Do We Need a Lower Property Tax Limit?
With home values rising, Ward 2 Councilmember Jack Evans introduced legislation yesterday to limit increases in property taxes. Currently, the growth in a homeowner's taxable assessment is limited to 10 percent, lowered from an earlier 25 percent limit. Evans' bill would reduce the cap to 5 percent. It would also eliminate the current 40 percent floor, which requires that people pay tax on at least 40 percent of their property, even if that means an increase of more than 10 percent.
Evans argues that very few D.C. residents see 10 percent increases in their income from year to year, so it's not fair to ask them to pay 10 percent more property tax if their home value goes up or if there's a gap between their property's assessed value and taxable value, as there often is.
But according to Ed Lazere, executive director of the D.C. Fiscal Policy Institute, Evans' legislation would solve a problem that doesn't really exist—and the benefits would go to Evans' Ward 2 constituents a lot more than most other D.C. residents.
Lazere says there are two problems with Evans' legislation, a version of which he also introduced late last year. First, D.C.'s property taxes are already the lowest in the region, due to lower rates and more release mechanisms: According to a DCFPI analysis from last year, a D.C. homeowner with a $500,000 home pays $2,718 in property taxes, versus $5,393 in Prince George's County and $4,688 in Montgomery County.
"It’s not really clear that homeowner property taxes are a problem," Lazere says. "If you're looking at any D.C. tax as too high, you probably wouldn’t put the homeowner property tax on that list."
The second problem is who benefits from Evans' legislation. "Most of the benefits of capping, going from a 10 percent to a 5 percent cap, would go to people who own the most expensive homes," Lazere says. DCFPI, which advocates for both fiscal prudence and policies that benefit low-income residents, found that homes worth over $550,000 would get 65 percent of the benefit, although they represent just 31 percent of D.C. homes.
"If you look at the benefits by ward, it’s even more skewed," Lazere says. "In Ward 7 and Ward 8, the homeownership rate is very low. Wards 2 and 3 combined would get half of the total tax savings."
Evans, not surprisingly, disagrees with Lazere's assessment.
"He’s dead wrong," Evans says. "The taxes in the District are far higher than they are in Virginia as a composite. He can probably find the one example where they’re relatively even, but as a general propposition, the taxes in the District are far higher."
Evans says the city's income, sales, and commercial property taxes are much higher than elsewhere in the region, though he acknowledges that residential property taxes are relatively on par with neighboring jurisdictions. But ultimately, taxes are taxes, regardless of where they come from, and he says residents complain to him all the time of their rising property taxes.
"Where Ed is right, although it doesn't matter, is that if you live in an expensive home, you’re going to realize a bigger dollar savings," he says, adding that "nobody living in wards 2 and 3 is having 10 percent increases in their salary either." He also notes that while residents of wards 2 and 3 might be benefiting now, it's homes in wards 5, 7, and 8 that are likely to see big increases in value—and taxes—in years to come.
If Evans had his way, he'd ban property tax increases altogether. "I’d go down to zero if I could," he says of the cap, "but I can’t get the votes for that."
I asked Evans why, if income and sales taxes are disproportionately high for the region when residential property taxes aren't, he's targeting the latter. His answer: because we can afford it.
"Frankly, the city doesn’t need the money," he says. "We don’t need to be gouging our residential homeowners when we’re spending more moeny than at any time in the history of the city. Every aspect of our government has more money today than they’ve ever had before."
And if his plan benefits wealthier D.C. residents, well, he says, they could use a little relief, too. "$250,000 in Washington, that’s a lot of money, but it doesn’t get you very far here," he says.
Add that to the list of problems I wish I had.
Photo by Darrow Montgomery