Tag Archives: taxes

Sociology prof behind San Jose measure to raise business taxes

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Sociologist Scott Myers-Lipton has worked to raise business taxes in San Jose:

With little discussion, the council unanimously approved putting a November ballot measure before city residents that would double annual business tax revenue from $12.7 million to $25.4 million. But the business tax voters will decide differs significantly from what Scott Myers-Lipton, the San Jose State University sociology professor who had led a successful 2012 campaign to raise the minimum wage in the city, had proposed last year.

Myers-Lipton was close to gathering enough signatures to qualify his measure for the ballot, but withdrew it to allow for the city compromise measure.

The measure the council approved for the ballot would increase the annual “base rate” businesses pay by $45 and then charge companies with three or more employees $30 to $60 for each worker, depending on the company’s size, capping at $150,000 a year. It would include inflation adjustments. The city’s current tax is $18 per employee for companies with eight or more workers without inflation increases and caps at $25,000.

Myers-Lipton’s proposed measure would have charged large companies based on their gross receipts, either 60 cents, 90 cents or $1.20 for every $1,000 in revenue. The model, he argued, has been successful in other large cities like San Francisco, Oakland and Los Angeles. A city study estimated the change would put an extra $39 million annually into the city’s pocket for services like public safety, roads and libraries.

It sounds like a typical political conversation about taxes. On one side, proponents argue that businesses should pay more, particularly when needed local services are on the line. On the other hand, proponents suggest businesses will leave and/or not locate in San Jose and instead locate in places with cheaper taxes.

Yet, does it make any difference that this tax proposal was brought forward by a sociologist? Conversations about public sociology sometimes suggest that sociologists have limited ability to bring about policy change. This would seem to be a positive example: sociologist who helped bring about a raise in the minimum wage now has a chance to help pass an increased tax on businesses. Both measures could be viewed as moves toward lessening inequality; this is a cause that many sociologists would support. At the same time, do Myers-Lipton’s moves differ much from typical liberal proposals?

Perhaps many businesses in San Jose can afford such an increase with the wealth in the area. Such a tax may not hurt very much in a thriving area compared to a struggling Rust Belt city.

Why would we want to promote more HOAs with a tax break?

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A new proposal in Congress would allow members of a HOA to deduct their association fees from their federal taxes:

Upward of 67 million people live in these communities — ranging from sprawling master-planned subdivisions down to individual condominium or cooperative developments. As of 2014, they contained nearly 27 million housing units. Their homeowners associations often provide the functional equivalents of municipal and county services, and residents nationwide pay roughly $70 billion a year in regular assessments to fund road paving and maintenance, snow removal, trash collection, storm water management, maintenance of recreational and park facilities, and much more.

The same residents also pay local property taxes to municipal, county or state governments. But unlike other homeowners, only their local property tax levies are deductible on federal tax filings. Their community association assessments that pay for government-type services are not.

Now a bipartisan group of congressional representatives thinks that’s inequitable and needs to be corrected. Under a new bill known as the HOME Act (H.R. 4696), millions of people who live in communities run by associations would get the right to deduct up to $5,000 a year of assessments on federal tax filings, with some important limitations…

The bill’s primary author is Rep. Anna G. Eshoo, D-Calif. Co-sponsors include Reps. Mike Thompson, D-Calif., and Barbara Comstock, R-Va.. Though the bill has little chance of moving through the House or Senate during this election year, it sends a message to the legislative committees now working on possible tax code changes for next year: Congress needs to acknowledge the role the country’s community associations play in providing municipal-type services. The way to do it is to allow deductions on a capped amount of the money residents are required to pay to support community services.

It will be fascinating to see what sort of formula is used to calculate these deductions as the fees paid to associations do not cover all sorts of municipal services used outside of the association.

At the same time, won’t this promote more HOAs, or at least make them more attractive? And do we really want more? They certainly are popular but they continue a trend that is not necessarily good for society: privatizing municipal goods and helping neighbors guarantee their property values. For the first, instead of paying a municipal government, a new layer of private government is enabled to take care of certain services. Americans tend not to like more and more layers of fees and government. However, this might be outweighed by the second factor: the HOAs help keep the neighbors in line without owners directly having to interact with other neighbors. Instead of possibly having to live next to the neighbor who paints their house purple and starts a garden in the front yard, the HOA polices this. In other words, this tax break might help more and more Americans work out civic life through private associations that they see as a necessary evil.

