The Property Tax Riddle Why you probably pay too much or too little

Posted: December 09, 2001

William P. Johnson's house sits on two pastoral acres of Thornbury Township in Delaware County. He bought it for $332,000 in 1999, and this year his property tax bill is $2,952.

Beatrice Kyne's home is on a sixth of an acre in Colwyn, at the county's other end. She bought around the same time, for $65,000. Her tax bill is $3,181 - or $229 more than what Johnson pays on a house worth five times as much.

He lives in one of the region's richer communities, with well-regarded schools. She's in one of the poorer towns and worst-off school districts.

But thanks to a bewildering tax system, Kyne pays more property tax.

It isn't fair.

Neither are the property taxes paid by thousands of other Pennsylvania and New Jersey homeowners.

Their tax bills are the product of a system shot through with inconsistency.

An Inquirer analysis of property taxes in the eight-county region has found that thousands of taxpayers pay far too much, while others pay far too little. Some institutions pay nothing, forcing their neighbors to pay more.

Camden County homeowners, who contribute $43 million annually to the impoverished city of Camden, pay some of the nation's highest rates. Some rates in Camden and Delaware Counties are triple those of wealthy Lower Merion, for reasons far beyond the control of local administrators.

For more than a century, the property tax has paid for chalk and erasers, police revolvers and fire engines, snowplows and trash trucks.

Now, with ever-growing funding crises in school systems and municipalities, lawmakers in New Jersey and Pennsylvania are asking a question already confronted by several other states: Is this antique system any way to pay the modern costs of government and schools?

In the words of John Snow, a church missionary who lives in Clementon, Camden County, and who devotes nearly a tenth of his $35,000 salary to paying the property tax: "It doesn't make sense."

The property tax lands hardest on the region's working class and working poor, the Inquirer analysis shows. It forces densely built communities to seek ever more taxable development to pay the bills - or else squeeze residents for yet another tax increase. It has failed to provide school districts like Philadelphia's with adequate local funding.

"We're using the wrong kind of tax. It doesn't work," said Don Familiar, who quit as school board president of Delaware County's struggling William Penn School District two years ago, partly out of frustration over funding. "There's no way you can correct it."

It is, analyses show, a stubbornly regressive levy: It favors the wealthy and, as three suburban counties proved recently, not even a wave of reassessments could fix that.

It allows generous exemptions for certain businesses, hospitals and other institutions, sticking some of the region's poorest places - Camden, Chester, Norristown - with acres of land that they can't tax. That results in a bigger burden on homeowners.

It is unwieldy to administer and often bewildering to taxpayers. It is so wayward that people in similar houses on opposite sides of a street can pay very different bills.

The region's map has become a checkerboard of wildly differing tax rates that in the end have little to do with the quality of government or the caliber of services, or what children learn in schools. The rates have far more to do with differences in wealth among communities, the legacies of planners, decisions by long-dead officials, the housing market - and sheer serendipity.

The Pennsylvania and New Jersey constitutions both require local assessors to capture the true value of each property in town, and to tax a "uniform" percentage of each property. But The Inquirer's analysis found many expensive homes assessed at well below market value, and many of the least-expensive homes assessed well above their value.

Inaccurate assessments help widen the differences in tax bills among communities.

The analysis found the region's highest tax rates not on the Main Line, with its acclaimed schools, or in Chester County, with its crop of "McMansions," but in a handful of aging post-industrial towns in Camden and Delaware Counties - towns like Clementon, Darby and Colwyn.

That's where Beatrice Kyne and Ephraim Rosario bought their $65,000 house two years ago. The couple, both mental health counselors, had saved up to move out of an Upper Darby apartment, and were startled by their tax bill. But they moved anyway, and this year the bill is $3,181. Rosario says, "What can you do?"

In general, Pennsylvania's property taxes are lower than New Jersey's, but most communities supplement them with various so-called nuisance taxes that disguise the true burden.

Local property taxes went up in most South Jersey communities in the last year, and all over Bucks and Chester Counties. The bulk of those funds are for schools. But given that only about one household in four has school-age children, this can be a tough sell among voters, especially retirees on fixed incomes.

"The one thing that's destroying the middle class and the poor is the school property tax," said former Darby Mayor Charles Sanders, a retiree on fixed income whose annual tax bill is $3,120. Last year, he said, he had to borrow to help pay his taxes.

