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Thursday, September 27, 2012

UPDATED: Talking Taxes

Let’s have an honest discussion about taxes
By Will Collette

The biggest mistake Charlestown Democrats made last November when they presented a proposal for a $1000 Homestead Tax Credit to the Town Council was to tell the truth.

Town Democrats did a full disclosure on who would benefit – homeowners who make Charlestown their permanent home, with the greatest benefit going to Charlestown citizens with homes in the $200-$500K range – and who would not, specifically, nonresident property owners. 

They talked about how much it would cost. Both here on Progressive Charlestown and on the website of the Charlestown Democratic Town Committee, we provided you with our Magic Tax Calculator so you could see exactly how you would make out under the CDTC proposal.

Town Democrats explained why they were proposing the tax credit plan – that town reassessments gave million-dollar properties, most of which are owned by nonresidents, a 7% break under the new tax rate, plus many of the communities where Charlestown’s nonresident property owners live grant Homestead property tax breaks. Further, non-residents do not share in the costs of state infrastructure that those of us who live here pay through state taxes, but our part-time visitors do not.

But that sparked a revolt by the Charlestown Citizens Alliance (CCA) and RI Statewide Coalition (RISC), both of whom have a long history of advocacy for wealthy property owners and the “rights” of nonresidents.

The Homestead Tax Credit idea died at last December’s Town Council meeting, which was stormed by “the riot of the rich” – a roomful of angry nonresidents who made all manner of veiled and not-so-veiled threats about what they would do if they had to pay extra taxes. Some actual Charlestown residents took those threats seriously and called for killing the proposal so as not to offend our landed gentry and force them to take their mansions and move them to China.

CCA Town Council Boss Tom Gentz and his sidekick Dan Slattery. as well as Planning Commissar Ruth Platner have repeatedly noted that the rich nonresidents owning million-dollar mansions by the ocean support the town through the large tax bills their huge houses generate. 

Well of course they do. If you're from Connecticut and you buy a $6 million vacation "cottage" in Charlestown, instead of, for example, a $20 million equivalent in East Hampton, of course you're going to pay taxes on a $6 million house. What does the CCA want to do? Give a discount to property owners with $6 million houses? As if we were picking on the rich by not giving them – and not struggling middle-income families – a tax break. 

As if the owners of these big, beautiful and expensive houses didn't choose Charlestown for their second, or perhaps third or fourth home. As if paying two or three thousand extra in taxes will send the owners of a $6 million property down the slippery slope toward pauperism. Or force them to take some terrible retailiatory act against the town.

Look, our wealthy out-of-state landowners come here because it's cheaper to own a mansion off of West Beach than the equivalent in the Hamptons. And it's cooler here in the summertime than Florida or the Cayman Islands.

From time to time, the “Voice of the CCA” Mike Chambers and CCA Town Council wannabe George Tremblay have referred back to the CDTC Tax Credit proposal as an example of how town Democrats want to foment class war. The CCA is shocked, shocked, at the idea of taxing the rich differently than everyone else. They're even more shocked that anyone might suggest that, perhaps, the rich could pay a little more in taxes on their luxury vacation homes than, say some struggling middle-class family whose only home is Charlestown.

I guess you'd have to place the CCA a lot closer to Mitt Romney on the political spectrum than some radical like, for example, Thomas Jefferson. 

Actually, all we want to do is give working families in Charlestown a fair chance to hold their own in the class war that the CCA, RISC and their wealthy nonresident backers have been waging against them. Charlestown’s 1% has been steadily attacking Charlestown’s 99% and, as the saying goes, now that we’re fighting back, they want to call it class war.

As we did the research on the Homestead exemption, we noted that some jurisdictions – the state of Indiana is a good example – use a hybrid formula that combines a tax credit with a percentage reduction in a way that equalizes its effect from homes with low assessments to high assessments. These are all things that could have been discussed, except the CCA majority killed Gregg Avedisian’s motion for a study group at the January Town Council meeting.

During the run-up to the “riot of the rich” climax last December, I wrote a series of seven articles describing Charlestown’s existing system of tax breaks and incentives. What the CCA and RISC don’t like to admit is that taxes have always been used to reflect the values and priorities of the community. That’s why there is general consensus supporting tax relief to certain taxpayers and certain uses. In Charlestown and elsewhere, these include veterans, the elderly, the blind and disabled, religious institutions, nonprofits and certain conservation uses. 

