"Tax cuts on the federal level have greatly outweighed those state and local [tax] increases," agreed Dean Maki, an economist at J.P. Morgan Chase, who has studied the impact of tax law on personal incomes and spending.
But Maki had a caveat that could well apply to the Washington area, one that can easily make people feel as though their annual outlays have grown, no matter what: Housing prices in the Northeast and California have risen considerably faster than the national average. Deloitte & Touche's Property Tax Services Group in Chicago found that single-family home values nationally have jumped 24.2 percent since 2001, from a median $147,800 to $174,600. But in the Northeast, median home values shot from $146,500 in 2001 to $212,280 in May, a 45.5 percent leap.
Airline copilot Al Aitken says property taxes have eaten up his federal tax savings and then some; maintenance mechanic Donald Belton faces rental inflation; brew-pub owner Jerry Bailey says his late-'90s profits have evaporated.
(Gerald Martineau -- The Washington Post)
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That, in turn, has driven up property taxes and cut into individual gains from the federal tax cuts. Nationally, property taxes rose an average of more than 10 percent, DeLoitte researchers say. In Alexandria, they rose 53 percent.
As the economy slowed in 2001 and federal funds for states tightened, local jurisdictions had to find myriad ways to raise revenue that have pinched local consumers' pocketbooks. In 2001, the District of Columbia repealed a law that would have lowered the top marginal rate on income earned in the city to 8.5 percent from 9.5 percent. In the past three years, the District has raised taxes on cigarettes, alcoholic beverages and phone services.
Maryland has raised a number of fees, such as raising the price to register a typical car to $128, from $81. And Virginia this year passed a wide-ranging tax package that will increase the sales tax rate by a penny per dollar starting next month, and eliminate a $12,000 state income tax deduction for wealthy seniors.
"I have no doubt I've gone backwards," said Al Aitken, an American Airlines copilot who is trying to organize a property tax revolt through his VOTORS, or Virginians Over-Taxed On Residences. "I favor President Bush's tax cut, but my increase in property taxes more than ate it up."
Aitken has the records to prove his point. In 1997, he fled his five acres outside of Manassas when his property tax payment reached $4,000, then settled on 10 acres in Culpeper County, where his tax payment dropped to $1,700. But Washington sprawl and soaring real estate prices quickly caught up to him. By 2002, his tax obligation was back up to $4,000. It has now reached $6,000.
With an income of $128,132, including a Marine Corps pension, Aitken did profit from the president's tax cuts, saving roughly $3,150 last year, by Stretch's calculations. But $2,000 of that was snatched away by Culpeper County. About $270 was consumed by rising gasoline prices, inflating the cost of his 100-mile commute to Dulles International Airport. His net gain? $880.
It's something, of course, but there are other factors. The collapse of the airline industry in the wake of the Sept. 11, 2001, attacks took a toll on Aitken personally. This year, American Airlines pilots swallowed a 23 percent salary cut to keep the planes flying. With wages last year totaling $92,236, Aitken effectively gave back more than $21,000. His net gain vanished into a substantial loss.
Bush administration economists say such anecdotes do not paint an accurate picture of the national experience. Property taxes have risen, but measured against personal wealth, the increase has been slight, from 1.24 percent of personal incomes in 2001 to 1.35 percent now. Overall, they stressed, after-tax incomes have risen 11 percent since the president took office.
