Business: Trying to Change an Unfair Tax

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The temptations to favoritism and bribery are great. In Seattle and three of California's largest counties six years ago, assessors were caught taking bribes from tax consultants to lower their appraisals on property owned by national companies. In Chicago last fall. Cook County Assessor P.J. Cullerton and several subordinates were accused of giving assessment breaks to the politically friendly owners of several industrial and commercial properties. The upshot was a $9,000,000 rise in the valuations for eleven buildings, which will yield the city and county $1,000,000 a year more in taxes unless the owners can persuade the courts to overturn the increase. The nation needs fewer but better-trained chief assessors—certainly no more than one per county. They should be appointed and subject to strict supervision by state review boards that could also provide specialized expertise for such complex tasks as valuing one-of-a-kind industrial complexes. Among other things, this would make it more difficult for political machines to sell underassessment in return for campaign contributions.

Exemptions Everywhere. Another source of wide inequity is that much property is taxexempt. About a third of such property is owned by—and often produces profit for—governmental, religious, educational or charitable organizations. Measured by its dollar value, half or more of the real estate in Albany and Ithaca, N.Y., and Washington, D.C., is taxfree. The ratio is 33% or more in New York City, Pittsburgh and Harrisburg, Pa., and Montpelier, Vt. In a penetrating new book, The Free List (Russell Sage Foundation; $7.50), Journalist Alfred Balk argues that the exemptions have become so large, loose and inconsistent as to hurt all other property-taxpayers and the nation as a whole. Balk cites several authoritative estimates that $600 billion worth of real estate—one-third of the U.S. total—is not taxed at all. The cost in terms of lost taxes amounts to $310 a year per U.S. family, and it is rising.

Balk points out that Manhattan's 77-story Chrysler Building pays no property tax because its collegiate owner, Cooper Union, has an 1859 charter from the state legislature granting permanent exemption. The Chrysler Building will soon lose its distinction as the world's tallest tax exemption to the 110-story World Trade Center, now rising, says Balk, "like a tombstone over the tip of downtown Manhattan." The twin towers are being built by the quasi-public Port of New York Authority, which is tax-exempt but will make a token payment for city services.