Tom Sgouros: Beware the sticker price

“Doing more with less” is a slogan, not a plan, and no municipality can realistically make that happen every single year, for all time.

We often hear about the property tax cap in Rhode Island. I mentioned it in an article about revaluations last month. The cap limits property tax increases to 4% per year. But it’s not a limit on increases in your tax bill, as it used to be, but a limit on increases in the total amount collected in property taxes, which is a little weird.

In the 1980s and 1990s, there was a movement in the plains and mountain states out west to establish a Taxpayer Bill of Rights (TABOR). The idea was that property taxes should go up no faster than inflation plus population growth. Colorado passed a version of TABOR through a state referendum in 1992. After a decade of experience -- watching the devastation these tax limits caused to public schools, libraries, police forces, and pretty much all other local services -- the bill was partially repealed in 2005, again by referendum. After Colorado, despite billionaire-funded campaigns in around a dozen states. No other state has passed TABOR.

Except in Rhode Island, where, in 2006, under the leadership of Senate President Teresa Paiva-Weed and Governor Donald Carcieri, the state enacted a tax cap that was actually more restrictive than TABOR. The new law lowered the limit on increases and changed it to apply to the amount collected, rather than the tax rate. The number is written into law, so a city or town can increase its tax revenue by no more than 4% in years with zero inflation and in years with 4% inflation. And if the town grows by 5%, too bad, the limit is still 4%. If new construction increases the property tax base, it’s too bad; the limit is still 4%, and any increase in tax revenue above that must go toward lowering the tax rate rather than improving services.

This, of course, is crazy and a recipe for long-term municipal fiscal disaster, as cities and towns accumulate responsibilities and grow their populations while their overall budgets are strictly limited. Even beyond their population growth, in the past few years, the state has imposed new education requirements for local school districts, new housing and reporting requirements for city and town planners, new records requirements for municipal clerks, new insurance requirements for fire departments, new disability requirements for injured police officers, and more. Whatever you think of these changes, they all cost money and must be accomplished within the budget constraints established almost two decades ago.

The entirely predictable result of the 2006 reform has been increased pressure on municipal budgets across the state, with results ranging from the merely disappointing — such as the end of free swim lessons at the town beach or the curtailment of library hours in my relatively prosperous town — to the utterly catastrophic, such as the cities’ of Providence and Central Falls inability to fund their schools properly. “Doing more with less” is a slogan, not a plan, and no municipality can realistically make that happen every single year, for all time. All of Rhode Island’s municipal governments are forced to be a little bit meaner and cheaper every year as town halls and schools feel a bit more squeezed each June.

Paiva-Weed, the author of this shambles, was nobody’s idea of a progressive, but it still seems strange to see a Democrat pass legislation that so thoroughly undercuts municipal services like education and fire protection. Again, TABOR was a right-wing obsession for over 15 years, and many states resisted the imposition of such simple-minded rules for exactly the reason we now see around us.

But the reason is actually pretty simple. Paiva-Weed heard many complaints about taxes and responded to them.

And, in fact, municipal expenses had gone up a lot over the previous decades, but largely because of our sprawling population and the resulting crazy growth felt even by the distant suburbs. For example, in 1960, our state had around 3000 miles of local streets and roads. By 2000, this was over 6500 miles, all of which needed to be maintained by some city or town. Our school districts made massive investments in new suburban schools while leaving urban schools to empty. We hired hundreds of police officers in communities that do not need them nearly as much as our cities do. Suburbs are expensive, and, along with inflation and the accumulation of state mandates, these were the primary drivers of aggregate municipal expenses. Public employee unions are often blamed for this increase, but the effects described here were well underway years before those unions were recognized in 1966. (See RI Policy Reporter 32 [http://whatcheer.net/ripr/ripr32.pdf] for more.)

None of this was helped by the inequitable ways we fund those increasing expenses. (Check out RI Policy Reporter issue 10 for more about that.) But this is a complicated explanation, and Paiva-Weed — as with so many of our friends and neighbors — did not care for them. Rather than stop to ask why property taxes continue to outpace inflation, she just demanded a tighter cap, making herself a hero to the right, people with whom she would find little agreement on almost anything else. But her “solution” was nothing of the kind, just a recipe for slow decline.

This is the core of the problem. If all you care about is taxes, then you are next-door neighbors to the anti-tax zealots who care about nothing but making their contribution to our collective project of self-government as small as possible. If you spend your time lobbying simply to make government cheaper, you are part of the problem, not the solution.

And of course, it’s hardly fair to single out Paiva-Weed. In addition to her fumbling of the property tax issue, consider all the state tax changes she did not write. Rhode Island cut state income taxes multiple times between 1995 and today, virtually all of which benefited the topmost taxpayers. Those cuts, today worth around $200 million per year, were in large part offset by increases in local property taxes, which affect the lowest end of the income spectrum far more heavily than the top. So not only did we cut taxes on rich people, we increased them on poor people. Using fairness and equity as a guide to government, rather than blindly pushing to lower the sticker price, would have prevented this, but it’s not too late to go back.

In truth, the whole reason we talk about a “sticker price” is because the actual price of a car is much more complicated than what is pasted on the windshield. Instead of focusing on the sticker price for government, we should be engaged in the project of making government better, fairer, and more equitable. For some people, this will make government cheaper, probably by a lot. For others, maybe not so much. In the end, though, few people regret pushing for justice.