Dear Source:
As owners of a house in Calabash Boom that we rent when we are not on-island, we were astonished to learn that our home may be taxed as commercial property. While we do not know how much of a real estate tax increase such a change would cause us, such a plan, if implemented, would be inequitable and short-sighted.
Perhaps rental home owners are seen to be fair game, considering that we are, by and large, mainlanders who cannot vote on St. John and don't have any political clout. The fact is, however, that we who have built homes on St. John that we rent part of the year are already making substantial financial contributions to the VI government. In addition to the residential real estates taxes we already pay, we collect and remit the 8 percent hotel tax. (In 2001, for us, that amounted to more than $5,000.) We are also subject to a gross receipts tax.
If we raise our rental rates to cover the increased cost of commercial real estate taxes:
1. Some rental managers may expect to receive a commission on the rent increase, which would require an even greater rent increase to cover the cost of the increased real estate taxes and increased commission.
2. As a result of a rental rate increase, in the short run the 8 percent hotel tax will generate even more taxes, as will the gross receipts tax. However, would-be vacationers on St. John have many vacation options in the Caribbean. Although vacation villas may be viewed as geese that can lay ever-bigger golden eggs, there is a point at which tax increases and resulting rental rate increases will produce reduced rentals, which will in turn produce lower hotel and gross receipt taxes.
Perhaps if there were some assurance that increased taxes would produce improved governmental services, the increase would be acceptable. Given the state of the territorial treasury, however, we doubt that an increase in our real estate taxes will have any positive effect on our property. (Our rough, unpaved public road will remain a rough, unpaved public road.) In any event, we urge territorial officials to look at the total impact that both business and real estate taxes have on owners who rent their homes part of the year and on the territorial treasury before subjecting our homes to commercial real estate taxes.
Sincerely,
David and Barbara Grove
Calabash Boom
