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March 23, 2005
No government plan will stop property tax increase
Would-be-governor Sen. Dina Titus is already setting the stage for enacting a law to reduce the sudden catastrophic property tax burden resulting from last year's real estate pricing anomaly. The method she seems to have chosen will allow for a guaranteed annual growth in property tax revenues to state and local governments for the foreseeable future. By thus earning the undying gratitude of public employee unions and all their satellite special interest groups, Sen. Titus will have integrated tax inflation for both our and our children's lifetimes. Now there's something on which to base a run for the Governor's Mansion. Many people are not fully aware, but the prime source of inflation in our country for the last century has been the growth of government and its spending habits. Although under control recently at a national level, Nevada's government is chomping at the bit because its usual 4 percent annual pay increases along with step in grade salary adjustments have been severely limited during this time. In order to make up for this perceived loss in income, our elected officials have steadily raised the bar as far as wage and benefit guidelines. By increasing the base wage paid to new employees, subsequent increases are made to all pay scales above that line, there providing an increase in pay without ever having to go on record for an across the board "wage hike." The federal government figured this out more than 30 years ago when they enacted the COLA or cost of living allowance concept into all government programs. Once this principal was in place, all our government officials had to do was sit back and watch the money flow out of our pockets and into their system. It is this program that allows Congress to receive regular raises without ever having to vote on them. If you think this point is overstated please remember that in 1975 total U.S. government receipts were $279 billion and the deficit was $53 billion, or 16 percent of spending. This was the period when gas prices last went through the roof. In order to ensure government stayed above the curve, the COLA was put in place. Today, a short 30 years later, the U.S. anticipates revenues in excess of $2.2 trillion and a deficit of $420 billion, or 16 percent of spending. As you can see, the story changes but the game remains the same, in spite of all the rhetoric about the deficit. The real story lies in the 790 percent increase in budgeting and how that has impacted our everyday lives. In 1975, the average price of an existing home was about $35,000. Today it is about $282,000, an increase of almost exactly the 790 percent increase in federal government budgeting. In a very distorted way, one could almost say the massive increase in values in Nevada last year was simply our way of catching up with the rest of the country. And you would not be far from wrong. Remember the massive tax increase of 2003? The rise in home sales prices began almost at the same time the massive tax increases went into effect. Most of the increases came from outside investors who bought up all they could at any price they could, not seeming to care if the value was supportable. And it wasn't to the benefit of most residents, despite the claims of the Legislature. A look at the final numbers shows fewer than 9 percent of existing homes were resold during this period, which means 91 percent of homeowners did not participate. But the taxman has seen an opportunity to raise money for the expansion of government and will not be deterred by anything as trivial as common sense. And this brings us to the Titus proposal. Regardless of how the Legislature tries to portray a solution to the assessor's expansion of values for taxation, the end result will be long-term increases in property taxes to owners. And the reason is the value is computed not on a sale of the property, but on the value of a sale of another property. Since most homes have seen assessed values go up 40 to 60 percent, the annual increase in tax payments can be budgeted by government for at least the next decade. The benefits to the government of such a plan should be obvious as well. Rather than having to vote on a tax increase each session to allow for the continued growth of government wages and benefits, all they have to do is decide how to spend the money. They can even look to supporting increased wage and benefit programs in the manner of Connecticut where bonding became necessary to meet the payroll. It is only 4 percent a year after all. Surely the people couldn't object to that. Maybe not, but they should. Little writes from Pahrump. His column, "The Other Side," appears here on Wednesdays. |
