Business: Trying to Change an Unfair Tax

IN their desperate search for cold cash, officials of financially strapped cities have lately been offering much apocalyptic prophecy about the impending bankruptcy of municipal governments (see THE NATION). Cities have reached the limit of their taxing powers, they insist, and the Federal Government must rush to their rescue. Touring New York City last week to impress on the public the urgency of their plight, the mayors of eleven cities sounded even gloomier than usual. Said Boston's Kevin White: "Look, we raise 70% of our money with the property tax, but half our property is untaxable and 20% of our people are on welfare. Could you run a business that way?"

One of the major problems is that municipal governments depend on property taxes, mainly from real estate, for an average of 85% of the money that they raise locally. This year these governments will collect some $37 billion in property taxes, up from $22.6 billion in 1965. But the property-tax system is a mess. Most fiscal experts agree that it is disgracefully administered and unfair to millions of individual taxpayers. Despite the legal requirement that property of equal value must be taxed alike, a Census Bureau study found that the typical homeowner can expect a tax bill that is 20% more—or less—than it ought to be. Some big, rich property owners pay little or nothing at all.

Erratic Assessments. In greatly differing ways, the cry for changes in the property tax has been picked up by men as disparate in their views as California Governor Ronald Reagan, Michigan Governor William Milliken, former Senator Paul Douglas. Educator Robert Hutchins and HUD Secretary George Romney. Ralph Nader has added the reform of property taxes to his roster of causes, charging that so much business and industrial real estate is undertaxed as to constitute "a national scandal of corruption, illegalities and incompetence." As a result, says Nader, "small businessmen and the owners of houses are paying nearly one-third more in taxes to meet local revenue needs." Prodded by Nader, Maine Senator Edmund Muskie's Subcommittee on Intergovernmental Relations plans to hold hearings on property taxes in several cities this spring.

Tax assessments are erratic and often unfair, partly because many tax assessors are ill-trained and poorly paid (average: $6,900) political creatures. About half of the nation's 15,000 chief assessors are elected, but few states require any professional qualifications for holding the office. Flouting the law, assessors often appraise properties at widely varying fractions of their true value. The difficulties of challenging appraisals are so formidable that the assessors generally get away with it.