David Coker, President of the Vanderburgh County “Taxpayers Association” wrote an opinion column for the Evansville Courier Press. I didn’t find a great deal new in the piece – mostly he says that we can and we should eliminate property taxes. We can do it by imposing new taxes and raising existing taxes on sales and income. The question that he touches upon a little bit where many of his predecessors have not is an effort to explain preferring higher income and sales taxes and getting rid of real property taxes:
The argument speaks to a philosophical view that establishes a correlation between land ownership and the ability to earn income from agriculture or commerce. Unless one operates a home-based business, the argument holds, a homeowner who purchases a house in which to rear a family does not realize income from the home.
The government, therefore, levies a tax upon unrealized wealth based upon the estimated value of the property, which is not realized until the home is sold.
In many instances — particularly as they apply to senior citizens on fixed incomes — the tax liabilities have risen beyond what the homeowner is capable of paying.
Unspoken is an opposition to requiring property owners (whether they be senior citizens on fixed incomes or businesses or other citizens who simply have other spending preferences) to go ahead and realize the gain and pay their taxes.
That’s fair criticism. But, the other taxes have their problems as well. What about pricing a low income citizen out of their next gallon of milk through a sales tax? How about an increased income tax that prevents a low income worker from even getting a house in the first place? In those contexts, the person who is strapped for cash but at least has a house seems rather privileged.
To put it bluntly, taxes suck. Nobody enjoys paying them. But they are, to one extent or another, necessary. Let’s not get carried away eliminating one kind of tax until we’re certain it’s more pernicious than the others.
Awesome post. I couldn’t agree more.
Property taxes are the worst taxes, except for every other tax!
There are a bunch of reasons why real estate taxes should be part of the revenue mix.
Government can see the asset, and the person who owns it can’t hide it in a secret offshore account. If the taxes aren’t paid government can easily seize the asset.
The ability to generate revenue isn’t the only rational basis for allocating tax; it’s also worth considering what government is spending money to do. Local government provides safety mechanisms (fire departments, police, courts) that protect the real estate, and infrastructure (roads, bridges, parks, libraries, schools) that help create a viable, desirable community and thereby support the value of real estate located in the community.
People who own real estate in a given locale may reside or earn their income elsewhere, even in another country, so there’s no guarantee that they will contribute to local government through income taxes. Or they may work in the black or gray markets and avoid sales or income tax.
Sales and income revenues vary significantly with economic conditions too, and drop quite a bit during recessions. Government needs to be able to continue providing services during a recession. Real estate taxes are more stable.
To the extent that sales tax goes to the locality where the transaction took place, retail-rich localities will tend to drain money away from localities with less retail activity.
From a governmental point of view, there are some many advantages to a real estate tax that it’s hard to picture it going away.
The real question in our neck of the woods-northwest IN-is that much of the north Lake County cities (Gary, Hammond, East Chicago) need to have gastric bypass surgery. A regular diet won’t work! They are so used to getting millions of dollars from the mills and BP Amoco; and that burden is now placed on the taxpayers’ backs. And many of the people who remain in these communities are seniors and the poor. Add to that a bloated and antiquated township system…and…well you see the problem!
The gallon of milk is not going to be taxed, nor would any other food, thankfully.