Tuesday, April 27, 2010

Let's Have A Fair Property Tax

      A recent ruling by the Pennsylvania Supreme Court has created a windfall for most retirement communities in the state. Prior to the ruling, retirement communities were exempt from real estate taxes on property used for assisted living and nursing care facilities. Property devoted to independent living facilities was subject to such taxes. The court decided that the exemption was to be applied at the institutional level – not parcel by parcel. Thus if a retirement community was deemed to be a (C)ontinuing (C)are (R)etirement (C)ommunity, all of its property should be exempt from real estate taxes. The exemption is not automatic – CCRCs must apply for it.
      Naturally retirement communities all over the state began filing for exemption. In the Lancaster area, one such community made headlines when it won approval to pay the taxing authorities an annual $400,000 payment-in-lieu-of-taxes (PILOT) instead of the $900,000 it had been paying.
      Understandably such a drop in revenue is devastating to county governments and school districts, and the slack will need to be taken up by increases to other taxpayers and reduced services to everyone. The local authorities decided not to go to court because of the expense of fighting a case they could not win.
      There is no requirement that non-taxable entities negotiate a PILOT, although realizing that they do need water, fire protection, schools, etc., most if not all non-taxable organizations do make such arrangements. Even the federal government makes PILOTs, although President Bush did attempt unsuccessfully to cut them to 25% of the taxes which would otherwise have been paid to local governments.
      I live in a retirement community, and as a resident, I would think it remiss of the organization not to investigate a tax reduction.
      That said, I think there is an ethical problem in doing so. I do not think it is fair for any entity to be excused from taxes which ordinary citizens are required to pay. In my opinion, if normal property owners are required to pay taxes on their property, then every square inch of property in the district should be taxed except property owned by the taxing authority!. No exemptions! Period!
      That means that every retirement community, hospital, church, synagogue, each and every eleemosynary organization whatsoever would be required to stand on its own two feet.
      Think of the boon to the ordinary taxpayer. Revenues would go up, taxes would go down, and organizations which presently do not have to compete for space would be on a par with everyone else.
      Now I am not stupid enough to think that this will ever happen. But then, my grandparents never imagined social security, and neither did I think that we would ever have a national healthcare plan. Strange things happen.
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      Because his friends always raved about his homemade ice cream, John decided to start selling it. After conducting an exhaustive market survey, and meeting with a business consultant, he drew up a realistic business plan. Impressed with the plan, his bank agreed to lend him the money for the necessary equipment. He leased a small shop in an area of heavy foot traffic, and after three months, sales and profits were doing even better than he had anticipated.
      Then a war broke out in South America, and in one week the price of sugar doubled. In addition, a surge in the world wide demand for oil sent diesel fuel prices skyrocketing; as a result, higher transportation costs increased the price for milk and eggs by 30% in one month.
      John tried increasing his prices to cover the higher costs, but the fuel shortage was hurting everyone, and ice cream was one of the first luxuries that people gave up. Six months after the grand opening, John was forced to close his dream store.
      All the conditions for a successful business appeared to be in place for John’s ice cream store, but any entity operates in a universe of competing activities . . . The creative process driving John’s business was overwhelmed by creative processes in the larger universe.
      Introduction – The Spirit Runs Through It.

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