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

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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.