The problem with unrestricted taxes
This Tuesday, San Jose's City Council will vote on placing a real estate property transfer tax measure on the 2020 ballot targeting properties valued at $2 million or more. The City says revenues generated from the tax will support San Jose’s affordable housing programs. Pat Waite, president of Citizens for Fiscal Responsibility, worries the money may end up going towards pensions, not housing.
Opportunity Now: What is your biggest concern regarding the proposed ballot initiative?
Pat Waite: The funds from this proposed tax are unrestricted. That means the proceeds from the tax will go into the general fund, so the City can apply those tax dollars to anything it likes. There is no guarantee that the monies will go to improving housing affordability. This could turn out to be a bait-and-switch measure.
ON: Well, the city says the monies will go to affordable housing. Why is that not enough?
Pat Waite: I believe Mayor Liccardo when he says the funds will be dedicated to affordable housing efforts. But today’s City Council can’t tell future City Councils how to spend General Fund money. So even if the current council agrees to spend the proceeds the way they intend, the Council makeup could change, even as soon as next year, and future council groups are not obliged to fulfill the intent of this council.
ON: What would future councils likely spend the money on?
Pat Waite: Subsequent administrations will be compelled to divert the funds to fill the black hole that is San Jose’s pension problem. {Editor’s note: See Pierluigi Oliverio interview close by.} Residents must keep an eye out for every new tax idea offered by local governments, taking care to ensure that we get new services out of the taxes, rather than paying off yesterday’s debts with tomorrow’s dollars.
ON: Your group opposed the last ballot measure San Jose offered regarding a new tax for affordable housing, Measure V in 2018. Has your group’s thinking changed since then?
Pat Waite: None of the facts that compelled our opposition to Measure V have changed. The reason we have a housing crisis is not because we don’t have enough money to subsidize affordable housing. It’s the bureaucratic quagmire that frustrates development. It’s a zoning philosophy geared more toward protecting the value of existing homes than encouraging creative solutions to our housing crisis.
ON: So what do you think the City’s role is regarding promoting affordable housing?
Pat Waite: Step number one is to stop being part of the problem: San Jose needs to get rid of the regulations that constrain new housing. That’s the most important thing they can do. Besides, providing affordable housing is still not part of San Jose’s core services. The housing issue is being addressed by the appropriate entities—albeit at a frustratingly slow pace. The county is deploying Measure A funds for affordable housing, committing $234 million for nearly 2000 units to be completed between now and 2020. The state is deploying over $1 billion for affordable housing. The tech companies are stepping up bigtime, with Apple, Google, and Facebook all making very generous grants for local housing. The smartest things the City can do are twofold: first, liberate the housing market so that new construction can help drive affordability and second, avoid increasing taxes that may not even end up being spent on housing.
Related:
On outmigration, living standards, and (yes) taxes: What's really at stake with ACA 1?
Would increasing local property taxes solve housing (un)affordability?
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