Monday, May 27, 2013

Property Tax Reform
2-6-13 WOSO Commentary

Everyone knows that property taxes in Puerto Rico are very low as compared to the States.

At a recent San Juan Rotary meeting, Sergio Marxuach of the Center for the New Economy proposed increasing real property taxes as one of the measures to help cover our budget shortfall of some 1.1 billion. His arguments are persuasive.

First of all real property cannot be hidden. Although Sergio did not get into this, similar to the States, we would need to develop an efficient process to ensure that assessments cover all real property at their fair market value. I do not know how they do it, but Florida adjusts it assessments annually, and from what I have seen, the new rate is very close to what a professional appraisal would establish.

Secondly, the tax would be progressive falling on those who can best pay and we could continue reasonable incentives for home ownership and productive use.

Thirdly, the tax would incentivate putting inactive property to use, especially if you incentivate productive use.

Finally, although Sergio did not mention this, the municipalities would share in the increased revenue thereby helping resolve their deplorable financial condition that we have been hearing so much about these days.    

The reform should be implemented in stages over a period of years, but at the end of the day, property taxes need to be a more important and updated component of our Puerto Rico tax system.

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