Comment of the Day: Property Taxes

Local tax debates are in an odd place where the most visible revolt against "regressive" taxes is directed at property tax - a tax on wealth, if not income. There are, of course, hard cases, but I've been struggling to find a column with the right mix of sympathy and focus on the truly poor. In yesterday's open thread Al Dimond did it for me:

There's sympathy, and then there's policy. The choices that cash-poor, fixed-income people have to make are tough; those people that are also house-rich often didn't choose to be house-rich, and can't access the benefits without taking on some risks. There's lots of room for sympathy.

But it's most fair and most practical (from a tax stability point of view) to tax both income and accumulated wealth. High-earners here get away with criminally low taxes and reform is needed so they pay their fair share. But it's hard, from a policy perspective, to put property taxes first in line for relief in tax reform, rather than sales taxes. People with wealth in property have better choices and better means to make them than the poor people gouged by sales taxes and usage fees. California's attempt to protect people from rising property taxes ended up being spectacularly poorly targeted, and easy for rich and well-connected people to effectively exploit to their benefit - in California people with lots of accumulated wealth are under-taxed as badly as high-earners in Washington, to the detriment of other taxpayers that bear higher burdens, and of the public realm generally.

We'd probably do better by encouraging (and sometimes subsidizing or even directly building) more diverse housing types in more places, so that people that do move don't have to move so far, than by trying to build tax policy around people living in the same houses for the rest of their lives (then passing those houses on to their children). There are lots of non-financial reasons staying in the same home doesn't work out, and people making those transitions for any reason need better options and more support.

In our interview with Cary Moon last year, the candidate shared an anecdote of an elderly homeowner who had to take in boarders to stay in her home. I wasn't quick-witted enough to say it at the time, but this is the production of naturally occurring affordable housing. While no one likes to see sympathetic people be lightly coerced, dynamics like this operating at scale are the only thing that can solve the affordable housing crisis.