Redistributive Property Taxes: Who’s in the Providence Crosshairs?


Yesterday morning, Ted Nesi tweeted mention of “a number of East Side residents saying their land value shot up while their structure’s value fell in Providence revaluation.”  A few Twitter replies visible at the link add their own testimony to the fact.

Later in the morning, Anchor Rising writer Patrick Laverty offered the necessary reminder about the relationship between assessments, property tax rates, and a city or town’s property tax levy:

The cities actually do these calculations in reverse. In a way that might not really make sense. First they figure out how much money they need for everything they want to do and everything they want to support. Next, they take the total assessed value, divide one by the other and the result becomes the tax rate.

In a nutshell, your assessed value going down really doesn’t mean anything at all.

That’s not entirely accurate.  Behind all of the math, what the assessments ultimately do is to change around the distribution of the city or town’s tax burden.  If your property value goes up while your neighbor’s goes down, you pick up a larger portion of the town’s total tax levy — which is to say, you cover more of the total amount of money that the town’s government tells its residents it needs from them in order to do all of the things it wants to do.

In principle, none of this is inherently bad or unfair, and RI’s tax reformers arguably err when they target the property tax.  Handled intelligently and in keeping with democratic principles, the way the property tax works should give the town’s government incentive to make taxpayers’ property worth more, as well as to make it easier for people to improve their own property.

As with just about every other civic principle in Rhode Island, though, this notion has been perverted, not the least with the concepts of “equity” and redistribution.  To the prevalent progressive mindset around here, every tax should be treated as if it is ultimately an income tax.   Put differently, the progressives want to take more from people who ostensibly can pay more, even when the rationale for the tax has nothing to do with how much money they earn.

This perversion of principle is made much worse by the process that Patrick describes, whereby the property tax rate is just about a meaningless number, not unlike the unemployment rate.  Sure, it gives you a quick way to calculate your tax bill from your property value, but voters and taxpayers don’t really focus on the rate as much as they do when it comes to what they pay on their income or on the things that they buy.

But back to the redistributive nature of property value assessments:  According to Ted and his correspondents, for some reason on which nobody has apparently reported, the city shifted its tax burden away from buildings and toward land.  Since this won’t really have an effect on the total amount that the city collects from taxpayers, it must necessarily redistribute the tax burden from property owners whose buildings are especially valuable to those whose land is especially valuable.

People with a more local knowledge of Providence and its tax code would be better positioned to judge whose wealth is being redistributed to whom.  In a general way, we can speculate that lots that are almost entirely filled with structures — such as the Superman Building — end up on the better end of this new assessment.

The reports from Providence taxpayers also provide an interesting perspective on two bills currently awaiting review by the Rhode Island General Assembly’s House and Senate Finance committees.  S0819 and H5816 — sponsored by Senator Gayle Goldin (D, Providence) and Representative Raymond Hull (D, Providence, North Providence) — would put state taxpayers on the hook for the property taxes of land that was formerly occupied but I-195 until it is sold.

Obviously, if the weight of property value has shifted from buildings to land, the taxes owed on undeveloped parcels will have gone up considerably.  The money that investors would need up front would also increase, inasmuch as their taxes will be higher for those initial years that they have no usable buildings in which to work and live.

  • helen

    I don't know a lot about this,its just something I've come across in my reading. Maybe those who are skilled in research can find out more about it.

    Allodial or aloidal title. Not sure of which spelling it is. It's supposed to give you free and clear ownership of your land without having to pay property taxes. I think there are still one or two states in which one can get allodial or aloidal (?) title to one's property,one being possibly Nevada,however,as I recall from the article I read,one must pay a certain amount of years taxes up front to get the title.

    Don't know how true this is,but it seems worthwhile looking into.

  • mangeek

    I kind of like the idea of pushing the ratio more towards taxing land vs. buildings. Providence's core has been 'suburbanizing' for a while now, downtown's density just keeps going DOWN. The taxes here are so messed-up that it makes it more lucrative to run a surface parking lot than a multi-level garage (since the garage is a SUBSTANTIAL structure to be taxed, while the surface lot is just some asphalt).

    One of Rhode Island's realities is that we're dense and highly urban, compared to our neighbors. If we can 'do this city thing right' then we have a chance at prospering without just becoming a bedroom/beach house community for Boston and Hartford.

  • John

    I have come to the conclusion that this is a politically motivated way to lower the real estate taxes on commercial properties. By lowering the relative value of the building that are on lots that are barely larger than the footprint of the building, combined with the commitment to not raise the commercial tax rate (or even lower it) will result in a signifiant reduction in comercial tax bills. Of course, the pie not getting smaller, the residential taxpayer will need to pick up the rest.

    Maybe it's not really [political, but practical. Either way, the startegy should be part of a public discussion of intent and effect.

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