D. Dowd Muska


Why the Property Tax Is Your Friend

June 14, 2012

The right’s talk-radio gabbers and cable-news blowhards are disappointed. Voters torpedoed Measure 2, a ballot initiative to eliminate property taxes in North Dakota.

It’s tempting to declare any tax-axing a beautiful thing. But true to form, the national conservative media, mired in sound bites and talking points, failed to dig deeper. There were compelling reasons for deep-red North Dakotans to reject the measure.

Most importantly, the initiative was no tax cut. Since it didn’t compel the zeroing-out of a single “public” expenditure, it was a tax shift. Measure 2 barred North Dakota’s “counties, cities, townships, school districts, park districts, water districts, irrigation districts, fire protection districts, soil conservation districts, and other political subdivisions” from collecting property taxes. “[S]tate sales taxes, individual and corporate income taxes, oil and gas production and extraction taxes, tobacco taxes, lottery revenues, financial institutions taxes, and other state resources” were to step in as substitutes.

If you live in a region with a tradition of strong home rule, North Dakota’s proposed switcheroo sounds awfully dodgy. For decades, districts, towns, cities, and counties have increased their dependency on state capitals and Washington. “Free” money proved too enticing for selectmen, councilmen, mayors, and commissioners to resist. Property taxes once furnished the bucks for nearly all spending by municipalities and counties. Today, their share has dwindled to 28 percent.

That’s a regrettable decline in financial self-sufficiency. Public-employee wages and benefits are easier to boost when local taxpayers contribute a small part of the added cost. Trendy, and counterproductive, education fads are more attractive when financed by a “millionaire’s tax” at the state level. And with “intergovernmental revenue” comes intergovernmental strings.

Give Measure 2’s crafters credit for anticipating the loss-of-autonomy argument. The initiative’s text included a provision that the enhanced lucre that would soon gush from Bismarck was to be spent “at the sole direction” of local governments. But state pols would still decide the value of the grants for schools, roads, police protection, firefighting, and the like. As a Mandan resident noted, if successful, the measure would have prompted “endless expensive lawsuits over funding formulas perceived to be unfair.”

The activists behind North Dakota’s voter-vetoed experiment relied on a simple truth. As a reporter for The Philadelphia Inquirer quipped, Americans are divided on the property tax: “Half … hate it, and the other half really, really hate it.” Hyperbole it is not -- the Tax Foundation’s Joseph Henchman blogged that his organization’s “surveys and polls … have consistently shown that the property tax is the most hated tax in America.”

Why does a levy that raises less than a third of the revenue consumed by just one level of government generate such venom? Because most of the folks who pay property taxes do so knowingly, in annual or semiannual sums. Taking a big honkin’ load out of your checking account, all at once, stings far worse than the plodding, almost imperceptible accrual of income- and sales-tax obligations.

The property tax’s high visibility is the reason why so many bureaucrats and career politicians prefer paycheck withholding and micro-filching consumer purchases. The strategy was best articulated by Mobutu Sese Seko, the African despot, in a lecture to his kleptocratic flunkies: “If you steal, do not steal too much at a time. You may be arrested. Steal cleverly, little by little.”

The property tax steals big, and that’s why liberty-lovers should not only embrace it, but work to restore its role as the prime funder of local government. By directly dunning every homeowner and businessman -- and in many states, everyone who drives a car -- the levy creates a broad constituency for smaller, cheaper government. In places where property taxes cover the bulk of on-the-ground “public services,” taxpayers regularly encounter what they’re forced to support. Joe Sixpack and Jane Diet Coke find it difficult to gauge the cost-effectiveness of prisons, commuter-rail lines, arts subsidies, and missile-defense systems. But they notice when roads are poorly snowplowed, cops are slow to respond to 911 calls, the fire department is overstaffed, softball fields are unkempt, and code-enforcement officers enjoy their jobs a bit too much.

Measure 2 offered further evidence that dim-bulb populism on the right can be nearly as dangerous as vacuous tubthumping on the left.

The property tax isn’t a villain. It’s despised due to its method of collection, not inherent “unworkability” or “unfairness.” And the best way to reduce the property tax’s unquestionably onerous burden is to make local government affordable through privatization, competitive contracting, and right-sizing employee compensation.

D. Dowd Muska (www.dowdmuska.com) writes about government, economics, and technology. Follow him on Twitter @dowdmuska.

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