It's an old story: A clever politician offers a package of tax cuts he claims will benefit everyone -- from the wealthiest households to the poorest. But on closer inspection, it seems the poor will get only crumbs, while the rich will enjoy a huge windfall.
Is this President George W. Bush, misleading us into giving a tax break to the rich? No. It's County Executive Dan Onorato, trying to do a favor for the poor.
Unlike President Bush, I don't suspect Onorato of bad faith. He has an unenviable job trying to solve the latest property-tax fiasco: a 19 percent increase in property values countywide since the last assessment three years ago. But Onorato's plans, like those of Bush, seem to depend on voter shortsightedness about what's really going on. And the debate around them is blinding us to even larger problems.
Onorato wants to cap increases in a home's assessed value at 4 percent, no matter how much more assessors say it is worth. The measure is due for a vote at County Council as this issue goes to press. It may or may not be unconstitutional. It is certainly unfair.
Consider that among the seven communities with the largest assessment hikes, three have the word "Sewickley" in their names. In Sewickley, Sewickley Heights, and Sewickley Hills, the average homeowner is facing a hike of 30 percent or more. Getting that increase knocked down to a paltry 4 percent would be a huge break. Much bigger, in fact, than you'd get in McKeesport, where values increased only by 15 percent. Whether tax "reform" is proposed by Democrats or Republicans, it seems, the rich always get the biggest breaks.
For many people, the big mystery is this: How can home prices be going up here when people keep moving away? How can housing prices be climbing so high when everything else is going downhill?
A few things to bear in mind. First, while we're bound to hear horror stories about individual properties, a countywide increase of 19 percent over three years isn't unrealistic. According to a March 2005 report from the Office of Federal Housing Enterprise Oversight, based on sales, local housing prices have increased by 31 percent over the past five years.
Second, it could have been worse. According to the report, price increases here were just half the national average last year. Over the past five years, prices here grew at less than two-thirds the national rate.
Third, if you're looking to assign blame, don't just blame the assessors. Blame Alan Greenspan.
Much of the "Bush recovery" has been financed not by tax breaks but by low interest rates set by Greenspan and the Federal Reserve. Banks and other lenders lowered their rates in turn, which encouraged homeowners to refinance their mortgages. Many of them took the savings and bought things -- SUVs, for instance, that barely fit into their newly refinanced garages. That spurred the economy.
The downside, however, is increased property taxes. Low interest rates allow people to buy homes they couldn't otherwise afford. Even in Pittsburgh, that has driven up demand -- and prices. In a March 10 presentation to county council, Chief Assessment Officer Deborah Bunn cited low interest rates as a cause for the county's "volatile" housing market.
An even larger bill may yet come due. Greenspan's critics warn that a housing bubble may be forming, as cheap credit inspires people to pay more for a home than it's worth, or than they can afford.
There's little evidence of a bubble in Allegheny County: The effects are concentrated in a handful of high-growth areas like L.A., New York, and Washington. The problem, as the Washington Monthly pointed out last April, is that "those areas contain roughly half the housing wealth of the country." If the bubble pops there, we'll feel it here too -- maybe even more than we felt the bursting of the dot-com bubble. As the Monthly reported, studies suggest that when housing bubbles burst, they can have "twice the effect on consumer spending as comparable declines in stock prices."
So as you're waiting for your assessment appeal hearing, look on the bright side. There are worse problems than having your home increase in value. If there is a housing bubble, bursting it will create problems Dan Onorato could never hope to solve.
Don't expect much from George W. Bush, either.