Our View: An excessive tax increase

Our View: An excessive tax increase

In most years, a 2-cent increase in the city’s proposed tax rate would be acceptable, as inflation raises the cost of doing business year over year. But this isn’t most years.

This year, property values in Alexandria went through the roof. They jumped enough to fully fund a reasonable budget while also lowering, not raising, the tax rate by several cents.

Tax assessments are up by 4.15 percent on all taxable property, and by 4.62 percent overall on residential property. Condo values jumped the most, by 5.32 percent.

This is a good news/bad news scenario for homeowners. On one hand, the value of what for many people is their most significant asset – their home – increased significantly in 2019, lifted by overall strong economic growth. But that very increase, absent a reduction in the rate of taxation, is resulting in a major hike in property owners’ tax bills.

The tax bill for the average city homeowner, if this increase is approved by city council, would rise by $428 in one year, for a whopping tax increase of 6.8 percent over last year. This is a sizable burden on Alexandria taxpayers and will be made worse if the robust economic growth of the last few years slows or reverses during 2020.

It’s also a burden that will be felt at all income levels, as rents will almost certainly rise sharply as a result of the tax spike, making Alexandria’s dwindling supply of affordable housing units more expensive.

The budget proposed by City Manager Mark Jinks increases spending in Alexandria by 4.5 percent over last year. While spending has to keep pace with inflation, this spending increase is fully two percent more than the current national inflation rate of 2.5 percent.

That’s a lot of spending.

It would have been more fiscally prudent, and fair to Alexandria’s taxpayers, to increase city spending along the rate of inflation. Any revenue above this amount could have then either been put to capital spending projects, or even returned to city taxpayers in the form of a rate decrease.

After all, residential property taxes comprise only a small part of the overall tax burden shouldered by residents. Earnings, investments and personal property are all taxed at the federal, state or local level, plus there’s both state and local sales taxes – which are the most regressive form of taxation – along with fees for services, such as sewer and water.

What’s also disturbing about the 2-cent tax hike on top of the assessment-created tax spike is that it’s dedicated funding. While the Times has no problem with dedicated funding per se, some city leaders, such as Mayor Justin Wilson, have taken previous, well-documented stances against dedicated funding on principle.

In 2018, Wilson argued against dedicating the 1-cent increase in the local restaurant tax to affordable housing, saying that he opposed set asides in general. Wilson and others have also opposed having funding in the budget dedicated to open spaces.

Will Wilson now lead the charge against dedicating these 2 cents – not to mention the additional, dedicated future tax increases Jinks recommends – to spending on capital projects?

Jinks left little room for parsing words about whether this is a set-aside when he stated in his budget release, “However, due to capital investment needs, I am proposing a 2-cent increase in the real estate tax rate to be applied exclusively to Schools and City capital projects.” If something is applied exclusively to one thing, then it’s a set-aside.

While last year we praised Jinks for fiscal prudence in his proposed budget, we unfortunately can’t say the same for his FY2021 proposal.