Only change needed to tax cap is its elimination

IT SEEMS THAT some of our state legislators were not content to tell cities, counties and school districts how much they can and can’t raise taxes, even in those cases where 100 percent of the local residents have a different idea of the appropriate level of taxation.

Now, egged on by the business community, there’s talk of going back and lowering those local tax rates, because some jurisdictions are charging more than some legislators who live on the other side of the state consider appropriate.

This latest assault on the prerogatives of local communities comes because a small number of school districts (and likely a few counties and cities as well) have done precisely what you would expect them to do after the Legislature passed a convoluted property tax law that rewards them for raising taxes this year.

We wish we were making all this up.

Anti-tax groups claim that “nearly 20” of the state’s 85 school districts (that would be less than a quarter) have raised taxes since the Legislature passed the property tax swap and cap law.

Businesses and some legislators are convinced that they are trying to game the law and soak businesses, and we’re sure that a few districts are doing that. After all, the law that eliminates homeowner taxes uses this coming year’s property tax collections to determine how much money the state sends each district in return; so districts that increase their taxes get extra state funding for years to come. But we’re also sure that some of those districts would have raised taxes this year even if the law hadn’t passed; with 85 districts, some are going to be raising taxes in any given year.

The promised extra funding for higher taxes isn’t the only part of the law driving up taxes. The Legislature also prohibited cities, counties and schools from increasing their tax rates by more than the growth in inflation plus population — after this year. If this part of the law doesn’t actually reward tax increases this year, it certainly encourages them.

Frankly, we’ve been impressed by how few cities, counties and school districts have rushed to raise property taxes. Mostly, what we’ve seen is some local officials deciding not to dip into their reserves to cover next year’s budget, but instead raising taxes, and saving those reserves to use after the cap is imposed.

Legislators are not similarly impressed by the restraint. Sen. Larry Martin says he will introduce legislation to roll back tax rates to 2005 levels, and use those rates as the basis for future property tax increases and school funding.

Frankly, it doesn’t make a lot of difference whether schools are funded based on 2005 or 2006 tax rates — either one is the wrong standard. Schools should be funded based on the number of students and the academic needs of those students. We already have formulas to determine that, and in fact those formulas will determine how much each district’s funding increases each year. It makes more sense to set all school funding based on those formulas, rather than rewarding those districts that collect more taxes than others.

As for the tax cap, we agree that the law needs changing, but not to reset the starting point. The cap needs to be eliminated. If local communities want pre-set limits on their local taxes, they can impose them. There is absolutely no justification for the Legislature to impose its vision of local government on local communities.