PB: Tax or fee? Why it matters.
Today’s report was first intended to focus on the Art in Public Places Program (AIPP) decision at the July 11, 2013 village council meeting.
But along the way to drafting this post, SDM had a revelation about an important larger issue facing our community. That is, how do we want the Village of Palmetto Bay to be managed and governed? More specifically, do we want a lean, focused local government or do we want a government that provides a wide array of services and which imposes the taxes and fees necessary to that end?
SDM was around at the beginning of this government experiment and we understood the former to be the model. Yet, the last few years have seen a government that is growing larger in terms of revenues and employees and more diverse in terms of services and programs.
One of the ways governments grow is to hide or transfer the costs to persons other than those who pay ad valorem taxes (i.e., property taxes). For example, the Village of Palmetto Bay supports its AIPP by extracting money or art from new government, commercial and even residential construction.
Of course, the elected officials enamored with the AIPP are like those who love any government program. Who doesn’t want to stand around and take credit for beautifying a traffic circle with a fish sculpture? Surely our mayor wouldn’t miss the dedication of such a monument.
But please don’t call the extraction from the property owner a tax, or our beloved mayor will throw a hissy fit: “We have been referring to this as a tax, it is not a tax. It has been blogged [ ] as if it is a tax of the privileged. This is an effort to make this community something that excels.” (2:02:30)
So the $45,000 extorted from some property owner to pay for “Pelicans & Mangrove Tree” was not received from taxes and taxpayers, but from some unnamed source out there in the ether?
Well, Mayor Stanczyk’s comment got SDM to thinking. What is the difference between a “tax” and a “fee” and does the difference matter?
The U.S. Supreme Court in Massachusetts v. United States laid out a three-prong test to determine if a fee constitutes a reasonable charge:
(1) Is the assessment non-discriminatory?
(2) Is it a fair approximation of the cost of the benefits received?
(3) Is it structured to produce revenues that will not exceed the regulator’s total cost of providing the benefits?
Others have described the difference between a fee and a tax this way: Taxes are applied to various transactions, often as a percentage, as a means of raising revenue or, in some cases, as a means of incentivizing behavior. Fees, unlike taxes, are directly linked to the cost of providing a service.
Still others say that taxes are applied for a general purpose (i.e., funding the general activities of a government) while fees are used to pay the cost of a specific activity the taxpayer is undertaking (e.g., paying a toll to access a highway).
According to the village code, the purpose of the AIPP is as follows:
The purpose of the Village of Palmetto Bay Art in Public Places Program is to promote the general welfare by encouraging pride in the community, increasing property values, enhancing the quality of life through artistic opportunities, uniting the community through shared cultural experiences, and creating a cultural legacy for future generations through the collection and exhibition of high-quality art pieces that reflect diverse styles, chronicling history through the collection of artifacts, documents and memorabilia that will acknowledge the past and create programs and activities that will further these goals. (Sec. 30-160.1) (Emphasis added by SDM.)
The only way the above purpose squares with the way the AIPP is funded is to for the imposition to be a tax. Why? The AIPP tax is certainly discriminatory because only some property owners pay it. There is no way to determine if the amount paid approximates the benefit gained. And, who know the heck knows if the monies raised under the AIPP exceed the cost of providing the “benefit?”
To the extent that the AIPP produces any benefit whatsoever, the alleged benefit was designed from the start to be a benefit to the community at large, rather than to the property owner who pays the tax.
So why does the distinction matter SDM? Well, first, based on her own words, it matters to the topmost elected official in our village: Mayor Stanczyk refuses to acknowledge the nature of this tax. But more importantly – because mercifully she will exit the stage someday (soon we hope ) – a tax is general imposition that is designed to benefit the community at large.
Which begs the the question: If the AIPP money is generated from a tax that benefits all of us, then shouldn’t we be asking whether buying artwork is the highest and best use of the money?
Stated another way, would Palmetto Bay benefit more from a $45,000 sculpture of birds sitting on a mangrove tree or from new park equipment, road improvements, or even from beautification of our “downtown?”
SDM Says: In the end, government grows when it fools us into believing that money generated from taxpayers writ large, must only be spent on certain functions. Such thinking bought us the disastrous Marlins stadium deal and uncounted other pet projects.
When Mayor Stanczyk tells you that AIPP funds can only be used for art, ask her why she doesn’t change the law so that the money can be used to address real, pressing needs. When she tells you the county controls the process, ask her whether she’s ever asked for a change in the county laws.
Better yet, ask her what SDM’s mother would ask: would she jump off a bridge just because her friends were doing it?
SDM Says (Bonus Edition): Leadership starts by understanding what you are doing and the choices you are making. Mayor Stanczyk: You are imposing a tax on construction. Taxes, as opposed to fees, benefit the general weal. Every dollar spent on statues could have been spent benefiting the public in another way. If you believe that statues are important, then don’t run from your tax – embrace the choice and let the voters decide if they agree.