Can we have a consistent tax rate?

Published June 29, 2015

Editorial by Wilmington Star-News, June 27, 2015.

Those property taxes we argue about every June go back a long way. According to the Economic History Association, “the modern tax has roots in feudal obligations owned to British and European kings or landlords.”

In the 14th and 15th centuries, the king taxed his subjects. To determine how much was owed, assessors were dispatched and evaluated property. What people paid depended on what their property was worth.

The so-called property tax – “in rem” is the legal term – made its way to the American colonies and became part of the economic fabric of the United States. Property taxes evolved, however, with changes such calculating the tax on the value of the land instead of the size of the land.

In North Carolina, property taxes are the primary way local governments are funded.

Unlike sales taxes, which hurt a little bit at the time, property taxes can come in one fell swoop.

Homeowners with mortgages generally pay toward their property taxes each month as part of their house payment. For others it’s simply a fairly sizable bill that comes once a year.

Regardless of the property tax rate, the bottom line is how much a person owes the city/town or county each year (or both, for some people).

Property taxes can go up for a variety of reasons, but one that can cause the biggest spike is paying for bond debt. Pender County residents will see a nearly 34 percent increase in their next tax bills, a hike driven by school bonds county voters approved.

The bonds have to be paid for, although even after they are approved by voters, governments have discretion on when and even if to borrow the money.

A key question, then, becomes: is there some way that local governments can budget for both short-term and long-term needs without causing such large spikes in taxes? Rather than issuing bonds for major capital projects such as schools, roads and other infrastructure, would it make more sense to use a set portion of the tax rate to regularly pay into major capital project funds for specific areas? Not just maintenance funds, but a fund with enough money to build a school or two or four-lane a city street?

At least that way there would be fewer surprises at tax time.

Could local governments follow the state’s lead and work off a two-year budget, with adjustments made after the first year? What about a three-year rolling budget?

None of these ideas may be practical. It seems, however, like there is something municipalities could do to avoid the surprises and gnashing of teeth we go through each spring at budget time.

A stable tax rate would benefit governments and taxpayers, alike.

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