It’s Fix the Tax Code Friday!
Earlier this week, the Philadelphia Inquirer ran an article about an issue that has been on the minds of many local taxpayers as the city prepares for major cuts in services: real estate tax abatement. Many municipalities – from major metropolitan areas like Philly and NYC to smaller towns like Oskaloosa, IA and Shaker City, OH – offer temporary property tax breaks to developers or homeowners who buy new construction or significantly improve existing construction. The tax breaks range from as short as one tax year to as many as ten tax years.
Opponents of property tax abatements argue that such measures disproportionately favor the wealthy. The Philadelphia Inquirer notes, for example, that Phillies hottie outfielder Pat Burrell benefits from a tax abatement to the tune of about $25,000 per year. Opponents also claim that developers and homeowners already have plenty of incentives to pursue projects in most municipalities. At a time when cities like Philadelphia and New York City are facing huge losses, these opponents believe that the property tax abatements should end and that property owners should pay up.
In contrast, those in favor of property tax abatements consistently cite the tax break as a major incentive for taxpayers to choose to live within the boundaries of the city or town. That choice, the argument goes, brings increased revenue in terms of patronizing existing businesses like retail stores and restaurants. Additionally, proponents note that property tax abatements may be offset by other expenditures, including local income taxes, associated with living in a certain municipality. Burrell, for example, is one of a handful of sports super stars who chooses to live within the city limits – and pay an increased city wage tax as result. Burrell pays an estimated $500,000 more to City Hall as a city resident than he would as a resident of the suburbs.
So today’s Fix the Tax Code question is:
Are property tax abatements, like the one in Philadelphia, a good investment? Or a drain on already taxed resources?
