It is a popular pastime here in Indiana to complain about property taxes and their effects on the local economy. In the minds of many citizens, these taxes are levied on property owners and appropriated for wasteful pet projects and high administrative costs. But that’s just flat-out wrong, as property taxes provide citizens with the most important public services in the US.
Well, I can’t tell you what the right tax rate should be nor can I tell you how the money should be spent, but I can tell you that property taxes should remain an option for cities to raise funds. Politicians, civil servants, and public sector employees work for the people, but only when their paycheck comes directly from us.
I worry that we are so averse to property taxes that we will end up paying only payroll taxes and taxes on economic activity. At that point, will our leaders try to increase GDP at any cost? Will we pay all our taxes through sales tax? Why would we want to give our tax dollars to a middleman and have them decide what our priorities should be?
If the public were to reject property taxes and payroll taxes altogether, then government would be financed by commerce and industry instead. At that point, would our local government still remember who they worked for? Do we really want free enterprise to replace the voice of the people?
Property taxes support the most important services that local government provides including education, healthcare, and emergency services. While the Indiana legislature is busy considering property tax reform, please remember that capping property taxes does not reduce our government, only our control over it.
One final consideration, and the reason I raise the issue on this website, is that property taxes encourage economic activity and property development. Property taxes discourage land-banking because owners need to make a profit on the property quickly. Unlike sales tax or production taxes, they do not penalize additional production or commercial activity. Not only do property taxes provide a stable source of funding for government services, they force the highest and best use for property.
If anyone is looking for more information on property tax revolts and why they are becoming more common, see Urbanophile’s recent post here.