Given all of the HOAs, is there any analysis that shows they pay off financially in the long run either for the property owners or the municipalities?

Taxing McMansions and other buildings by roof size to cover stormwater costs

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Want a McMansion or another building that covers a lot of ground in Mississauga? You will have to pay more for stormwater costs:

In a move that’s a first for the GTA, Canada’s largest suburb and its sixth largest city will soon charge home owners and businesses for storm water costs based on how much of their property is covered. If you have a very small house that causes little run-off water, you will pay nothing. But if your home is in the highest of five size categories, it will cost $170 in 2016 for your share of the city’s storm-water management costs. It’s an approach that Toronto is also looking at ahead of its 2016 budget process, according to a city spokesperson…

Councillor George Carlson, council’s resident environmentalist, has championed the innovative approach since it was first examined in 2011. He recognizes the impact of climate change, but said development trends are also at the root of the problem. “You can’t use pipes the size of Dixie straws when we need massive concrete culverts,” he said after the meeting. “There were streets in Mississauga that looked like Venice in July of 2013 (when a major storm event wreaked havoc across the GTA).”

“But look at all the asphalt and parking lots and McMansions in this city. All of that covered land is sending more and more run-off water into pipes that were probably already too small. I can see the king and queen needing to live in a castle, but does every third person have to?”…

Charges to businesses will be based on a formula that measures the total covered amount of space, but they will be able to save up to 50 per cent of their fee by putting in measures such as catchment basins and permeable material to prevent storm run-off.

It will be interesting to see how this works out. The Councillor quoted above said he thinks this could have an impact on building sizes down the road. Communities with lots of sprawling development often have water problems and solutions range from permeable pavement to green roofs to taxes like these. But, many of these solutions are after the fact which can get quite costly (just see the massive Deep Tunnel project in the Chicago area).

If the real estate pressure is there to build McMansions, I wonder if there are ways around such a fee. (To be honest, $170 a year doesn’t sound like much for the types who buy McMansions.) What if people built underground to get extra space and to minimize the roof size (a la the luxury underground facilities in London)? Presumably there are height restrictions in the community that would limit building up.

Lesson of Glendale, Arizona: don’t put so much public money into sports stadiums

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The Super Bowl will be played in Glendale, Arizona but the suburb’s push to become a sports center has not exactly paid off:

As the Coyotes and Cardinals sought new facilities in the early 2000s and efforts failed to build them in other parts of the Phoenix area, Glendale stepped in. The city helped pay for the Coyotes’ arena with $167 million in bonds in 2003, and as the hockey team’s finances began to fade during the recession, Glendale went all-in to keep the team in Arizona. The city dished out $50 million earlier this decade to keep the team and continues to make annual payments toward the arena, but the money it is getting in return has not met expectations.

The football stadium was built in 2006, but Glendale was not on the hook for the costs of the $450 million retractable-roof facility. It was funded primarily with new taxes on car rentals and hotels in the Phoenix area, but that financing hit a snag last year when a judge ruled that the car rental tax was unconstitutional, leaving a major funding source for the Super Bowl venue in jeopardy. The issue is still being argued in the courts.

Glendale is far from alone. Cities and states nationwide have long struggled with how much public money to spend on stadium projects. The effort to build a new stadium for the Minnesota Vikings became embroiled in controversy over a financial commitment by the state that opponents said was excessive. The St. Louis Rams are at the center of a debate over whether to spend public money on a new stadium. Topeka, Kansas, is immersed in a fight over a motorsports track that has drawn comparisons to hockey in Glendale…

In the case of the Super Bowl, he believes the city is paying dearly. He said Glendale will actually lose a “couple million dollars” by hosting the event. It’s spending huge amounts of money on overtime and police and public safety costs associated with hosting the Super Bowl but getting very little in return.

