Eleven days ago, Allegheny County Common Pleas Judge R. Stanton Wettick ruled that it is unconstitutional to base property taxes on a historical base year. That's because homeowners who have seen their property values decrease end up paying more than their fair share while fortunate homeowners who have realized an increase in property value end up paying less than their share.

Paul Fischbeck is director of the Center for the Study and Improvement of Regulation at Carnegie Mellon University (fischbeck@cmu.edu).

To illustrate how unfair the current system is, it is possible to use the county's discarded 2006 reassessment figures, which were released in the spring of 2005. These figures show that, on average, property values in the county had increased about 19 percent over previous assessments, with some individual properties jumping considerably more while others rose less or fell. These figures were posted on the Internet for a month until the outcries from county residents forced officials to take them down and propose the current "base-year" system pegged to assessed values from 2002. The 2006 reassessment hasn't been seen since.

But before identifying which homeowners are winners and which are losers, it is important to separate the two main questions about any property tax system: 1) how much tax revenue should be collected (the tax or millage rate), and 2) what is a fair share of taxes for each homeowner (based on the assessed value of his or her property).

Unfortunately, this distinction is seldom made. Just because property values increase does not necessarily mean that tax bills or total revenues should increase. A community whose values increase, but increase less than the average in the county, would see lower tax bills from the county if total revenues are held steady. A community also may see a sizable increase in property values but a decrease in the number of children attending school, so total collected taxes should go down.

The question of how much money should be collected is one that should be argued each election with government officials defending their proposed budgets and tax rates. However, determining the fair share of taxes for each homeowner should be done without politics. What would happen if the assessment process was revenue neutral -- which is essentially mandated by state law -- so that the total taxes collected did not increase automatically with increased property values?

Using the much maligned 2006 assessment figures and a revenue-neutral tax rate, 75 percent of the municipalities in the county would see a decrease in county taxes. This is true even though only five municipalities had a net decrease in property values. In fact, any homeowner whose assessed value went up less than 19.24 percent would see a tax cut.

Homeowners in Braddock would see an average decrease in their county property tax of 30 percent. Nineteen municipalities would have their taxes cut by more than 10 percent. Of course, some municipalities would see an increase in taxes, but nowhere near the percentage increase realized in their property values. Sewickley Hills and Edgeworth, whose property values increased an average of 40 percent, would have seen a tax increase of 18 percent. Only 14 communities would have seen tax increases of more than 5 percent.

It is time for the property tax process to be straightened out. Government officials should have to justify their budgets and tax rates, and county residents should pay their fair share.

Officials also should get assessment data out to the public so that the inequities buried in the current base-year system can be uncovered and discussed. With each passing year the base-year system becomes more and more unfair, rewarding those communities whose property values are escalating while punishing those with steady or falling values (which generally are less affluent communities).

With a revenue-neutral tax rate, the redistribution of tax burden that would occur with a true and accurate assessment becomes far more palatable and definitely more fair.