Well, the Republican governor of Connecticut has put up
a trial balloon for property tax caps. Here's the letter I
sent my local paper:
To the Editor:
I read with great dismay that our governor is
contemplating property tax caps. We need only look at the
experiences of California ("Proposition 13") and Florida
("Save Our Homes") to know that such a thing is something
that intelligent people who believe in the golden rule
and rational taxation would avoid at all costs. (Do we
qualify as intelligent? I hope so!)
Property tax caps may sound very appealing, and likely
will gather knee-jerk approval from homeowners and
commercial property owners. But if we regard ourselves as
educated, rational, reality-based people, we need to
examine the medium-term and long-term effects of such a
plan. California's and Florida's experiences can save us
conducting our own experiment.
Property tax caps don't reduce the demand for public
spending a bit. They merely shift the funding from taxes
on real estate to taxes on wages and taxes on goods we
produce and buy from others — and from those who
own choice sites to those who own less-choice sites and
those who own no property at all. Property tax caps
increase housing costs, which is the last thing we need
here. Economists regard taxes on wages and taxes on goods
as distortionary, as inefficient, with deadweight loss.
They burden the economy. They burden poor people. They
deaden the entrepreneur.
Alabama has low property taxes, and has sales taxes as
high as 11% on purchases as basic as bread and milk;
their income tax starts at under $20,000 for a family of
four (a few years ago, it started at under $5,000!).
Their education system, to put it gently, leaves a lot to
be desired.
So what should we do? Reform the property tax. The
reform I favor — which I think will hold up to
whatever scrutiny one might apply — is to separate
the two portions of the tax on real estate. Reduce the
taxes on buildings, and increase the millage rate on land
value. Were we to announce that reform today, to be
enacted, say, 3 years from now, people would have a
chance to make appropriate decisions regarding the
housing that makes sense for them. Would it displace some
people from older housing they could no longer afford?
Yes, possibly. Would it create more affordable housing
for the wide range of people who need affordable housing?
Yes, definitely. Would it lead to less urban sprawl and
shorter commutes? Yes. Would it lead to fewer vacant lots
downtown? Yes.
There are many good reasons to undertake property tax
reform. But assessment caps and tax caps have no place in
that reform.
WCA, 3/29/2007
What's even more peculiar is that at the same time that
Governor Rell is proposing caps on property taxes (even
increases from revaluations!), she is simultaneously
proposing spending more on education. What tax base does
she propose to tap?