Friday, January 16, 2009

You Ain’t Seen Nothin’ Yet*

The irony implicit in this story concerning the ongoing battle between Nuçi’s Space and the Unified Government of Athens-Clarke County over property taxes strikes me as absolutely delicious. It will also be missed by most of the locals.

The Classic City bills itself as a self-consciously progressive community, packed to the gills with every left-leaning pressure group and nonprofit organization imaginable. And the just-as-equally self-consciously progressive Unified Government is putting the screws to some of them in order to generate more property tax revenue.

As always, there is a bit of history to consider (paraphrased though it will be for the sake of space). Back in 2003, the Unified Government dug up a Georgia Supreme Court case from 1971 that said commercial property owned by nonprofits could be taxed if it was used to make money. Armed with that, the folks in the Tax Assessors office targeted the thrift store properties owned by the Salvation Army and Habitat for Humanity (not to mention the concession sales at Sanford Stadium and the inventory of the UGA bookstore).

At this point, none other than local State Representative Jane Kidd entered the fray by introducing a bill under the Gold Dome to exempt nonprofits from local property taxes. The bill failed to make it through the General Assembly in 2005 but was passed in 2006, being approved as a state constitutional amendment later that year. When Nuçi’s Space applied for a property tax exemption in 2007, the Unified Government turned it down on the basis that the property was rented out for parties on occasion.

For more background, see a couple of articles from the Banner-Herald here and here. Also, see this editorial; I would add that this is just the latest in a long series of court defeats on a variety of issues suffered by the Unified Government, legal setbacks that collectively have cost the taxpayers quite a bundle.

Consider also, though, that “nonprofit” and “tax-exempt” are not the same. The former is a state designation; registering with the Georgia Secretary of State as a “nonprofit” corporation is a comparatively simple process. It does not, however, bestow “tax-exempt status.” The latter is a federal designation accomplished through a much more involved process courtesy of the Internal Revenue Service having to do with income and sales taxes – it has nothing to do with local property taxes. Hence the necessity for a state constitutional amendment.

Be that as is may, to my mind arguments as to the property tax-exempt status of this or that charity miss the point entirely. I remained convinced that the problem with the Unified Government (and the Clarke County School District, the State of Georgia, etc.) is not due to any lack of revenue. The problem is continued unrestrained spending. Until and unless government at all levels gets spending under control, it will never have enough revenue.

Unfortunately, government exhibits no such realization. In economic good times, when government is typically flush with cash, it increases spending accordingly (usually on all manner of unnecessary things in my opinion). Then, in poor economic times, government increases spending so as (ostensibly) to help those in need or (equally ostensibly) stimulate the economy. By the way, how is that TARP thing going? Yeah, just what I thought.

Even as I write this, municipal, county, and state governments all across the country are creating new taxes by the score and jacking up existing taxes to cover decreased revenue projections. They are also lining up to get their cuts of the feds’ stimulus (and I use that term in the loosest of senses) and bailout largess.

So now trillion dollar per year deficits are projected as far as the fiscal eye can see – which means we either 1) sell more debt to countries like China (assuming that they will continue to buy it), 2) jack up taxes to an economically strangling degree, 3) inflate the currency by printing dollars, or 4) a combination of all three. None of these constitute sustainable strategies. The problem is that all of this stimulus and bailout money ultimately comes from the same place – the taxpayers.

Government at all levels is simply rearranging the proverbial deck chairs without fundamentally reconsidering the way it conducts fiscal or monetary policy. Of course, the obvious solution is for the politicians and bureaucrats to throttle back on the spending, simplify the tax codes (municipal, county, state, and federal), and stop incurring mountains of debt and unfunded liabilities.

Like that is going to happen.
Government at all levels will continue to ratchet up its efforts to grab every dollar it can even if, as has happened locally, it has to turn on the progressive voters who put into power. Get used to it.

*Apologies to BTO.

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