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Rehoboth needs to do homework on voting rights

November 24, 2017

The following letter was sent to the Rehoboth Beach Commissioners, with a copy submitted to the Cape Gazette for publication.

It has been alarming to watch the Rehoboth Beach Commissioners over the past month debating the wacky plan to give voting rights to LLCs. The mayor and commissioner who introduced this idea are constantly changing their own proposal, because they have not done their homework, and they just want to arbitrarily rush this thing through.

At a recent meeting, it was noted that people who own their home in an LLC already can vote in city elections, either as a resident or by writing a long-term lease between themselves and their shell company landlord. So what is the problem they are trying to fix with this amendment to the city charter? There is simply no convincing rationale.

As Mayor Kuhns conceded in a recent meeting, the main reason people choose to put their Rehoboth properties into an LLC is to avoid taxes.

Another name for tax avoidance is tax evasion. And it is not just federal estate taxes they are trying to evade. As the Delaware Supreme Court ruled in a 2005 decision, LLCs are not required to pay the kind of transfer tax that Rehoboth Beach relies on for more than one-third of tax revenue. Why do the commissioners want to reward and encourage tax evasion by giving them voting rights in city elections? How much money is the city losing because the owners of these LLCs are not paying their fair share to fund the city - but instead are enjoying a free ride on the backs of the rest of us who are being responsible citizens and not exploiting tax avoidance schemes?

By putting their properties into these legal-economic entities, the people behind these LLCs have chosen to give up some of the privileges that belong only to real people. The U.S. Supreme Court has ruled that residents have a fundamental constitutional right to vote where they live.

The high court has said "the right to vote is personal," an "important area of human rights" which is given to voters who are "people, not acres" and not "economic interests." But the half-baked idea to give voting rights to hundreds of anonymous LLCs in Rehoboth Beach will dilute the fundamental voting rights of these real people, in favor of economic interests, when there is no convincing rationale to do so!

The city solicitor has repeatedly advised in recent meetings that this proposal is groundbreaking, and has not been tested in the courts. By rushing ahead, the mayor and commissioners are making a grave mistake that may drag the city into a federal lawsuit for violating the Equal Protection Clause in the 14th Amendment. Do they really want to spend the city's precious funds on federal lawsuits instead of improving services to the residents?

Mayor Kuhns and commissioners like Kathy McGuiness are known for their business acumen, but the work of government is very different from running a business. Whereas tax avoidance makes good business sense for the anonymous owners of LLCs, the City of Rehoboth should be stopping their takeover in our residential neighborhoods, and should be protecting the city's tax base. Why don't the commissioners leave the charter alone respect our constitutional rights, and focus instead on cracking down on the LLC transfer tax loophole?

Brian Patterson
Rehoboth Beach

 

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