There is plenty to be concerned about with Indiana’s current property tax system — but here’s one that comes pretty far down on the list to me: The General Assembly’s tax preference for owner-occupied properties. Lesley Stedman Weidenbener, writing for the Louisville Courier Journal, has an article entitled Indiana landlords to make plea for tax relief.
In addition to the concerns pretty much everybody else has about property taxes, the landlords add a complaint for the preferences given for owner-occupied properties. The General Assembly provides a homestead credit for properties occupied by their owners, resulting in a lower tax obligation for such properties. This, the landlords say, is unfair. In particular, I like the analogy offered by Morton Marcus, director emeritus of the Kelly School of Business:
My concern is that property should all be taxed on the same basis,” Marcus said. “We don’t say when you buy a box of cereal: ‘Do you have false teeth? And if you do, we will charge you a different sales tax.’ “
I’d say it’s more like giving a tax break to people who are going to eat the cereal than those who are going to use the cereal as, say, an art supply. Both are perfectly legitimate uses of the product, but the General Assembly might reasonably provide a preference for the more basic necessity.
I recognize there is a debate to be had as to whether tax policy ought to be a tool for social engineering. For example, you might argue that the General Assembly contributed to the subprime mortgage debacle by encouraging everybody to own a home. That example’s a little tenuous, I suppose, but the debate is legitimate. However, if one accepts the legitimacy of using taxation to advance policy preferences, I think a preference for owning one’s own residence is generally sound. In my own neighborhood, the owner-occupied properties seem to be better maintained than the rentals. I’m generally happier when my neighbors are owners rather than renters because, generally, there is going to be more pride in ownership.
At the end of the day, the landlords’ pleas for “fairness” seem to be nothing more (and nothing less) than a complaint that they have to pay more on their capital investment than folks with like property who choose to live in their investment.
Sounds like we’ve crossed, burned, and buried the ashes to that bridge before my parents were born. Any taxes other than uniform sales or flat income tax are taxes that are designed for some form of social effect.
I don’t think it is wrong to encourage people to own their own homes. It makes for stronger communities, IMHO. I think new home developers and lenders pushing people to borrow more for much bigger houses that they end up not being able to afford. That is the bigger cause, I think.
As for taxing owner-occupied differently than rentals, I’m all for it. Owner-occupied homes are the shelter for the taxpayer. Rentals are income producers for the taxpayer. Makes sense to me.
While a uniform sales or flat income tax might not be DESIGNED to have a social effect, the change would most certainly would have some kind of social effect. Look at the upheaval just changing the way proeprties are assessed has caused. Anyone promoting a major overhaul of a tax needs to beware that the transistion to the new system would have winners and losers and some unforseen or unintended consequences. I hate to mix Economics 101 with Physics 101, but for every action there is a reaction.
Oh, I agree. That’s why I say we’re WELL past that point. Everything we do with taxes at this point is going to benefit some and hurt others, no matter what we do.
Can’t put the toothpaste back into the tube, crap back into the horse, etc…