Here in Maine, as in so many other states, there are endemic budget crises, and there is great grumbling over the property tax. Everybody hates the property tax; everybody thinks it must be reformed, lowered -- eliminated, if possible. Some of our perceptive readers may have noticed this, and wondered what it portends for Georgists, who, after all, seem to have good things to say about the property tax, or a form of the property tax, at least. Are we barking, perhaps, up the wrong tree?
Perhaps not. It seems clear to me that the property tax is reviled for two main reasons. First, it penalizes us for doing innocent, constructive things like screening in our front porches, remodeling our kitchens or adding second baths. A number of homeowners in my rather distressed community of Jackson, Maine intend never to side their houses -- not because they prefer tarpaper, but because they simply can't swing the property tax hike. It is galling. No one denies the fact that home improvement is good for the overall economy! But, across this great land of ours, our municipal governments fine us for it, as though our rec rooms and bay windows were some sort of public menace.
That's thing one, and it is indeed annoying. It's thing two, however, that really, really gets people's dander up: the fact that property taxes are demanded in a big, ugly lump, while other taxes are nickle-and-dimed out of us. It's like the difference between a dripping faucet and a cold splash in the face. What people tend not to realize, though (and this is the true genius of the so-called "broad-based" taxes) is that you lose a lot more water through the dripping faucet. According to the Tax Foundation, a median-income US family pays roughly 25% of its income in Federal taxes, and only 13.5% in state and local taxes. Remove state (and local) sales taxes from that figure, and we see that all the barking about the property tax is a lot worse than its relative bite.
True, nobody likes paying income taxes either, and most US citizens were tickled (albeit a tad skeptical) about the Bush tax cuts. But, outside the Libertarian movement, income taxes simply don't inspire the level of outrage that property taxes do. For middle-class wage-earning people, Federal taxes are primarily taken in the form of payroll taxes, which means we never really see them. We live on the money we take home. Each April, a bizarre calculation ritual is performed which results in an adjustment, either for us or against us, but not for any explicable reason. Sales taxes make even less of an impression. We want a candy bar, a TV set or a square of roof shingles. If we can afford the price, we pay it, tax in, and get on with life. But: the property tax bill comes, and Whoa! It seems like a lot of money.
Well, I started trying to think of ways to make the property tax less odious to folks. We could address the first problem -- the way it fines us for constructive acts which are neither illegal nor immoral -- quite easily, by simply removing the property tax on improvements. I agree that the town should not fine you for building that rec room -- in fact, why should it fine you for any part of your house, or for that matter any Game Boy, cooking utensil or flea collar contained therein? No, let the property tax be levied on the value of land -- the thing that really does belong to the whole community, the place where all of us are really just strangers and sojourners -- and leave it at that. If nothing else, that reform would encourage Jackson residents to finish their houses, making our road a much more pleasant place to visit.
But that wouldn't get rid of what really bothers people, the lump-sum thing. So, I thought, why not collect the property tax via a payroll deduction, so people wouldn't have to think about it? That's the way to really bring in the revenue, after all. But...
Hmmm. That would entail some daunting logistical problems, wouldn't it? After all, real property is locally assessed, locally administered and locally lived on -- but payroll taxes must be collected by a centralized bureaucracy. Good heavens, would we have to let the IRS collect real estate taxes and rebate them back to municipalities!? Can you imagine the horror!
No, it just wouldn't work. For property taxes to be collected incrementally, as payroll deductions, they would have to become part of the national tax-ocracy, and that would be unacceptable for all KINDS of reasons. But perhaps there's a lesson in that.
Perhaps our taxation systems make less sense than we're accustomed to think. Maybe it isn't all that great an idea, after all, to penalize the honest purchase of chocolate bars, television sets and roof shingles -- at least not if we could imagine any other more sensible way to raise revenue. Perhaps it's not actually all that sensible to raise Federal revenue by means of a system that not only depends on taxpayers waiving their Fifth Amendment right against self-incrimination -- but does so in the most annoying, cumbersome, exasperating manner that anyone could think of.
And yet, somehow, people are all worked up about the property tax. I think the most astounding realization about all of this is that once you start trying to apply common sense, you start to see how mindbendingly wacky our tax system truly is.
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