More and More Taxpayers off the Hook

As income tax day, this year April 17th, came and went many people lamented having to file. But as the Tax Foundation points out, filing does not necessarily imply owing money to the Federal government.

In 2011 they released information detailing the percentage of filers who have either zero or negative tax liability. The table, dating from 1950 to 2009, shows that since 1984 when the rate was about 18 percent it has been rising steadily. It surpassed 25 percent in 1998, then 30 percent for the first time in 2002 before finally reaching 41.7 percent in 2009. While we haven’t quite reached the point where half of Federal income tax filers are submitting returns with either a zero or negative liability, if this trend continues, that mark may not be far off.

But liberals are quick to dismiss this statistic, even though it can be substantiated, because it doesn’t advance their agenda of squeezing more from the rich and redistributing wealth. They like to fan the flames of class warfare and are quick to offer their own statistics, often unsubstantiated and taken on blind faith, to promote their ideology. And of course since they can’t argue with the message, they shoot the messenger and anyone affiliated with them.

Household Income and Property Taxes

A previous blog discussed the Tax Foundation data and the additional light shed on Pennsylvania’s counties in a state study. Allegheny County ranked 1st in the state when measuring tax burden by the median property tax bill and the median value of a home.

How about tax burden when measuring property taxes paid as a percentage of income? In Allegheny County with the median property tax bill of $2,547 and median household income of $61.9k, the property tax burden works out to 4.1%. The U.S. average complied by the Foundation was 2.85% (taxes of $1,854 and household income of $65,088).

Unlike the taxes/home value metric that placed Allegheny County at the top of the state’s ranking, the 4.1% was lower than that of many other counties, including Berks (4.54%), Delaware (4.97%), Northampton (4.67%), and Monroe (5.31%, the state’s highest). Using the County’s median household income to find similar counties (in the $60k to $66k range) found counties that fell below Allegheny’s tax-to-income burden (Adams County, 3.05%, Butler County, 2.97%, and six others) as well as counties that were above Allegheny County’s level (Berks, Monroe, and Pike, 4.59%).

Food for thought as the County works through the process of a new reasessment for 2012.

Property Tax Burdens Across the State

In a study released this fall by the state’s Legislative and Budget Finance Committee (LBFC) there is an additional look at the data produced by the Tax Foundation that we wrote about in a blog in late September. That data focused on counties with more than 65k population and, using data from the American Community Survey (self-reported), determined property tax burdens for residents of those counties. Trying to paint the picture of a typical homeowner, the Foundation used median property tax payments against median home value to compute a "tax as a % of home value".

Allegheny County did not come out looking good in that national measure, ranking 42nd out of counties across the U.S. with 2.26% based on median home value of $112k and median property taxes of $2,547. The U.S. average was .96% by comparison. We even noted that the measurement might have been low since those median values would produce millage rates in Allegheny County that would be quite low in comparison with reality.

Here’s what the LBFC study does: it uses Foundation data to show the "tax as a % of home value" for all counties in Pennsylvania. Allegheny retains its #1 ranking; no other Pennsylvania county had a value greater than 2%, though several came close (Armstrong at 1.94%, Erie at 1.87%, and Greene at 1.77%). In counties where the median value fell in a range close to Allegheny’s (six counties had a value of $110k to $116k) and their property tax burden was as low as 1.03% in one case (Bedford) and 1.20% (Columbia). Many counties (including all of the collar counties around Philadelphia) had a higher dollar value of taxes paid than Allegheny, but since the median home value was much higher the property tax burden was lower.

A future blog will look at the relationship of taxes to median household income data.

Is Tax Foundation Comparison on Solid Ground?

A study of property taxes paid in the nation’s nearly 800 counties with a population of 65k or more shows that Allegheny County is on the high end. Not a surprising find, and something that we have pointed out for quite some time.

The study, done by the Tax Foundation, looked at data from the American Community Survey to find that, based on the County’s median home value ($121k) and the median property tax bill for owner-occupied homes ($2,528) the taxes as a % of home value was 2.09%, which ranked Allegheny as 42nd highest on the list, the highest for Pennsylvania using that metric.

Given the wide variations in assessed value, taxes from school district to school district, municipality to municipality, and the fact that some states allow for special districts to levy property taxes the Foundation has undertaken a massive project. Obviously aiming for the median is their way of trying to paint a picture of a typical taxpayer.

But consider that in order to produce what they find to be the median property tax bill from the median home value the millage rate would be around 20.8 mills ($121k x 20.8 = $2,528 in taxes). Taking away the County millage of 4.69 leaves 16 to be split among the municipality and the school district. It is safe to say that not many places would achieve that threshold: only 7 of the County’s 43 school districts have a millage rate under 20. Obviously the self-reported ACS data missed something. The tax hit might be bigger than the ranking shows.

Based on their methodology, Allegheny County took a bigger bite than Butler and Washington Counties, and was above the U.S. average as well.