How to Fix the Property Tax

Eric Anderson, the city manager of Tacoma, came by the 13th Floor last week and floated an interesting idea: What if we paid for local ...
by | April 12, 2006

Eric_anderson Eric Anderson, the city manager of Tacoma, came by the 13th Floor last week and floated an interesting idea: What if we paid for local services such as police, fire and libraries once a month, just like a water or gas bill?

Before you complain about the hassle of paying one (or three) more bills, listen to Anderson's reasoning. He's definitely on to something -- and at a time when there's growing unrest about rising property taxes in cities around the country.

Anderson's main problem with the way local governments tax is that citizens tend not to understand what services their property taxes actually pay for. Not only that, but Anderson finds that when he asks people how much they're paying in property tax, they don't know the answer. That's because so many homeowners blend their tax with their monthly mortgage payments. "The connection between the tax you pay and the service you get is obscured," Anderson told us. "It undermines the legitimacy of the property tax."

What Anderson has proposed doing in Tacoma is to break down the budgets for police, fire and libraries to determine the net cost of each service. For cops, for example, he would add up all the outlays for salaries, pensions, squad cars, equipment, etc., and subtract revenues from tickets and fines. Any remaining cost is what would get billed to the taxpayers.

Anderson thinks that sending people a police bill--and having them sit down and pay it--would solve the disconnect problem. He also believes that monthly billing would inform public debate about government spending in a useful way. Residents may clamor for cheaper police services, or even decide that they're willing to pay more each month for them. Either way, at least they'll know the numbers. "Right now it's hard to know the value equation," Anderson said. "Is my police department worth what I'm paying? Am I getting a good deal or a bad deal?"

In exchange for moving toward user fees, Anderson's plan would eliminate Tacoma's property tax, do away with the local business and occupancy tax, and cut city utility taxes. It would also institute an "everybody pays" principle, meaning that nonprofits and hospitals (but not churches) would have to start paying up. (More on the plan is here--scroll to page 12).

It'll be interesting to see if Tacoma goes along with the idea. The city council appointed a task force to study it, and is due to report its findings in August. If passed by the council, the state legislature would also have to approve it.

Would user fees work?