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Arizona property tax bill would hurt homeless and help homeowners

If Arizona voters approve a ballot proposal in November that would give taxpayers a larger property tax refund, it could change property tax policy and public attitudes toward homeless people.

The proposed rule would provide taxpayers with a property tax refund for any expenses they incur to mitigate the impact of the state's failure to remove this “public nuisance.” But a more humane and practical approach would be to motivate taxpayers to support initiatives that help the homeless — not to demand refunds from the state for failing to evict them.

The proposed measure would reinforce negative perceptions of homeless populations by framing homelessness as a disadvantage to nearby homeowners. It would also introduce a new method of taxpayer recourse that could have far-reaching implications for the management of property tax policy and public funds.

Intention regarding property tax

Property taxes have long helped fund a wide range of public services, from education and infrastructure to support for vulnerable populations like the homeless. In general, they can be viewed as tax revenue that benefits the public.

State governments have generally used tax revenues for spending,
for example, through tax exemptions for affordable housing to address housing shortages. Property tax reductions and relief generally target vulnerable and economically disadvantaged populations, for example through senior citizen discounts and property tax reductions.

Arizona's November proposal would provide compensation to homeowners who suffer the negative impacts of the homeless presence, and the potential long-term damage this provision could cause can hardly be overstated.

Arizona, like much of the country, is suffering from a housing shortage – there is an estimated 270,000 units missing nationwide. One side effect of the crisis is the increase in homelessness. As the minimum income required to buy a home increases, more and more people are staying on the wrong side of the border.

In Phoenix, the number of homeless people has increased by 72 percent in the last six years. Parts of Arizona are also experiencing heat-related deaths, especially among the homeless, for whom heat is the second leading cause of death.

Homeless people are caught in the crossfire of these two threats, which could easily be avoided with sufficient resources.

Redefining taxation

The proposed reimbursement program would have far-reaching policy consequences that go beyond the immediate draining of state coffers. It means that taxpayers should be entitled to reimbursement of all so-called expenses incurred by them as a result of the state's failure to enforce laws. This precludes any selective discretion by the state in enforcing laws.

In the homeless example, it's because the state isn't enforcing bans on illegal camping and panhandling. But this shift could undermine broader social service efforts and allow individual taxpayers to demand refunds if their preferred policies aren't implemented.

In an extreme case, the property tax could be seen as a way for every taxpayer to decide for themselves which services they finance and which they neglect.

If the proposal passes, there could be reimbursements in later years for costs incurred by selectively enforcing laws that prohibit homeless people from staying on public property. Next year there could be a call for reimbursements for taxes paid for shelter or food for the homeless.

If Arizona sets a precedent for issuing refunds when a taxpayer finds that a state policy decision cost him money, it will open the door to all kinds of mischief.

Humane politics

A humane policy would reverse the proposed relationship between homeless populations and property taxes: instead, property taxes should be increased in areas with high homeless populations and used to fund improved social services.

A fair solution would be to gradually increase property tax rates in areas with high levels of housing incapacity. The additional revenue could be used to fund more comprehensive social services, from affordable housing and emergency shelters to mental health services and job training.

The counterargument is that increasing property taxes could drive out the most solvent property owners, leading to a segregation of regions into the homeless and the affluent. Setting a statewide property tax rate that reflects the need for improved social services could also encourage residents to move to states that have policies more similar to Arizona's current one.

The solution to this potential pitfall is simple, but not easy: Advocate for similar measures in other jurisdictions. One possible sugar spoon to improve this particular policy medicine is to give taxpayers the opportunity to significantly reduce their property tax bill – even below the level paid before any benefit increase.

Instead of suggesting that homeless people are outsiders who need to be pushed out, we should emphasize that they are members of the community who need to be helped. Taxpayers could receive tax credits for donations to recognized nonprofit and private initiatives that support homeless people – from building housing to job training and mental health services.

This would create a virtuous circle: in areas where homelessness is rising, property taxes would also rise to meet the demand for services. Private initiatives that care for homeless people would get more money from taxpayers who help them while acting in their own financial interest to lower their bill.

The more effective private initiatives are, the more the proportion of the homeless population will decrease and the lower the property taxes will be.

Ensuring that funds raised benefit vetted initiatives is necessary for any successful policy reform. Transparency would be key to allocating funds to programs that have been proven effective in helping homeless people – rather than programs that aim to displace them.

outlook

When Arizona voters go to the polls in November, they will decide the future of their state's homeless population and determine who the victims of the housing crisis are.

The government can set a good example by addressing the problem of homelessness with compassion or by treating property taxes as money used to hide the homeless from the privileged who do not count themselves among them.

If implemented, the proposal could exacerbate existing social disparities by using tax policy to categorize the homeless as outsiders of society. If taxes are what you pay for a civilized society, as Justice Oliver Wendell Holmes Jr. said, what identity do the people who see themselves as taxpayers have that in part causes them to be displaced?

Andrew Leahey is a tax and technology attorney, principal at Hunter Creek Consulting, and adjunct professor at Drexel Kline School of Law. Follow him on Mastodon at @andrew@esq.social

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