenario? Are they ready to make tough choices about efficiency and triage, or will their solution be to hike up the tax rates to make up for budget shortfalls?

3 comments:

14th & You said...

Keep in mind that budget deficits don't necessarily mean debt; there are all sorts of ways for the city to make up for a shortfall from their projections. A lot of area jurisdictions based their budgets on the faulty logic that real estate taxes would keep growing at record levels indefinitely. If the population of DC and the number of businesses here continues to grow, tax revenue will also grow despite property values remaining the same. Though advertised sales prices do seem to be dipping, I think also that there are still homeowners making improvements to their properties which will raise their tax-assessed value. We're also getting some increased government efficiencies under Fenty. Maybe he'll help our tax dollars to go further?

ML said...

I would like to see the vacant property tax rate (class 3) raised to cover some of these sort of short-falls. We need to motivate owners of empty buildings to do something with them or sell.

DC said...

Unfortunatly most if not all property tax revenue goes to administrative services and will never be used for washington DC neighborhood improvement.

Regardless, I can't imagine there will be any significant difference in effective tax rates for individuals because of the income dicounts taken into consideration when calculating house property taxes.

In some cases even a 1% raise in tax rate will only amount to maybe $100 more a year. That's not going to have much of an effect on most people.

Amanda