Many of those who administer the tax acknowledge that it is flawed, and that it tends to cement the gap between economic classes.

"We have created economic apartheid in this society," said Wallace Nunn, the Republican who is chairman of the Delaware County Council. He calls it "an unfair tax."

A moving target

Unlike an income tax that is based on a fixed percentage of paychecks or dividends, the property tax is based on the value of real estate - which is far more subjective.

Its supporters point out that property gives local government a more stable revenue base than income or sales, which are more sensitive to such economic downturns as the nation's current one. But what's good for the tax man may not be good for the taxed, who have to pay regardless of job status. Laid off by an airline? You still owe your property tax in full.

In Pennsylvania, where counties administer the tax, some assessments have gathered dust for decades, even as home values have fluctuated wildly.

"We live in a democracy. That's a good thing, except when it comes to assessment," said Roger Downing, an expert on Pennsylvania property taxes. "Nobody wants to reassess, and they don't unless they get forced."

When they do, it's like trying to hit a fast-moving target with a cudgel. Chester, Delaware and Montgomery Counties spent a combined $20 million in the last five years to reevaluate all properties for the first time in decades. But data show that many of the new figures quickly became obsolete.

In Chester County, for example, those McMansions and estate properties have jumped in value, while values of older houses in Phoenixville and Coatesville have stagnated. But assessments have not changed. As a result, many high-price houses are now underassessed, while the least-expensive ones are overassessed.

In Chester County, on average, taxes on homes that sold for less than $50,000 last year are $350 higher than if they'd been assessed accurately, based on market value - while $400,000-and-up homes are undertaxed by more than $1,000 each.

Though New Jersey urges towns to reassess at least once a decade, skewed assessments are still common.

In Clementon, for example, Daniel Thomas bought a house last year on Whitehorse Avenue for $49,150. It is assessed at $59,100, and that costs him about $400 a year in extra taxes.

On that same street, Lester MacDonald is getting a slight break. He paid $110,000, but his assessment, $93,200, translates to a tax savings of about $600. Assessments are supposed to parallel market value, and under law the truest measure is price.

One exception to this regionwide over-under pattern is brand-new homes - which tend to get assessed correctly, at 100 percent.

Schools in crisis

In Philadelphia, where more than half of this year's $780 million in property taxes went to the schools, Mayor Street has vowed not to raise this tax to cover the district's looming deficit.

Street's predecessors took a similar vow. In a city with one of the highest wage taxes in the nation, officials haven't raised the real estate millage in 12 years, lest they drive more people out - and get booted out of City Hall. "Our bias was not to raise any taxes," recalls David L. Cohen, who was Mayor Edward G. Rendell's chief of staff, "because Philadelphians are, statistically and anecdotally, overtaxed."

In older suburbs on both sides of the river, some school districts become little pockets of tax rebellion on Election Day.

"We cut so deep that we are now becoming inefficient," said Gary Dentino, superintendent of Camden County's Waterford School District, where voters rejected a tax increase last spring. "It's frustrating."

In Delaware County, Don Familiar's old district has become fertile ground - for tax appeals. "Taxes in the William Penn School District are overly burdensome," Anthony and Joyce Giunta of Aldan wrote in their appeal, saying the tax came to about half their mortgage payments.

"The older people can't afford it," says Joyce Giunta. "The new, younger families are moving in, and they can't afford it."

The Giuntas got a slight reduction, but in their appeal they made a common mistake, disputing the bill instead of the assessment. Taxpayers have to prove they were way overassessed - by at least 15 percent.

Fixed income? Too bad. The law says assessors cannot consider your ability to pay.

"You're almost in tears," said Dennis J. Sharkey, chairman of the Montgomery County assessment board and mayor of Narberth. "There's nothing we can do for these people."

Location, location

What factors skew the assessments? Sometimes it depends on what is nearby.

Owners of low-end homes in Colwyn pay taxes that amount to more than 5 percent of the home's worth. But this drops to about 1.3 percent in West Conshohocken's priciest parts.

Colwyn sits near the old Industrial Highway, where most of the industry is only a memory. It is in the William Penn district, where less than $9,000 is spent per pupil. West Conshohocken is near the bustling Blue Route and the Expressway. Its children go to Upper Merion schools, where per-pupil spending is about $12,000.

In West Conshohocken, more than 100 homes have sprouted in the last three years; McMansions and townhouses crown the hills overlooking the old part of town. In Colwyn, not one house went up in the 1990s.

