This will respond to Senator Liburd's recent opinion piece regarding the illegal property tax system presently in place in the Virgin Islands. I entirely agree with and endorse his statement that "the Berne case brought to light that our method used for calculating property taxes are [sic] flawed." However, his reasoning and suggested solutions are equally flawed. First, his attempt to equate commercial property tax rates with residential tax rates is simply wrong. While it is true that both residential and commercial properties are taxed at the same rate (assuming proper application of the existing laws, which the District Court found did not happen), his argument ignores the fact that commercial property tax owners are also subject to excise taxes, gross receipts taxes, and income taxes that are not imposed on residential property owners. Senator Liburd is simply comparing apples and oranges with his example. As required by the federal statute, and by virtually every stateside property tax law, assessed values are presently based on "actual value" or "fair market value" and nothing else. Secondly, Senator Liburd glosses over the fact that the Legislature has had – and ignored – since 1936, the ability to equalize property taxes by the simple expedient of adjusting the mileage rate. This is not just my opinion, but is also the opinion of the District Court and the Special Master that the Government specifically approved to oversee the new property tax system.
It is important to note that the 1936 statute specifically gave the local Legislature the authority to equalize the property tax system by adjusting that mileage. Unfortunately, the Legislature has never done this. As Judge Moore noted in the Berne case that invalidated the present property tax system: "Although this case involves the role and methodology of the Executive Branch acting through its Tax Assessor, it is equally important to acknowledge that the Legislature has utterly failed to understand and perform its role in this process." Joe Hunt, the Special Master appointed to oversee the revaluation process, has also noted: "The revaluation will create a significant increase in the tax base and tax bills unless the standing property tax rate is reduced. Common practice is to calculate a 'revenue neutral' tax rate and then adjust that rate as may be necessary to fund the jurisdiction. Reluctance by the Virgin Islands' legislative body has been a source of criticism and is not consistent with typical property tax policy."
Instead, in violation of federal statutes, the local Government has given a 95% tax exemption to certain local families who graze five or more cows on multiple hundreds of acres of vacant land. After being held for years at almost no cost, that land is then carved up in highly profitable commercial developments that benefit the property owners but not the people of the Virgin Islands. The Legislature has also, in violation of federal law, allowed a 10% cap on residential properties. While the Senator can make an emotional argument regarding the fact that an old family on St. John will be taxed at a lower rate than a new EDC beneficiary buying property there, there is no question that exactly the same rationale will apply to a newly wed couple trying to buy a house in Hidden Valley on St. Thomas. Differential tax, rates based solely on the date on which a property was purchased, impact lower-income homebuyers far more than wealthy buyers.
Is the Legislature aware of its obligation to adjust the mileage rate to achieve a revenue neutral tax? Absolutely. In 2003 the Legislature adopted Act 6586 which, among other things, required a Tax Study Commission to "analyze and make recommendations for the adjustment of the 1.25 percent mileage rate and . . . submit a report and its recommendations to the Governor and the Legislature within 180 days after the effective date of this Act." There is no indication that the Commission was ever appointed, that it ever undertook any analysis of the tax rate, or that it ever made the required report, even though it was due over two years ago. Senator Liburd appears to be more of the problem than the solution since he ignores the Legislature's obligations under Act 6586.
Senator Liburd's solution to this mess that was created and perpetuated by the Legislature is to give the Legislature even more power to unfairly manipulate property taxes. His "solution" is to give the Legislature the power to give sweetheart tax exemptions to favored groups, with the result that the those of us not in that group will be forced to pay higher taxes.
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