Super Bowl visitors are mostly staying in Phoenix and Scottsdale and only showing up in Glendale on game day, meaning the city won’t see much of a boost in tax revenue. And the city was hoping the state would reimburse Glendale for its police overtime costs, but lawmakers have scoffed at the idea.

Teams and cities typically sell stadiums as engines for economic development. Think of all the fans who will be there! You can build around the new facilities! This will put your city on the map! But, such stadiums come with big costs including tax money that is often used as well as a whole host of other infrastructure concerns (from police to building hotel rooms). And the winners in such schemes are often the team owners who don’t have to pay completely out of pocket for facilities that can immensely boost the value of their team. (A thought: just imagine a team owner selling the team for a big profit – and many current sports franchises would turn such a profit today – and having to reimburse the community for costs incurred.)

But, if Glendale hadn’t built these stadiums, some other community might have fallen over themselves to make it happen…

Debate the data: are millionaires leaving New Jersey in large numbers?

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A new report suggests some millionaires have left New Jersey:

New Jersey lost roughly 10,000 millionaire households, but those affluent families who remain still account for 7 percent of the whole state, the researchers said…

A high tax rate for top earners may have led to some migration out of the state, according to David Thompson, the lead researcher.

By losing those 10,000 millionaire households, the Garden State returns to third, where it was ranked from 2010 through 2012. Since the last report, Connecticut lost only 1,000 millionaire households, as it vaulted to the second spot, the group said.

And alternative interpretations:

“If millionaires were truly trying to flee NJ’s top income tax rate, we probably would have lost a lot more when the rates were higher,” Whiten said. “But during the 2000s NJ almost doubled the number of tax filers above $500K at a time when the tax rate was increased on them, twice.”Wealth has been reported leaving the Garden State before, however. In 2010, a Boston College team found that in a five-year period some $70 billion in total wealth left for other parts of the U.S.

Last year, a report by the Morristown-based Regent Atlantic wealth management firm released a report entitled “Exodus on the Parkway” that claimed so-called “tax migration” began in 2004, with the state’s passage of the “millionaire’s tax.” The report found that a couple with an income of $650,000 who moved to Pennsylvania would save some $21,000 per year in taxes, adding up to $1.65 million over 25 years, if invested. Most families with incomes of $500,000 per year or more were departing New Jersey for either the Keystone State or Florida, the Regent Atlantic authors added.

“The phenomena is there, that people are leaving – but people in New Jersey have high incomes,” said Joseph Seneca, professor of economics at the Edward Bloustein School of Planning and Public Policy at Rutgers University.

My interpretation: no one really knows whether 10,000 millionaire households leaving is a big number or not. If the true figure was 5,000, might those who oppose higher taxes still argue that taxes are pushing a large number to leave? And if the true number was 15,000, would this be enough evidence that taxes really are making a difference? Because this appears to be an ideologically laden debate, each side can look at the 10,000 figure and make a reasonable interpretation.

Here are two ways around the issue that both make use of comparisons. The first way would be to compare the New Jersey leavings over the years. Is the 10,000 figure more or less than years past? The second would involve comparing the leaving rate across states. This new report looks at millionaires per capita across states but why not compare the leaving rate per capita across states? Then, people in New Jersey could decide whether they are concerned with having similar or different rates compared to states with other policies.

Miami fights climate change with fees derived from new waterfront condos

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Miami can could lose big with the consequences of climate change but in order to fight the consequences, the city needs to approve more oceanfront development:

The more developers build here, the more taxes and fees the city collects to fund a $300-million storm water project to defend the shore against the rising sea. Approval of these luxury homes on what environmentalists warn is global warming quicksand amounts to a high-stakes bet that Miami Beach can, essentially, out-build climate change and protect its $27 billion worth of real estate.

The move makes budgetary sense in a state with no income tax: Much of South Florida’s public infrastructure is supported by property taxes…

By 2020, Miami Beach plans to complete 80 new storm pumps that will collect and banish up to 14,000 gallons of seawater per minute back into Biscayne Bay. Construction started in February. The goal is to reduce sunny day flooding — which frequently invades streets at high tide whether or not it is raining — and prepare the community for future ocean swell…

The $300 million project is ambitious for a city with a $502 million annual budget. A new stormwater utility fee on homeowners, hotels and stores helped Miami Beach save enough money to borrow the first $100 million.