Chateau Platner - from the official Charlestown Tax Assessor's database
Contains updated narrative to be more precise about how Planning Commissar Ruth Platner gets her fantastic, low tax bill.: to promote farms, forest and open space, we grant very generous tax breaks to owners of properties designated for those purposes. The head of our Planning Commission, Commissar Ruth Platner, enjoys a fantastic tax break on her 13.5 acres and 2500-square-foot house because a portion of her land is deed-restricted to agricultural use. 

Indeed, she and her husband Cliff Vanover pay less property tax than a neighbor of theirs who owns a mere 3.1-acre property with a 900-sq-ft. house.

We have, for inexplicable reasons, decided to tax the Shelter Harbor Golf Club and Quonnie Yacht Club as though they were open space. The contrast is stark when you note that the two-thirds of the Shelter Harbor Golf Club that lies in Westerly is taxed as commercial property, while we let them slide at the bargain-basement tax rate for open space. What makes their land in Westerly more valuable than their land here in Charlestown?

We also grant tax exemptions to houses of worship and parsonages and to nonprofit organizations. Again, this is tax policy reflecting social values.

Shelter Harbor Golf Club - taxed as open space
According to Charlestown Tax Assessor Ken Swain, more than 40% of Charlestown’s land (spread around 236 different properties across town) is tax-exempt.

When we make taxing decisions that reduce taxes for one class of properties, the reduction in that tax must be covered by higher taxes for everyone else. The more costly the tax break, the more other people’s taxes rise. Simple math.

To use the logic, such as it is, of Mike Chambers and George Tremblay, these tax breaks are discriminatory against non-veterans, the able bodied, the irreligious, businesses and a host of others who are not tax-favored under existing Charlestown tax policy.

The CCA’s bias for favoring the rich and for wanting more and more open space means higher taxes for middle-income Charlestown homeowners and small businesses. Again, simple math.

According to their version of reality, this is fair. According to their version of reality, restoring some equity to the tax system is unfair, discriminatory and, of course, not civil.

What Charlestown needs is to take a good, hard look at our tax policies. As a community, we must decide what is important to us and let our tax policies reflect those priorities.

There is a stark contrast between the position of the CCA on children, more specifically on children who go to Chariho schools, and their position on open space. The CCA views these children as a tax burden, as parasites that plague their true constituency of wealthy retirees. But is there a consensus in Charlestown that schoolchildren are parasites?

Or are children and their education an integral part of a civilized society, no more optional than police and fire protection or roads? Some things are optional – buying more open space is one example – but schooling children is not.

Bear in mind that none of us are allowed to pay our taxes on an à la carte basis. That means we don’t get to decide, except at the ballot box, that we don’t want to support schools because we have no school-age children, or police because we believe in vigilante justice, or roads because we don’t drive a vehicle.

The CCA has no hesitation about raising Charlestown taxes to quench their desperate thirst for more and more open space, where we actually pay twice – once to acquire the land by paying long-term interest on the bonds we issue to finance the purchase and again to either keep the land off the tax rolls or tax it at only a small fraction of its worth.

We pay these dual costs for open space for a whole lot longer than the dreaded cost of educating Chariho schoolchilden. At most, we pay the 13 years of K through 12 for schoolkids who go all the way through Chariho, but we pay interest and principal on the bonds over the long term and we lose the tax revenue those properties might have paid for generations. 

Before I get quoted out of context, I’m not saying open space acquisition is a bad investment per se – I support strategic acquisition of open space – but I condemn the double standard of attacking the cost of Chariho schoolchildren while ignoring the costs of open space. Plus, the education of children is not only necessary but a state mandate. Acquisition of open space is an option. 

Besides, where is the CCA’s cost calculator for open space? The only time I remember the CCA talking about this subject was when CCA Steering Committee member Cliff Vanover spouted some unsubstantiated nonsense during his failed 2010 Town Council candidacy. Cliff claimed that adding more and more open space to the town’s already substantial inventory will increase property values. When in fact, as I stated above, every time we take land off the tax rolls, everyone else’s taxes go up to compensate.

The real tax debate – and one we need to have – is over what is right and what kind of tax system we need to reflect our community’s needs and priorities. That’s a class war that’s worth fighting.

For information on Charlestown’s current property tax system, please read these articles:

Part 1: Waiver of interest

Part 2: Appealing your assessment

Part 3: Tax credits for the blind and disabled

Part 4: Farms, Forest and Open Space

Part 5: Tax Credits for Veterans

Part 6: Tax breaks for the elderly