Thursday, December 20, 2007

Replacing Property Taxes (I Hope)

Here in Texas there is a proposal by a Republican legislator who is suggesting that we replace property taxes with a sales tax. Naturally, it has met with resistance. The author of the opinion piece in the Dallas Morning News misses an important point about property taxes, which is the fact that when you tax property, you essentially make the government into the real property owner. If you don't believe me, try not paying your property taxes and see what happens. You will find yourself in the same situation as you would find yourself if you didn't pay rent to your landlord: evicted. Property taxes essentially turns the local government into your landlord, meaning you do not, in fact, own your land. With property taxes, there is no such thing as property rights.

I pay my property taxes with my house payments. That means that my combined payments are about $1200, only $800 of which is for the house payment. That's $400 per month in taxes, equal to 1/2 of my house payment. So over the year, I pay $4800 in taxes. And that's just for the house. And I have to pay it if I want to keep the house.

The author of the opinion piece argues that the $0.05 sales tax increase we would need to offset the property taxes would hurt the poor. Nonsense. How many more people would be able to afford houses if their house payments were 2/3 of what it is now? The elimination of property taxes would also affect the property of landlords, making it cheaper for them to own their property. Competition among landlords would result in prices dropping for those who rent, making rent for the poor (and others) cheaper. The author of the piece assumes that nothing would change except the increase in the sales tax, which is patently false. Prices of many things would go down precisely because the property tax burden was lifted. This is aside from the fact that Texas would become a very attractive state for businesses, since they would not have a property tax to pay. The combination of a lack of property taxes and our lack of income taxes would cause an economic boom in Texas, more than offsetting the sales tax increase. In fact, with such an influx of income, one would expect to see revenues from the sales taxes to increase.

All of this is aside from the fact that America spends more per student than any other industrialized country, and does so to provide our students with the worst education among industrialized (and even a few third world) countries. We could probably stand to cut back a bit, since the more money we have thrown at education, the worse our educational system has gotten. I would also love it if the money collected with the sales tax were used to give parents vouchers to spend on whatever schools they want to send their children to. The competition among schools would improve education for our students, giving the state even more of an edge long-term. The opponents of vouchers have to ignore the fact that competition creates the kinds of products people want to consume, and better products for that reason, while government has always created the kinds of products nobody wants to consume, and worse products over time, since nobody has any choice but to take the product. It is no coincident that our educational system has gotten worse and worse with every passing year since it became public education. Free markets work; communism doesn't -- in education as well as the economy.
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