The Highest Taxed Communities for 2013
Friday, November 09, 2012
Some of the most dramatic increases are in urban communities facing financial distress. They also happen to be the places where taxpayers can least afford the hikes.
In Woonsocket, the residential rate was hiked by $7.16 per one thousand in assessed values. The second highest increase was in Pawtucket, where the residential rate is now $5.28 higher. Other communities where the rate went up by more than a dollar were Tiverton, Cranston, Foster, East Greenwich, and Middletown. (See below table for the complete list of all the new rates by community.)
Poorer, urban communities are highest taxed
When the tax rate data is adjusted to take into account the wealth of property and the median per capita income, the highest taxed communities in Rhode Island are: Providence, Central Falls, Woonsocket, Pawtucket, and North Providence. Rounding out the top ten are Cranston, Johnston, and Warwick.
“The chart shows there is a continuing pattern in the state where the higher residential property tax burdens are occurring in the communities that can least afford them,” said Donna Perry, the executive director of the Rhode Island Statewide Coalition. “The urban core communities, including Providence, Pawtucket, Cranston, East Providence, and Johnston, are carrying budget deficits, are seeing the higher number of struggling businesses, tend to have the less desirable school systems, yet they are carrying the greater residential tax burdens.
Just nine communities saw no increase in their taxes.
And four communities saw modest decreases in at least one of their four local tax rates: North Smithfield, Glocester, Warren, and South Kingstown.
Taxpayers who want to compare the tax burdens between communities can’t simply compare tax rates from one city or town to another, according to Tom Sgouros, a progressive blogger and former candidate for state Treasurer.
“Raw tax rates don’t tell the real story,” Sgouros said. “The real story is that the cities are getting the shaft from the state, and it shows up in the equalized numbers defined in state law. Providence, Woonsocket, Central Falls, and Pawtucket have the highest taxes in the state according to their ability to pay—as much or more than twice the state average—and the legislature has only made the problem worse by cutting state aid and increasing their reliance on the property tax.”
The most meaningful measure of what communities are the highest taxed, Sgouros said, are their “tax capacities” and their “tax efforts.” The tax capacity measures the ability of a community to pay taxes and takes into account the total amount of property and median per capita income. By definition, cities and towns that are wealthier have a higher tax capacity.
The tax effort is how much of that capacity is being tapped by local officials. Those cities and towns that rank higher in terms of “tax effort” are higher taxed than those that rank lower. (See below table.)
Overall, 15 cities and towns are taxing above capacity. Those communities topping the list are within the urban core of the state.
“Property taxes are part of the reason that we have a regressive tax structure that asks low and moderate income Rhode Islanders to contribute more of their income to public services than higher income [Rhode Islanders],” said Kate Brewster, the executive director of the Economic Progress Institute, formerly the Poverty Institute.
She noted that nationally Rhode Island ranks as having the fifth highest property tax burden.
“The property tax conundrum is significant and it seems to be a problem in the northeast,” Brewster said. She noted that state public policy makers have yet to develop an alternative to property taxes that is not regressive.
Uncertain outlook for taxes
One year ago, the outlook for property taxes was uncertain. Taxpayer advocates expressed deep concern that local payers would take a big hit in their rates should the General Assembly fail to pass pension reform. Absent reform, an estimated total of 93 million more would have been owed in local pension contributions.
Pension reform ended up passing, perhaps avoiding the sharp increases that worried taxpayer advocates. However, the state has yet to tackle the other half of public retiree obligations: unfunded liabilities in retiree health care.
“Rhode Island has a critical dilemma where the local tax burden does not match the average city or town resident’s ability to pay it, yet budgets remain bloated, the quality of services keeps diminishing, and the employee retirement burden just keeps piling up,” Perry said. “It seems the goal to bring about more affordable communities in the state continues to move farther and farther out of reach.”
In the wake of this week’s elections, she expressed doubt that there would be much of an appetite in the Rhode Island General Assembly to pass reforms that will benefit local property taxpayers.
“The 2012 election season saw some good reformer styled legislators from both parties ‘taken out,’ generally by union interests who are intent on silencing those who advocate for pension reform, both statewide or in local municipal plans,” Perry said. “The loss of certain Republicans and some centrist Democrats jeopardizes the chances for getting additional needed reforms through in the months to come.”
EXTRA: Understanding the data
Immediately below is one table showing all four rates—residential, commercial, personal, and motor vehicle—for each of the 39 cities and towns in Rhode Island. Next to each rate is a column showing the change, negative or positive, from fiscal year 2012 to fiscal year 2013.
The communities are ranked from most to least taxed, based on a simple sum of all four tax rates. The ranking offers a very rough measure of which communities are the most taxed.
The most meaningful comparison, however, is one that takes into account income and the amount of property in each community. Data that adjusts for those factors is provided in the middle table. The ability to pay is technically known as the “tax capacity.” How much is sought in taxes is the “tax effort.” Both figures are calculated on a per capita basis.
The last two tables break out data from the first table, showing a raw ranking by residential and commercial tax rates for 2013.
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