Let's Talk Taxes

“The people are hungry: It is because those in authority eat up too much in taxes.”
Lao Tzu

“Taxes grow without rain.”
Jewish Proverb

“He has combined with others to subject us to a jurisdiction foreign to our constitution and unacknowledged by our laws; giving his Assent to their Acts of pretended Legislation... For imposing Taxes on us without our Consent.... We, therefore... solemnly publish and declare, That these United Colonies are, and of Right ought to be Free and Independent States.”
The Declaration of Independence of the Thirteen Colonies, 1776

“Why, sir, there is every possibility that you will soon be able to tax it!”
(PM William Gladstone, on the usefulness of electricity)

“We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.”
Winston Churchill

“The point to remember is that what the government gives it must first take away.”
John S. Coleman, address, Detroit Chamber of Commerce, 1956

“You don't pay taxes - they take taxes.”
Chris Rock, Bigger and Blacker

Bitching about taxes has been around for a while and I’d be willing to bet what remains of my income after April 15th that taxation will continue to be the target of “thoughtful” comments well into the future. The purpose of this post is not to out-do the witty insights of those who came before me nor continue the centuries old tirades, clichés, or sound bites against taxes. The goal is to arrive at a consensus as to what level of taxation is legitimate. To tackle this question we must also make some determination regarding the legitimate role of government. Our focus will be on taxes at the local level.

I am going to step out on a limb and say that we all agree that taxes are at least a necessary evil. The question then becomes what constitutes, “necessary.” Another aspect of this question that should be considered is the direct benefit of tax dollars to the community being served—overhead vs. outcomes.

Tax dollars collected at the local level stay local. They are primarily spent on services, not programs, and a higher percentage of those dollars goes towards services than to overhead. As you get farther up the food chain to the state and federal level those dynamics change—more program spending, less percentage of tax dollars actually meeting a need due to higher overhead. And then there is the issue of using tax policy for redistribution of wealth and social policy--A discussion for another day.

As with taxes in general there are those in the community who believe their local taxes are too high while others point to the fact that Fredericksburg has one of the lowest tax rates in the state as a justification for increasing taxes. For those supporting higher taxes you need to consider the fact that the City also has the lowest median income and the largest percentage of households on fixed incomes in the region. Our level of taxation in relation to other localities is irrelevant. The level of service expected and the efficiency of providing those services are relevant. For those at the other end of the spectrum consider this--

During one of our budget discussions I received a call from a constituent who was on a fixed income and was told that to raise taxes would cause her great financial distress. Then she told me not to cut the library budget. At the same time Council announced that the city would no longer be supplying trash bags, which would mean a savings of over $60,000.00 a year. I received more calls and comments (and still do) complaining about the loss of trash bags than I did about the tax rate. We are told not to increase taxes but at the same time we are told not to reduce services. The reality is that something has got to give--higher taxes or less service. The most common response to this reality is to deny it. We are told not to reduce services, but instead cut out “wasteful” spending.

I’ve lost count of the times I’ve been told that the City could end “wasteful” spending if it were run more like a business. To date I’ve yet to receive an explanation as to what that means. Am I to believe that the private sector is free of wasteful spending and runs at 100% peak efficiency? The current situation faced by the auto industry and financial firms, for example, would seem to indicate that this is not the case. So let’s put the clichés aside and focus on whether we can really save money without affecting services.

The city has actually been reducing expenditures in areas like travel, continuing education, and supplies for the last two years. In addition, the city has deferred maintenance and put off replacement of equipment and vehicles. We have reduced our workforce through attrition and are having to do more with less. As a result of these actions last year’s city budget was actually less than the one the year before. So as any good business would do we have been trying to control costs while trying to minimize the impact on our responsibility to provide services. It is not my intent to imply the city is now running at 100% peak efficiency but rather to make clear that further reductions will start affecting services.

Another factor which has a big impact on expenditures and services comes from mandates, regulations, and funding, or lack there of, from the state and federal governments. Before you recommend that the city should reduce work crews from three to five to do a job, read the OSHA regulations. Before you point to savings in the school budget in the area of administration or in the classroom, check to see how state or federal law mandates many of those positions or programs.

In regard to funding, at the state level the current view is to hold the line on tax increases and as a result funding to localities to meet state obligations in such areas as education, transportation, public safety, and Constitutional Officers, have been reduced, or are not keeping up with increasing costs, thereby leaving the localities to face the shortfall. This statement is not meant as either an endorsement or criticism of state tax policy it is simply a statement of fact.

On the Federal side of this issue it is not so much money as an added level of bureaucracy, which just adds to the amount of paperwork and procedures, which take time and resources away from actually providing efficient and cost effective services. In applying for or using HUD funds for example, the amount of paperwork and regulations, which change almost daily, is mind-boggling. The rationale for this process is to ensure that funds are properly spent. The reality is that these regulations waste time and resources dealing with the process, thus leaving less time and resources for the desired outcome.

Here is the link to the city’s current 2009 budget:
http://www.fredericksburgva.gov/citypubs/citypubs.asp
I invite you to go through it and point out where you believe the city is wasting money. Or if you believe that there are obvious savings that don’t require a look at the budget please pass them on. I will be happy to respond by either pointing out issues with the proposed cuts or acknowledge the validity of the suggestion and pass it on to staff. Let’s put assumptions and clichés aside and instead provide specifics with a rationale to back them up.

Now that we are in the process of eliminating all wasteful spending in the budget we need to address the issue of what services local government is to provide. As I noted the sole determinate in setting the tax rate should be to ensure that we have the revenue to provide the services that City residents expect and at a reasonable cost. We are dealing with the cost issue as outlined above, so let’s now talk about services.

In previous posts I have discussed my thoughts on the level of service we should be providing. Now I want to hear from you regarding what level of service you believe should be funded at the local level. As a taxpayer what do you expect for your investment?

I would breakdown services as follows: Core services would be public works—water, sewer, roads, trash pick-up, public safety, and education. Next would come quality of life services such as recreational and library facilities. Then there are services that we fund through outside organizations primarily related to social services— SPCA, legal aid, homeless shelter, counseling services etc. You may, or may not, agree with this breakdown of services. If not, let me know how you would rank services.

If you have the view that taxes are too high then you need to point out cost savings and/or what services should be reduced (and how) or eliminated. If you believe that local government needs to be providing more services let me know what they are and then offer a viable suggestion for how we are going to pay for them. Everyone has a position on taxes. I am giving you the opportunity to prove your point. No one-liners allowed!