The project started before planners worked out all the funding. It’s unclear how the city will raise the rest. “We don’t have time for analysis-paralysis,” said Levine. “We are going to have to get creative.”

It is hard for cities to turn down development when the luxury market is hot. Not only does an overheated housing market attract new residents, a hip reputation, and the interest of developers, it can also generate money for the city through taxes, fees, and increased spending.

Yet, development isn’t simply a game where more equals better. Whether the consequences are flooding or gentrification or a lack of affordable housing, cities tend to approve such projects that bring in money and growth. But, this ignores the bigger picture and the broader consequences that could affect everyone. The money may be pouring in now but what happens if this leads to flooding and a hampered tourist and investor economy for decades to come? What if avoiding the question of affordable housing contributes to other social problems or causes needed workers and citizens to move to other communities? As urban sociologists have asked for decades, who wins when big development takes place? Usually not the normal citizens. Instead, the growth machines – the powerful businesspeople and politicians – tend to profit.

Of course, funding to combat future problems is not easy to obtain. No state income tax in Florida helps contribute to hot housing markets. Should the federal government help pay to alleviate climate change? Should there be state or federal policies that do not allow building such expensive developments right on properties near the ocean (similar questions are raised about floodplains around major rivers)? Cities and other governments have a long way to go in order to figure out this issue.

Local governments staring at higher salt prices ahead of winter

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The supply of salt is tight, leading to higher prices for local governments:

Replenishing stockpiles is proving challenging, especially for some Midwestern states, after salt supplies were depleted to tame icy roads last winter. And price increases of at least 20 percent have been common in places including Boston and Raleigh, North Carolina…

Some local governments are avoiding the problem thanks to multi-year contracts or secured bids. Chicago, for example, used roughly three times more salt last winter — 436,000 tons — than it did in 2012-2013, but the city has locked-in rates based on a contract negotiated a few years ago.

Other states aren’t so lucky.

In Ohio, where more than 1 million tons of salt was used on state roads last year — a nearly 60 percent increase over the average — last year’s average price was $35 per ton. This year, 15 counties received bids of more than $100 per ton, and 10 counties received no bids from suppliers…

For road officials, that translates into having to conserve and be creative. In many places, brine is added to salt to boost its effectiveness. Officials also are buying trucks that can, among other things, spread salt in the morning and clean streets later in the day.

I’m sure a lot of these governments are hoping for less-than-normal snowfalls. At the same time, it is also a good time for creative solutions to getting snow and ice off roads. I hope the long-term answer isn’t what we often saw in northern Indiana: just don’t completely clear the roads at all during the winter. This may have been due to the higher amounts of snowfall due to lake effect snow on the east side of Lake Michigan and it wasn’t terrible because of a lack of hill. Still, such a general strategy would slow down a lot of road travel.

I haven’t seen this suggested anywhere but is anyone thinking of some sort of special and/or temporary tax to cover road salt? These are public roads and the funds have to come from somewhere. Such ploys wouldn’t be popular with motorists but it could be more desirable than taking your life into your hands anytime driving during the winter.

The difficulties of merging or dissolving local governments in Pennsylvania

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Pennsylvania has the third-most local governments but there is difficulty in trying to merge or dissolve these bodies:

Lawmakers are considering a bill that would allow dissolution and limit municipalities’ stay in the state’s distressed program. Thirteen cities have been stuck with that designation for at least a decade, and fragmentation at the local level makes it harder to turn them around, said Matt Fabian, managing director at Concord, Mass.-based research firm Municipal Market Advisors…Some localities have shrunk so much they may be unable to operate, according to Ross. The communities are stagnating as Pennsylvania’s economy is falling behind, with job and population growth trailing most states, said Standard & Poor’s…

In Pennsylvania, every square inch of land must be incorporated, preventing dissolution. Municipalities in Connecticut, Delaware, Hawaii, Massachusetts, New Hampshire, New Jersey, North Carolina, Rhode Island and Vermont also restrict dissolution, said Michelle Wilde Anderson, who studies distressed communities as an assistant professor at University of California Berkeley School of Law…

The path of merger or consolidation is often unavailable because municipalities are reluctant to take on neighbors, which may be distressed.

