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Consistency needed most in enforcing county's excise tax

July 18, 2010

For those who spend the better part of their adult lives grousing about taxes, the excise tax is low-hanging fruit. It's a tax on new development designed to pay for the government services that those developments will require. As taxes go, it's even less equitable than most.

The tax unfairly penalizes, for example, people who buy a large new home, but have no children and telecommute. By contrast, big families moving into the county, but buying an older home, escape this "growth tax" altogether.

The Washington County Commissioners put the wheels for the excise tax in motion seven years ago, and it's been torturing their souls ever since. Houses that are too big or too small, or targeted toward senior or work-force housing, all have generated angst and loopholes as the county tries to make the tax fair for everyone while still generating enough money to pay for roads and schools - which is a nice thought, but a practical impossibility.

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Currently, the commissioners are discussing a section of the ordinance that doubles the tax for developments built at a pace of more than 25 houses per year - which in itself might not be a bad idea if it works to standardize the tax.

But never mind the details of this proposal for the moment. What concerns us is that every time there is a change in the housing market, or every time a developer complains, the commissioners go scurrying back to the drawing board to tweak the legislation.

To simplify, the commissioners should focus on two questions: 1. Does growth have the potential to overly burden our roads and schools? And if the answer to this is yes, then 2. How much does the county need above and beyond its normal revenue streams to pay for those improvements?

That sum should be the excise tax, and it should be spread evenly over all development on the basis of square footage.

The problem with exceptions is that developers naturally will seek the least-taxed option. That's not a knock on developers, it's just sound business.

So when an "elderly housing" exemption is created, developers might build a glut of "elderly housing" subdivisions, whether there is anything particularly elderly about the houses or not.

This is the way of the market. As the commissioners seem to be realizing based on recent discussions, if taxes are doubled for subdivisions with more than 25 houses, developers might build three 25-home developments rather than one 75-home development. And that might not be the smartest use of county land.

So by creating exceptions through the years, the commissioners only have been chasing their tails, and not capturing any more fairness or revenue in the process.

Developers also need to know what the law is, and they need to know that it will not change based on the whim of some commissioner who might be listening to the specific needs of one particular developer or another.

If developers get wind that the tax is going to come down or go up, they will delay, or accelerate, construction accordingly. That's not the way supply and demand is supposed to work.

In short, we believe that the commissioners should have a blanket, no-loophole excise tax on development. If they can't live with that, they should repeal the tax altogether.

It might even be wise to let the matter rest until the newly elected commissioners (who might have their own ideas about the tax) are seated early next year. The excise tax is a levy in want of many things - but now, the thing it needs the most is some consistency.

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