Taxing questions

A 2-cent tax increase on a $300,000 home would cost $60 a year, or $5 a month.

On the state and national stages, associating with taxes, spending and expansive government can bring an abrupt end to a politician’s career. Anti-big government sentiment has gained steam through the Tea Party movement. It also has taken root locally, as Tea Party groups set up websites loosely allied with bloggers who question taxes and spending.

As an unrepentant tax-and-spend opponent, I expected local budget workshops to bring my own anti-tax feelings to the surface. Especially since three towns as well as the county appear to be leaning toward raising property taxes.

But I listened as elected officials argued for increases. Most work in the private sector, some as business owners. Republicans, conservative Democrats and others associated with property rights and less government were among the most ardent supporters of raising the tax burden. Something seemed wrong.

My first epiphany came when I opened my homeowner’s insurance renewal. I jumped off the “Beach Plan” years ago due to constant increases in wind and hail coverage. I switched to a private insurer that covered wind, hail and homeowners under one policy.

In 2007, my annual premiums were $1,942. In 2010, it is $2,512, a $570 increase in three years — 30 percent. Ten years ago, my total insurance premiums were about $1,200. This is from a private sector company on a home where a claim has never been filed.

My county taxes? In 2006: $1,174.94. Today? $1,174.94. Ten years ago? $128 less.

It’s hard to grasp why tax critics have gone apoplectic over a proposed 2-cent county tax increase that would amount to $90 a year on a $455,000 valuation while watching silently as state-regulated insurance rates climb over 100 percent in a decade.

The second epiphany came during an exchange between two Republicans, county Commissioners Jack Shea and Richard Johnson, at a county budget workshop. Shea opined that local government should operate like businesses. He said businesses don’t raise prices in bad economies. They cut expenses.

Johnson disagreed, and he was correct. Bank earnings have taken huge hits in the current economic crisis. Their response? Layoffs to reduce expenses and increases in interest rates on credit cards and bank fees.

While online sales of music have skyrocketed, the cost of downloading songs has risen from 99 cents to $1.29 in many cases, even as the expense of maintaining storage and supplying bandwidth have dramatically fallen. And does anyone believe a trip to the grocery store is less expensive now, in the midst of a mini-depression, than it was in 2006?

Yet somehow, we expect local government to supply the same services to its customers, the taxpayers, without ever raising prices, the tax rate, which serves as its revenue source.

Local critics point to extravagance by citing bits and pieces of what they consider budget outrages. Thus, while Dare County faces a $4.1 million budget gap, some poor department head with a $100,000 salary is held up as a sign of fiscal irresponsibility. Take away his salary, and you still have a gap of $4 million.

The Taj Mahal county complex in Manteo? Easy to criticize, harder to tell us what would have been a better choice. These buildings are financed, so the cost is spread out over many years. Reduce the cost of that complex by 50 percent, and would you even come close to balancing the budget?

What about the $1.5 million “doggie park” in Kitty Hawk? One implication is that the county is spending over seven figures for a place where dogs can run free in a tax year when revenues are declining and tax increases contemplated. Left out is the fact that 50 percent of the money to buy the land and 100 percent of the money to build the park were funded in the 2007 budget with borrowed funds. The other half of the land purchase came in 2008 under a state grant.

Of the total $1.5 million, $25,000 was dedicated to the dog walk. All this makes for great anti-government fodder, but does the criticism fairly describe the problems with the budget now? If the park was an extravagance, it probably should have been stopped in 2007.

In Nags Head, my hometown, the scenario is similar. Almost all elected officials are calling for a property tax increase. The debate is about whether it should be 1 or 2 cents.

As is the case with the county, job vacancies have remain unfilled for more than a few years. Employees have not received merit raises, contributions to retirement plans have been slashed and promotion opportunities are scant.

Johnson noted that unlike the folks in Washington, local government doesn’t throw millions of dollars at the “study of tsetse flies.” And in Nags Head, Commissioners Doug Remaley and Anna Sadler noted the town has been operating on bare-bones budgets for years.

Even if Nags Head took back every penny it ever spent pursuing beach nourishment, it would not solve the current budget crisis. The town has, for years, borrowed funds from both its own “savings” account as well as the water system’s “reserves” to keep tax and water rates level. Beach nourishment expenditures might have reduced internal borrowing but would not have eliminated the operating red ink.

Maybe it is time to “pay the fiddler” as Remaley suggests. You can find waste anywhere, even in companies considered highly efficient.

Tax increases? I hate them. But here’s the challenge. How do we devise a true alternative budget? Not one focused on an individual’s salary, a large building or a park. I agree a penny saved here and there can soon add up to real dollars.

But the real problem today is a lack of revenues. You can’t “unbuild” a park or a school, and it’s hard to blame government any more than the private sector for failing to predict just how far the economy would deteriorate when these buildings were first planned and built.

We’re talking millions of dollars of reduced revenues in Dare County, with more unfunded mandates flowing from Raleigh and Washington.

What we need is fiscal oversight going forward. But we must also be fair, and criticizing tax increases simply because they are tax increases isn’t enough.