Naked Self-interest: New Fees vs. Property Tax Increases

Which is better for your pocketbook when the city and county do their budgets and need more revenue? Here's a hypothetical but realistic example you can try at home.

Suppose that federal and state cutbacks cause a $2.4M budget hole in some city service. The hole can be filled by either (1) a new fee of $2.80/month added to your household water bill or (2) a 1-cent property tax increase on your home. Which would cost you more?

Let's calculate your self-interest using a home tax value of $200,000 as an example:

Property Tax Increase

A 1-cent property tax increase is $0.01 more per $100 of tax value. A tax value of $200,000 is two thousand (2,000) of those units of $100.

So your annual property tax bill would increase by 2,000 x $0.01 = $20.00.

New Fee

The hypothetical new fee is $2.80 per month added to your water bill.

So your annual water bill would increase by 12 x $2.80 = $33.60.

Which would you rather pay for identical service--$20.00 or $33.60?

This example assumes ownership of a nice $200,000 home. What about the poor? For a family renting in, say, an East Durham quadraplex, the fee is even more regressive. Quadraplexes are typically valued at $25,000-30,000 per apartment. So a 1-cent proper-ty tax increase would cost the landlord $2.50-3.00 a year. That small an amount would probably not trigger an immediate rent increase; it's only 25 cents a month after all.

But the fee added directly to the family's water bill would create an immediate new expense of $2.80 a month. And if $2.80 is the proverbial straw some financially difficult month, the family could lose water service for non-payment. That's another downside of city fees—they are often added to water bills, like the new garbage fee will be.

PA Income Inequality Action Team1-28-2014