When George W. Bush not only won reelection in 2004, but saw his republican majority in the senate padded to fifty-five, I started daydreaming about the possibilities.
While he went the direction of reforming social security, a necessary venture for which he pushed the good idea to return some control to taxpayers, my mind drifted toward tax reform.
He’d cut them right out of the gate, and then again in 2003. Though he campaigned on dropping the top marginal rate from almost 40% to 33%, the legislative sausage-making process spit out 35%.
That was better than nothing, but it made me wonder: why not lob the opening salvo from the most ideal territory, like a flat 5% rate? The same principle applies to property taxes, but I’d go further, to 0%.
We don’t tax food, and we have the occasional sales tax holiday for clothes (there could probably be more of those); why do we tax the roof over our head? Why not tax only luxuries?
The tired response you’ll typically hear is that a tax on consumption is “regressive.” That means that the lower a person’s income, the higher the effective tax rate they would pay.
Even though taxing income and property deters the behavior that creates widespread community wealth, the word “regress” is politically calculated to tug at emotional heartstrings.
In actuality, resisting a consumption tax implies an entitlement to goods and services above and beyond necessities.
The irony is, despite politicians’ manipulative ploys, the level we pay on our purchases would likely not have to rise to compensate for the lost property tax revenue. We might actually be able to cut it.
“Whoa, whoa, whoa! How could we possibly have enough tax revenue to fund government then??”
Your standard political slickster (mostly on the left, but a disconcerting number on the right) would whip out the political canard that “tax cuts do not pay for themselves.”
This is part self-serving, part flat-out ignorance.
As to the former, the vast majority of politicians will always fear not having enough money to spend, the act of which is always and everywhere the sole reason for debt and deficits.
If they could be cured of the illusion of virtuousness they derive from failing to realize their good intentions with others’ money, public balance sheets would take a turn for the better.
The latter manifests itself in their disrespect for wealth-creating citizens, and their static worldview.
They do have a clue that when we’re taxed less, we have greater purchasing power. Where they slip, and regrettably peddle to the masses, is the notion that consumer spending powers the economy.
It does no such thing. It literally destroys the value created by the real fuel of prosperity: production.
This process is spearheaded by the precious few amongst us who have the requisite intestinal fortitude. The least government could do is stop robbing them of the incentive to take the dive.
When these visionaries plow $1 more into their idea, that’s $1 more of capital they need to invest to keep the proverbial assembly line going. It’s $1 more they need to spend on the human capital to operate it.
It’s $1 more that other employers will have to spend to compete for/retain this labor. Except by this point, anyone who gives more than a moment’s thought knows we’re talking about more than $1 more.
There are some influences in this area that are beyond our control.
Loose monetary policy set forth by Washington D.C. tends to drive investors into safer, more stable assets. Oil is one, housing is another. This in turn artificially drives up their respective prices.
Short-term market fundamentals are another.
If the value of your home is rising, it’s a sign that you are where people want to be. Opportunities in general are abundant. Taken at face value, who doesn’t like to see the value of their assets appreciate?
Government wanting to wet its beak more as a result is the only problem, and doing it via property taxes isn’t fair to anyone.
Along with the culture and character of historic neighborhoods, it’s a main source of the concern regarding gentrification. It tilts the scales away from longtime residents when apartment developers get an exemption.
Plus, it’s an unequal, uneven way to fund public education.
We should be serious about property taxes, and that means starting the conversation from their total elimination. Anything else is an exercise in keeping alive a political football to provide all sides red meat to throw to their respective camps.
