In the past 10 years, the District has experienced a general inflation rate of about 50 percent, while property owners have suffered real property tax increases exceeding 150 percent. These property tax increases have been uneven and in many cases, arbitrary, with some assessments increasing more than 500 percent.
Some neighborhoods have faced tax increases averaging close to 20 percent a year for a decade. At 20 percent, a compounded real property tax quadruples in eight years. These taxes, of course, are paid out of income, not out of the paper value assigned to a house. Few residents can say that their incomes have increased at comparable rates.
In 1981 the real property tax in the District was the city's third largest source of tax revenue after income taxes and sales taxes. Now it is the largest source of tax revenues.
The District must recognize that this ballooning of real estate taxes presents a threat not just to homeowners but to the viability of the District itself. Neighborhoods can be as readily destroyed by over-taxation as by other forms of blight, and the phenomenon of middle-class move-out, which has so eroded our tax base, threatens to accelerate unless the new administration can hold the line not just on rates but on the actual tax dollars demanded of our residents.
Many citizen and neighborhood groups are urging legislation to limit the annual increase in any homeowner's real estate taxes, as has happened in neighboring jurisdictions. Most argue that 5 percent is reasonable and would more than cover annual inflation. A 5 percent residential property tax cap would stabilize real estate taxes at least until a thorough-going revamping of the District's property assessment and taxation process could be made. Last fall all four Ward 3 Council candidates supported this cap, and the new administration and D.C. Council should give it serious consideration.
Also in need of attention is the problem of arbitrary assessments, which produced an almost tenfold increase in property tax appeals last year over four years before. Funds have been budgeted to computerize the District's notorious hand-written property tax records, but no one seems to know if the job will be done.
Further, the 30 assessors who must reassess almost 300,000 properties annually are compelled to resort to shortcuts and mass-appraisal techniques, which almost guarantee unfair results. A proposal now being discussed to reassess only every second or even third year, thus cutting the load to more workable proportions, should be considered.
The Rivlin Report projects that in the next decade if middle- and upper-income residents continue to depart, the District median income will drop 15 percent. The key to stopping this hemorrhage and preserving the city's tax base is to hold the line on taxes, particularly real property taxes.
Wise policy requires that relief be targeted at those income levels at which the failures of the system have been most damaging. The city and the new administration can afford no other option. -- Scott R. Schoenfeld heads the tax committee of the Palisades Citizens Association.