Up Route 23 from West Conshohocken is the poorest town in the Upper Merion district, Bridgeport. But its taxes are low - because the district is blessed with more than $3 billion in property, much of it shopping malls.

By contrast, tax millage just across the Schuylkill, in Norristown, is 65 percent higher than Bridgeport's - mostly because Norristown is in a poorer school district, with property worth two-thirds of Upper Merion's.

For cities and towns in decline, property taxes often become part of a downward cycle that can be measured several ways.

One is the "effective tax rate," which experts use to simplify your tax bill by expressing it as a percentage of your home's assessed value.

Thanks to its office parks and malls, Upper Merion's effective tax rate for homeowners is low: about 1.5 percent. But in the old streetcar suburbs of Lansdowne and East Lansdowne, The Inquirer's analysis found, the figure is 3.5 percent. In the cities of Chester and Camden, it is nearly 4.

Another yardstick is a town's overall tax base. If it is shrinking - say, as stores or factories close - odds are the cost of police and other services will rise as joblessness gives way to crime and poverty. Homeowners wind up paying that cost in higher taxes - even as home values fall.

Finally, there's the gap between a home's true worth and its assessed worth: When home values rise or fall, taxes get ever more skewed as fixed assessments fade like old snapshots.

The result: In some wealthier Chester County areas, where property values have risen steadily, owners are taxed on just 65 percent of their homes' current worth. But in Delaware County's poorer towns, where values keep falling, many owners are taxed on 125 percent or more of their home's worth.

Sometimes, not only does the street where you live make all the difference - but also which side of that street.

On County Line Road in Ardmore, Donna Littlewood's $143,980 assessment is just $10 more than her neighbor's across the road. Yet her tax bill is $2,337. Her neighbor's is $3,162.

In fact, several houses on both sides of the road have virtually identical assessments. But Littlewood's side is in Lower Merion Township. The other is in Haverford Township.

Dotted with sprawling estate homes, Lower Merion's tax base is worth about three times Haverford's, where building patterns are denser and houses generally more modest.

Littlewood says she's getting a good deal for her tax dollar. She also allows that people on both sides of the road have "the convenience of being near the city, the comfort of the suburbs" - but that the other side pays more.

A daunting challenge

In Harrisburg and Trenton, legislators are studying ways to change or replace the property tax. In Philadelphia, Controller Jonathan A. Saidel has proposed easing owners' load by taxing land more and homes less. But neither state is expected to act soon.

For all its flaws, the ancient tax has a peculiar staying power. "As much as people complain about the tax structure, they seem to complain about changing it as well," said Jay Himes, head of the Pennsylvania Association of School Business Officials.

Replacing it would be a daunting challenge for politicians and administrators. Besides, where's the fire? The underassessed don't protest. The overassessed typically have less money and less clout; economist John H. Bowman has called it "a tax based on political influence - or lack thereof."

Plus, most homeowners pay it from escrow, with the mortgage. Except on April 15, when you can itemize it as a deduction on your federal return, it tends to stay out of sight, out of mind.

Some administrators, such as David Glancey, chairman of Philadelphia's Board of Revision of Taxes, believe that as flawed as it is, it beats the alternatives. "The older I get, the less unfair I think the property tax is," said Glancey. "If you start with the fact that nobody wants to pay taxes, what's the lesser of the evils?

"We know the devil we have."

Others hold that it is beyond remedy.

John Schank, the business administrator for the low-tax Upper Merion district, says: "I really believe, philosophically, that real estate is not a good measure of ability to pay."

The Snows might agree. With scholarship aid, they keep three of four children in private schools because they are disenchanted with Clementon's. On a house they bought in 1999 for $90,000, their taxes are $3,420.

"I don't feel it should be this high," John Snow said. "We don't live extravagantly."

Anthony R. Wood's e-mail address is

The Property Tax Riddle

* Today: An analysis of property tax bills in the Philadelphia area finds that thousands of homeowners are paying too much while others pay too little.

Tomorrow: How could suburban counties pay $20 million to reassess and still get it wrong?

Tuesday: Why you pay property tax but your local college, hospital or museum does not.

Wednesday: Looking for better ways to tax? Start in Michigan.

* To read the series online, and for an interactive database that allows you to compare your taxes with others in the region, go to http://

* Back Issues: Call The Inquirer's service counter at 215-854-4444. Reprints will be available after Dec. 19.

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