Next week my colleagues on the Assembly and I will vote on whether my proposal to clarify how the local tax cap is calculated will appear on April's ballot. I believe the "Taxpayer Protection Act," as it has become known, is the responsible thing to do because it prevents our local government from dramatically increasing property taxes from one year to the next.
Some will say, "Wait, isn't that what the municipal tax cap is supposed to do?" The answer to that question is an emphatic "Yes!" When the tax cap was approved by voters in 1983, it was designed to limit the amount the city could extract from taxpayers in a given year. The cap eliminated the possibility of wild upswings in taxation levels by forcing local government to constrain its growth from year to year. Without the cap, the city could go on a spending spree and increase property taxes by 15 percent or 20 percent in one year. This action would have a profound effect on families, businesses and folks on fixed incomes. The cap guards against this scenario, protecting taxpayers by creating a "growth ceiling" and thereby ensuring government growth occurs gradually and predictably.
Here's how it works: The cap limits how much taxes can increase from year to year by using a "base" to calculate the next year's tax cap. For the first 23 years, the "base" was calculated to be the amount of property taxes actually collected the prior year, rather than how much government could have collected. Using the amount actually collected as the base protected taxpayers against a dramatic upswing in the amount of taxes due the following year.
In 2006, the previous administration changed how the tax cap was calculated by using the higher number for the base -- the amount of property taxes that could have been collected instead of the amount actually collected. Using this higher number guaranteed a higher tax cap and exposed taxpayers to the potential of dramatic increases in property taxes, which was contrary to the cap's intent. The previous administration further inflated the base calculation by including in its higher number money received from state revenue sharing, i.e. money not even collected from taxpayers!
The Taxpayer Protection Act clarifies that the base for calculating the cap is the amount of taxes actually collected the previous year. Therefore, when the amount of property taxes to be collected is less than what is allowed under the tax cap, that lower amount is used as the base.
The numbers speak for themselves: From 1984 to 2005, the lower amount was used as the base. From 2006 -- 2009, the higher amount that "could have been collected" was used as the base. During these four years alone, the tax cap was artificially inflated by $76 million, and taxpayers would have been stuck with the bill if city officials had decided to spend it. I'm glad to see Mayor Sullivan reverted back to the tax cap's original interpretation and intent, but it's my belief that many taxpayers want this protection included in the municipal charter. This can only occur if the Assembly places the issue before the voters on April's ballot.
I urge my fellow Assembly members to allow this ballot initiative to move forward and come up for a public vote. If they decide not to support it, the question of whose interests they have at heart can reasonably be asked. Protect taxpayers, or protect government spending? For me, the choice is clear.
Chris Birch represents South Anchorage on the municipal Assembly.
By CHRIS BIRCH