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Excise tax vehicle is careening out of control

March 10, 2013|By TIM ROWLAND

Those of us who enjoy the foibles of local politics get positively giddy when we see the words “excise tax” on the Washington County Commissioners’ agenda. Like a toddler with a can of Silly String, you just know something good is going to happen when they begin fiddling with tax policy.

The county has always treated the tax like a go-kart that can be driven with precision through every sharp economic curve that comes along. They aren’t alone. Through history, governments have tried to modify behavior through taxation, with mixed and often unpredictable results.

Slow-growth groups in Washington County will see the commissioners’ move this week to further gut the excise tax as confirmation that they are bought and paid for by developers. Maybe, maybe not. There is certainly evidence that the county is more willing to listen to builders than to, say, those who are interested in parks and recreation. But builders do contribute directly to the county’s economy, so some degree of latitude is forgivable.

What is not forgivable is that, instead of manipulating the excise tax with go-kart-like precision, the county is lurching and careening along a narrow country road like someone who has just exited the tavern at 2 in the morning. In no particular order, here are the problems:

 Routinely lowering the tax rate, and the square footage guidelines it applies to, might indeed spur development. But it might just as easily retard growth. If builders sense the commissioners are wishy-washy on the subject, they might hold out, hoping for a better deal on down the road. It’s similar to online Christmas shopping; if you get 30 percent off today, who’s to say you won’t get 70 percent off tomorrow?

 Every dollar in taxation that the commissioners exempt from developers is a dollar that must be paid by regular county taxpayers. It’s been incorrectly stated that excise taxes are designed to slow growth. In fact, the theory behind the excise tax is that developers who create growth should have an added tax burden to help pay for the roads, schools and sewers that the development will require. Many developers across the country accept this as a cost of doing business, and price it into their construction.

 Like most every other part of the country, Washington County has been suffering from a surplus of housing. Decreasing the cost of homebuilding perversely adds to this problem. It might help a builder or two in the short run, but virtually no one else (particularly someone with a house for sale) wins in the long run. The communities that are recovering fastest from the housing crisis are the ones that have sold off their surplus housing inventories. By adding homes to the glut, our commissioners have demonstrated that they do not understand what is a rather fundamental concept.

 Finally, and most importantly, the commissioners are probably lowering the excise tax at precisely the wrong time. They are succumbing to the popular mistake of assuming that the way economic conditions are now at this very second will be the same way they are two, five and 10 years from now. By shooting behind a moving target, the commissioners have fallen into the same trap as those who believe they can time the stock market. Development revenue is needed most in the times of greatest development, again to pay for the consequences of growth. By getting out of the market just as the recovery gathers steam, the commissioners are probably “selling” their taxing authority right before a run-up. By the time the housing market reaches its next peak and the commissioners need to jump back in to pay for schools and roads, it will be too late. Traffic will bind up the highways and portable classrooms will dot the landscape.

The pity is that, way back when, it took an act of courage for state and local lawmakers to enact a mechanism that fairly distributed the costs associated with growth. But rather than use this mechanism for the good of the entire community, subsequent commissioners have frittered away what was once a hard-won battle for tax equity.

Tim Rowland is a Herald-Mail columnist. His email address is timr@herald-mail.com.

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