More Taxation by Misrepresentation
April 7, 2003
By Arthur G. Purves
President, Fairfax County Taxpayers Alliance
Madam Chairman and Members of the Board:
I would like to address some concerns I have about the Fairfax County budget process.
First, the April 4, 2003, Northern Virginia Journal quoted the supervisor from Mason District as saying that those who testify against higher taxes, "want us to cut the budget, cut spending, but offer no real solutions as to what programs should be cut."
Last year I identified for this Board $400 million in wasteful spending. You may recall that my presentation took longer than ten minutes, and the chair, with the board’s consent, gave me extra time to complete my presentation. Since then, the presentation has been posted, and still is posted, on the home page of the Fairfax County Taxpayers Alliance website, www.fcta.org.
Second, before supervisors’ election four years ago, two prominent members of this board told the press that there were no plans to raise taxes after the election. The chairman personally told me and reporters that she, " … did not foresee raising taxes after the next election."
An October 10, 1999, article in the Times Community Newspapers described a press conference called by the chairman of the Fairfax County Republican Committee. The purpose of the press conference was to predict that Democrats on the Board of Supervisors were planning to raise taxes after the election.
The supervisor from Providence District was quoted in the article as vigorously denying any plans to raise taxes. Such plans were referred to as "pure fiction" and a "fairy tale."
In the four years since those denials, this Board has raised real estate taxes on the typical household by over $1000 dollars.
Third, state law requires the Board, whenever there is a large increase in assessments, to reset the real estate tax rate to an amount that offsets the assessment increase. If the supervisors then wish to set the rate at an amount greater than the reduced rate to offset assessments, the Board must advertise the new rate as a tax increase and publish an announcement of the tax increase in the newspaper.
For this year, the reduced rate that offsets the ten percent increase in assessments is $1.10. Therefore, the Board’s advertised rate of $1.19 represents a nine-cent tax hike, and not the two-cent reduction widely advertised in county literature.
The Board complies with the letter of the law. After asking the Clerk to the Board where I might find the advertisement announcing the nine-cent tax hike, I was able to find it on page D-7 in the classified section of the March 20, 2003, Washington Times.
The Office of Public Affairs even posted the tax-hike announcement on the county’s website, but it is well hidden. From the county’s home page you click on "Taxes and Revenue". Of the dozens of links on the next page, you click on "budget". Then you click on "FY 2004 Advertised Budget & Assessment Information". From there you click on "Budget Timeline". Then you click on "tax rate increase", which downloads a pdf file with the announcement of the nine-cent tax hike.
However, the reduced tax rate that offsets assessment increases is not mentioned in any of the county budget documents.
After the county executive’s budget press conference, I asked the county’s chief financial officer what the reduced tax rate was. I was answered that the analysis had not yet been done but would be available by phoning the county executive’s office in a couple of weeks.
The "analysis" takes a few seconds. It consists of dividing the current real estate tax rate, $1.21, by one plus the increase in assessments, exclusive of growth. This increase, 9.94 percent, appears on page 55 of the FY2004 Advertised Budget Plan Overview volume.
Over the last four years, the assessment of the typical Fairfax County household has increased sixty percent. The tax rate that is required to offset the sixty-percent increase in assessments is 76 cents. The $1.16 rate that the Board is considering is only a token reduction.
Fourth, as in years past, the county executive’s Advertised Budget Presentation compares, on page 31, the growth of county staff (124 new positions) to the growth in county population (24 percent) since 1991. He points out that while population increased 24 percent, county staff increased only one percent.
What is omitted is why he cites 1991. The reason is that an explosive 16-year growth period in county government peaked in 1991. During that period county staff increased three times faster than county population. Since 1991 the county should have been reducing staff to reverse the excesses of the gold-plated 80s.
Fifth, we are repeatedly told that Richmond is the reason for the increase in real estate taxes. If only Richmond would return more than 19 cents of our tax dollar, then real estate taxes would not increase. The reason we get back only a fraction of our taxes is because our taxes are sent to impoverished areas of the state. Those who blame Richmond need to say where Richmond should cut its spending.
Moreover, Fairfax County spending, even when adjusted for inflation, is at an all-time high. The county has never had more money per resident than it has now. For five years, revenue has increased between six and seven percent per year, while the growth of population, school enrollment and inflation has been about 4.5 percent. It is the county’s-out-of-control spending that drives up taxes.
When I mentioned at the County Executive’s budget press conference that Fairfax County inflation-adjusted revenues per resident were at an all-time high, the County Executive was not sure that that was the case.
Sixth, we are told that if only Richmond would allow the Board to raise cigarette taxes, meals taxes, and hotel taxes, the county would get an extra $76 million, and that would permit a six-cent reduction in the real estate tax. Tax restructuring, we are told, is the answer.
What’s not clear is how taxpayers benefit in paying higher cigarette and meals taxes instead of higher real estate taxes. Hotel taxes hikes would be reflected in higher business and government costs, since much travel is business related.
Moreover, there has been major tax restructuring. To reimburse the county for the car tax rollback, the state now gives the county an extra $200 million per year from state income tax revenues. This is $200 million of state revenue that the county did not receive before 1999. The county then recouped its lower car-tax collections by increasing the real estate taxes. Today the typical Fairfax County household’s real estate tax is the same as the combined real estate and car taxes before the car-tax rollback began.
If an extra $200 million does not permit the Board to control real estate taxes, it is unlikely that an extra $76 million from increased cigarette, hotel, and meals taxes would either.
Seventh, in his annual budget letter, the school superintendent made misleading statements about the school budget. He said the school budget had been cut $80.5 million in the last three years. In fact it increased by $345 million. True, his budget requests were cut $80.5 million, but that is not what he said.
The superintendent also stated, "Student membership growth continues to outpace available revenue …" In fact, school revenue is outpacing membership. Since 1998 inflation-adjusted spending per student has increased by 12 percent (from $8600 per student to $9600).
Between the FY2002 school budget and the proposed FY2004 school budget, inflation-adjusted school spending is increasing three times faster than enrollment. Since Dr. Domenech took office, school staff has increased two times faster than enrollment.
Having observed for years the chronic misrepresentation of government spending by the county and the school system, I would submit that our current form of government is best described as "taxation by misrepresentation."
Updated April 11, 2003
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