Over the last few years, we’ve seen unprecedented drops in property values and depletion of tax revenues generated from property taxes. I guess there are many reasons for this, including the crash of an over-inflated housing market, incredible foreclosure rates and a recovery that has never really happened.
So communities find themselves with millions of dollars of real estate without owners who are not paying income taxes AND a tax base that is literally shrinking before their very eyes.
Because communities are generally not allowed to run a deficit, many opt to simply raise taxes instead of cutting back on Government services. Many combine tax increases with cutbacks in services. Virtually all communities are scratching their heads wondering how to prevent such a disaster in the future.
Here’s a plan that I think would add jet fuel to our economy, boost economic growth and development, stabilize tax revenues and guarantee a healthy tax base for decades, if not forever:
GUARANTEE NO PROPERTY TAX INCREASES for as long as a person or company owns their property.
WHAT?! That’s right! As long as a piece of property never changes ownership, the tax on that property will NEVER go up. NEVER. In other words, if the tax on your home is currently $800 a year, you will never pay more than $800 in annual property tax.
The same would go for any business that invests in property, even if that property is bought as raw land and later has a 100,000 square-foot office building developed on the site.
Let me address the benefits, then the objections. Then, how to implement the policy.
BENEFITS: IF your property tax could NEVER be increased, what would happen?
First: The community would suddenly become a tax haven for folks looking to either live or invest here. Inventories of foreclosed homes would quickly dry up because of the demand for homes in this community. As vacant homes become occupied, taxes are paid.
Second: Current taxpayers would benefit from knowing their tax bill would never increase. They would want to stay current with their taxes and mortgage payments to keep the great deal they have.
Third: Economic development would BOOM as companies seek stable and predictable tax environments. And, the ability to acquire underperforming property and improve its value without being penalized for doing so would attract both investment and jobs. It would also encourage redevelopment of blighted areas for the same reason.
Fourth: Politics (relative to property taxes) are no longer an issue, ensuring a more stable local governing body.
Fifth: No elderly person ever needs to lose their home or property because they can’t pay their property taxes due to inflated real estate values.
OBJECTIONS: Mostly political myopia.
First: How would we fund needed Government services? It is assumed that the current rate of taxation is sufficient to cover the current level of Government spending. This program would impose a certain level of restraint on Government spending.
Second: How will taxes keep up with the increase in real estate values? Taxes are assessed on the REAL value of a piece of property determined by the Sales Price. As the market recovers, real estate prices eventually increase. As property is sold, taxes on those properties increase according to their price.
Wouldn’t the government be losing tax revenues if a company bought and redeveloped a piece of property? Maybe in the short run on THAT piece of property. Sure. But isn’t that better than having to GIVE tax incentives for a business to buy and invest in the community? This creates a predictable environment for ALL businesses to consider when contemplating relocation instead of politicians picking winners and losers.
Third: I can’t think of another reasonable objection to this plan.
IMPLEMENTATION: Obviously, this plan would require a buy-in at both the local and state level. It might require a Constitutional amendment codifying the plan. It should be made permanent and difficult to change.
It should be noted that with all concepts that limit the power of Government (especially in the matter of taxing and spending) significant reluctance can be expected. So, this would be an ideal political issue for someone seeking to change the status quo.
With the state of political discourse these days and the antipathy toward tax increases and runaway government spending, this issue should be a winning one.