This sounds like a two-step process:

1. Providing the legal means for dissolving local governments. Residents may not think about it much but a group of local residents can’t simply declare themselves an incorporated community or start collecting local taxes – this process has regulations and procedures.

2. But, even if such moves were legal, the article hints at another difficult issue: getting communities or governments to agree to merge with others. Americans are generally unwilling to give up local control, even in difficult financial times, or to take on the problems of nearby local entities that might threaten their quality of life. As an example, see the shift in the late 1800s as suburbs stopped desiring annexation from big cities.

Given the financial difficulties a lot of local governments face, I suspect stories about this will be more common in the coming years. Yet, consolidation or dissolving is not a quick process and generally requires consent from all parties involved.

New bill would allow states to turn interstates into toll roads

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With funding for highway repairs harder to find, the new transportation bill from the White House would give states more room to add tolls to interstates:

With pressure mounting to avert a transportation funding crisis this summer, the Obama administration Tuesday opened the door for states to collect tolls on interstate highways to raise revenue for roadway repairs.

The proposal, contained in a four-year, $302 billion White House transportation bill, would reverse a long-standing federal prohibition on most interstate tolling…

“We believe that this is an area where the states have to make their own decisions,” said Transportation Secretary Anthony Foxx. “We want to open the aperture, if you will, to allow more states to choose to make broader use of tolling, to have that option available.”…

Foxx said the highway trust fund would face a $63 billion shortfall over the next four years.

One expert suggests otherwise in this story but I imagine there are a lot of drivers who will not like this. Yet, roads are not free; they are a public service that have to be paid for. And the all-around costs of driving are not cheap: gas, insurance, car repairs, car purchases, road construction and maintenance, and then the host of other industries and business that exists on top of an automobile-driven culture.

While there will be a lot of debate over how roads can be funded (raising the gas tax which hasn’t changed since 1993, finding new revenue sources for roads like corporate taxes, or charging drivers per mile driven), this all hints at a larger issue: driving in America could change quite a bit in the coming decades. Some of the impetus is economic; who is going to pay for these roads which are expensive to maintain and repair? Some of the impetus is on the technology side: driverless cars may not be that far away since such vehicles could be much safer and more efficient on the road and other innovations could make cars and roads more efficient. Some of it may be cultural: Americans may be interested in driving less and living in sorts of places that require fewer individual trips by car. Some of it is environmental: improving the efficiency of cars and advocating for development that limits single-person car trips. This doesn’t mean the car will disappear from American life; it is an engrained part of American culture. Yet, how Americans view cars and driving might look different several decades from now.

Want more Chicago area mass transit? Have to find more tax dollars

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More mass transit may be good for the Chicago region but it will cost taxpayers:

A coalition of transportation advocates supported by Chicago Mayor Rahm Emanuel and Cook County President Toni Preckwinkle has recommended raising new tax money in Cook County to help pay for billions of dollars of mass transit improvements…

In a meeting with the Tribune’s editorial board, coalition leaders said that the board could potentially raise property, sales, or gasoline taxes for the local share. The money would help pay for such big-ticket projects in Chicago and Cook County as the long-sought extension of the CTA’s Red Line to the far South Side.

The Red Line extension and other billion-dollar projects like suburb-to-suburb Metra STAR Line have languished in recent years because federal funding for major transit endeavors has all but disappeared…

The coalition’s campaign comes on the heels of a Northeastern Illinois Public Transit Task Force report released Monday which concluded that current funding levels are insufficient to maintain current service, much less expand it.

I suspect it will be difficult to raise such funds when there are plenty of other needs for money in Chicago and Illinois. At the same time, I have little doubt that there are a number of mass transit projects that would be helpful in the Chicago area. Such projects could help limit road traffic, provide needed transportation options to places where driving cars (a relatively expensive task) is not as viable, and even potentially spur development around new mass transit options. But, the short-term cost is quite high.