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QUESTION 2 |
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PRIMARY (AD VALOREM) PROPERTY TAX
IMPLEMENTATION
--RESOLUTION
NO. 8649 |
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Shall the City of Mesa be authorized to
raise an amount not to exceed Thirty Million Dollars ($30,000,000) by
primary property tax (ad valorem tax)? IF SUCH AMOUNT IS APPROVED BY THE
VOTERS, IT SHALL BE THE BASE FOR DETERMINING LEVY LIMITATIONS FOR THE CITY
FOR SUBSEQUENT FISCAL YEARS. |
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Regressive Tax or Not?
Both the Property Tax and the Sales Tax
have been labeled "Regressive". What's the deal with that?
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Income
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Fixed |
Regressive |
Proportional |
Progressive |
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Tax |
Rate
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Tax |
Rate |
Tax |
Rate |
Tax |
Rate |
Jones |
$10,000 |
$500 |
5% |
$500 |
5% |
$500 |
5% |
$500 |
5% |
Smith |
$80,000 |
$500 |
0.625% |
$1,600 |
2% |
$4,000 |
5% |
$20,000 |
25% |
Brown |
$500,000 |
$500 |
0.1% |
$5,000 |
1% |
$25,000 |
5% |
$250,000 |
50% |
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If you study the table you'll see that a Regressive tax is such
that you pay a smaller percentage of your income as your income
rises. Conversely, Progressive taxes have you paying a higher
percentage of your income as your income rises.
An example of a Progressive Tax, that everyone is
familiar with is Income Tax. The higher your income, the
higher the Tax Rate. Social Security FICA Taxes, however, are Regressive.
You pay a Flat rate of 6.2% for income up to $90,000, but nothing after
that. That mean for those earning over $90,000 the withholding rate
is less than 6.2%.
That said, Sales Tax on food is somewhat regressive because the
proportion of an individual's budget spent on food declines as income
rises. (Mesa currently does not have a Sales Tax on
food.)
Property Taxes can be considered
either "Regressive" or "Progressive".
People with higher incomes tend to buy more expensive homes and pay higher
Property Taxes (Progressive); yet those with lower income
pay a greater portion of their budget for Property Taxes on
their more modest homes (Regressive).
The confusion comes about because these are not the true
definitions of the terms "Regressive" and "Progressive".
Sales Taxes are Transaction Taxes which are incurred
only at the time of a transaction. Property Taxes are Ad
Valorem taxes incurred through ownership of an asset.
(Ad Valorem is Latin for "according to value")
Both are actually Proportional
Taxes (Flat Rate) on the things that they tax. Either 8% Sales
Tax or $1 per $1000 Property Tax are Flat Rates.
They only become "Regressive" when you consider them in
the context of the person paying them. That's beyond the original
definition, but both the "Yes" and the "No" crowd
stretch the definitions to make their points. So
calling Sales Taxes or Property Taxes "Regressive"
is mostly a moot point. Think the poor are being fleeced? Try
cashing a check at PayDay Loans. $50 on $500 for a two week loan is
hella-regressive! |
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YesForMesa 2007 Example
Numerous references point you to the YesForMesa
website to get a handle on what your likely Property Taxes will
be. In fact, one Arizona Republic writer claims that
this will tell you "EXACTLY" what your taxes will
be. That couldn't be further from the truth. At least I hope
so.
Here's a snapshot of what their site says: |
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The
total amount that the city can collect from a property tax would
be capped at $30 million a year with an available 2% per year
increase for inflation. Any other increase would require a vote of
the people. Since the limited property values went up for
2007, the assessment ratio would go down. Also, remember
that the Limited Property Value (LPV) is capped in how much it can
increase in a single year.
It is estimated that the new
assessment rate will be close to $0.95 per $1000 in limited
property value in 2007 which is down from $1.00 per $1000 in 2006.
Use the number circled in
the sample below to calculate the 2007 estimated tax.
In the sample, this home
would pay approximately $143.50 in a property tax in 2006 and
$157.23 in a property tax in 2007. A difference of $13.00 or
about a dollar a month.
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Some Observations
First of all, should the Property Tax
pass, using YesForMesa's own numbers, the TAX INCREASE in
2007 from 2006 is $157.23 - $143.50. That's a difference of
$13.73. That's a bit more than the "$13.00" they
quote. That's really nearly $14. It's pretty sloppy math.
More importantly, $13.73 represents an
INCREASE of nearly 9.6% over the $143.50 City of Mesa Property Taxes to be
paid in 2006. So that's a 10% increase; and this just because your Property
Valuation went up? That's really sloppy
math.
In theory as Property Valuations go
up across-the-board, the Tax Rate should decline
accordingly. For the YesForMesa example, that means that in 2007,
the rate should have declined to about $0.87 / $1000. So either the
$0.95 / $1000 they quote is way off, or they know something that you don't
By the way, that example is assuming that
the City Council doesn't exercise it's option to apply a yearly increase
on the $30 Million Property Tax (which is limited to 2% per year).
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Secondary Property Tax
Secondary Property Taxes have only
been mentioned in passing. Despite some questions to the city, to
clarify how they might be implemented, I'm not satisfied with the responses.
Recently the Arizona Republic had this to say:
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Regardless of the election results, the
City Council has the option of instituting a Secondary Property Tax
at its
discretion to pay bond debt, but has said it would only use it for future
bond elections.
Arizona
Republic |
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My Questions
- Do you trust the City Council to keep it's word, and
only apply a Secondary Property Tax to future
bond elections?
- It's unclear, but this implies that at it's
discretion, the City Council could retroactively decide to pay down
existing bond debts by implementing a Secondary Property Tax, WITHOUT
Voter Approval.
- Would you have approved of past Bond Measures, had
you known that the City Council would implement a Secondary
Property Tax?
- Even if you do have trust in the current
City Council to keep it's word, these are only their
promises. Nothing here is legally binding on any future
City Council.
- Would you vote now, to implement the Primary
Property Tax (on the ballot), if you knew that just around the
corner, was a Secondary Property Tax in the offing?
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