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Unfairness of tax system is due to the kinds of taxes enforced

Sunday, January 19, 2014
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This year, there was a little something extra in the envelope that carries notice to Saratoga County property owners of the amount due in their taxes at the end of the month.

A single sheet of paper, headlined “Your Property Taxes” with the official county seal, stated that the “Board of Supervisors is providing this information to all property taxpayers in Saratoga County to inform them about how State and Federal mandates affect their annual property tax bills.”

All to the good, taxpayers should know to what use their payments are to be put.

According to the informative paper, state-required Medicaid, pensions, community colleges, early intervention and pre-school programs, social services, probation and legal defense services, as well as public health early-intervention efforts cost the county just over $62 million.

To cover these bills, it is explained, the county collects just under $52.5 million from its property owners, with the $9.6 million difference made up from a portion of the revenue produced by the county sales tax.

Let’s acknowledge for the record that property taxes in New York state are among the highest — if not the highest — in the nation. (It depends on which set of statistics one wishes to emphasize, but either way it’s less than ideal.)

Regressive systems

Let’s also stipulate that the property tax itself is among the most regressive and, therefore, inequitable of taxation schemes.

The sales tax, it should be noted, is not far behind on that score.

These forms of taxation are termed regressive because their allocation is based least on the individual’s ability to pay. However, this is not the reason the board chose to include that extra sheet of paper this year.

When the state’s local government officials gather to discuss the issues and challenges facing them, they increasingly decry the expensive responsibilities placed on them by the state government without providing the funding necessary to defray their costs.

They term these “unfunded mandates.” They reason that if the state sees the need for a program or service, it should pick up all of the costs. Perhaps more to the point, they also complain about what they see as the unfair light in which it places them with voters when local taxes need to be increased to cover the growing expense.

In other words, “don’t blame us — blame them.” Contact information for federal and state officeholders is provided as a silent exhortation to taxpayers to lobby against these “unfunded mandates.”

State-local relationship

This logic sounds almost too fair and self-evident to be disputed. That is, until one contemplates the true relationship between the state and its local governments.

Counties as well as most other local governments are, first and foremost, administrative conveniences — instruments created by the state primarily to serve state purposes. They can do nothing — spend money, collect revenue, enact legislation — without state government approval. Some of this authority is granted in the state constitution. Other authorizations are contained in statutes. Still others require specific and special state legislation.

Therefore, the inference that counties and other local governments hold a high degree of individual autonomy that is truncated by their shared responsibility with the state for statewide programs is just not true.

Assistance to those in need, pensions for the citizens who work for us, educational resources for our youth and adults in need of retraining all sound like important community matters with which county and other local governments should be intimately involved.

For Medicaid, the state already picks up the majority of costs, with the counties and other local governments contributing their shares based on formulae ostensibly designed to reflect program needs unique to each locality. Originally and ironically, this design was developed mostly at the behest of upstate governments eager to avoid subsidizing downstate problems. Arguably, the other cited expenses — like county employee pensions and community colleges — rightfully belong to the county because the programs serve the latter’s residents.

Furthermore, the state already provides local governments with the financial means they seek by granting them significant authority to set and raise taxes. The fact that they find the task unappetizing is not in and of itself sufficient grounds for seeking to “pass the buck.”

There’s also an element of the old shell game in all this. Even if the state were to directly cover all of the costs, the source of that money still would be the state — including county — taxpayers.

Not that fair

However, while shared responsibility based on local program needs is an objectively fair approach, it turns out to be far less so in practice when viewed from a taxpayer perspective.

Those most regressive of taxes — property and sales — happen to be principal sources of revenue for local governments, which means that the local burden falls to the taxpayers arguably least equipped to bear the cost.

To some extent, the recently enacted 2 percent annual cap on local property taxes acknowledges this unfairness. Unfortunately, it is neither a far-reaching nor satisfactory long-term solution. It actually exacerbates things by increasing reliance on the sales tax. This is what prompted Saratoga’s Board of Supervisors to include that information sheet.

There are undoubtedly good and valid public policy reasons to reduce the number and degree of overlapping responsibilities shared by multiple levels of government, as well as to research and re-evaluate how services are provided, how they are paid for and who delivers them.

Shifting the responsibility for funding to sources other than property or sales taxes, thereby relying less on these regressive taxes and more on taxes based on ability to pay, such as the income tax, would appear to be a fairer alternative to what is in place now.

But the fairness issue centers around the kinds of taxes used to fund the programs, not the fact that the county bears some responsibility for funding them.

John Figliozzi lives in Halfmoon and is a regular contributor to the Sunday Opinion section.

 
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