Property Tax Revolt: The First Time Was Only a Warning

It looks like a property tax revolt is brewing across the country, perhaps the biggest one since the era of Proposition 13, in the late 1970s. The Christian Science Monitor reports today that “legislative proposals, citizen initiatives, and lawsuits are on the agenda in at least 20 states.”

It’s no surprise why. Rising home values have meant rising assessments in many parts of the country. Rising home values are great if you’re selling; but if you’re not planning to sell your house, the increase can just mean higher taxes. And now, as Dennis Cauchon pointed out in USA Today, house prices are falling in some places but assessments haven’t yet been adjusted.

More importantly, cities and counties gleefully increased spending as the tax revenue rolled in during a decade or so of rising prices. But now that the revenue increases are slowing, local governments don’t want to cut back. Instead, they want to raise rates to keep the good times rolling—for governments if not for taxpayers.

The Wall Street Journal reports that more and more taxpayers are protesting their assessments. That’s one form of rebellion. Another is tax protests and calls for political action, and the Journal reports that those are happening, too, from Florida to Minnesota.

Back in 1978, the college newspaper cartoonist Berke Breathed (later famous for “Bloom County” and “Opus”) drew a brilliant cartoon about Proposition 13. For the benefit of our younger readers, I’ll explain: Proposition 13, which slashed property taxes in California, was spearheaded by Howard Jarvis. And it passed in June 1978, about the time the movie The Omen II came out, with its tagline “The first time was only a warning.” And Breathed was right: Prop 13 was a warning to the political class that taxpayers were fed up. After Proposition 13, the Democratic Congress cut the capital gains tax rate. Massachusetts passed Proposition 2-1/2 in 1980. More than a dozen other states put constitutional limits on taxes in the next few years. Ronald Reagan ran for president on a tax-cutting platform; he defeated incumbent Jimmy Carter, swept in a Republican Senate, and cut the top marginal income tax rate from 70 percent to 50 and then to 28 percent.

From earmarks to entitlements to local assessments, it’s time for taxpayers to give the political class another warning.

Posted on May 7, 2007  Posted to Budget & Tax Policy,Cato@Liberty,Government & Politics

Is This Libertarian Paternalism?

From the Washington Post:

Other experts are considering more creative ways to improve tax compliance. One idea is to take advantage of people’s desire to get a refund at the end of the year.

“What some people do when they are doing their taxes is they do a first draft and see how much they are getting back,” said Richard Thaler, a University of Chicago economist who studies how people think about money. “If they owe money, then they do a second draft. They keep finding deductions until the refund is positive.”

Thaler said mandatorily increasing withholding levels so more people get refunds could increase compliance because taxpayers would no longer have to go to great lengths to get a refund.

Thaler is one of the leading advocates of “libertarian paternalism,” which Will Wilkinson roundly pummeled the other day.

So is withholding more money from people’s paychecks in order to make the poor dumb sheep think they’re getting money back 16 months later an example of libertarian paternalism No, it’s just old-fashioned sheep shearing.

Posted on April 17, 2007  Posted to Budget & Tax Policy,Cato@Liberty,General

Volunteer Today!

This is National Volunteer Week — which is really appropriate, since it’s also the week our federal income taxes are due, and the income tax system is based on “voluntary compliance.” No, really, it says so right on the 1040 packet and throughout the IRS website. Indeed, the friendly folks at the IRS acknowledge (.pdf) that some people get the wrong idea because the IRS itself tells taxpayers in the Form 1040 instruction book that the tax system is voluntary.” But if you take their little online test of “Your Role as a Taxpayer,” they explain to you that it is True that “IRS publications state that the tax system is voluntary,” but it is also True that “The government has the right to force me to pay my taxes and charge me penalties for not paying taxes.” Go figure.

Anyway, if you have any time or money left after paying your taxes, consider doing some volunteer work.

Posted on April 17, 2007  Posted to Budget & Tax Policy,Cato@Liberty,General,Government & Politics

High-Tech Welfare for High-Tech Billionaires

Voters in a New Mexico county appear to have approved a tax increase to build the nation’s first commercial spaceport. Two other counties will also hold tax referendums before the project can proceed. British billionaire Richard Branson and his company Virgin Galactic have signed a long-term lease to use the spaceport.

But why should the taxpayers of rural New Mexico be paying for facilities for billionaire space entrepreneurs If the spaceport is going to be profitable, then businesses could pay for it. And even if it weren’t profitable, the space business has attracted the attention of a lot of people with a sense of adventure and billions of dollars, from Branson to Microsoft cofounder Paul Allen, the seventh richest man in America.

The argument to spend tax dollars on the spaceport is very similar to the argument for tax-funded stadiums and convention centers. Proponents say it will bring jobs and tax revenues to the three rural counties. But apparently it isn’t a sure enough thing for businesses to invest their own money.

Cato scholars have argued for years against corporate welfare. The spaceport is a classic example of corporate welfare, though in this case it might better be called billionaire welfare. It will transfer money from middle-class and working people to subsidize businesses and billionaires who won’t have to invest their own money — just like the typical stadium deal, paid for by average taxpayers to benefit millionaire players and billionaire owners.

At least in this case the voters get to decide, which rarely happens with stadium subsidies. The vote pitted “political, business and education leaders” against retirees and groups representing the poor.

“I’m not opposed to the spaceport, but I think it’s a terrible idea to tax poor people to pay for something that will be used by the rich,” said Oscar Vasquez Butler, a county commissioner who represents many of the unincorporated rural colonias where the poorest New Mexicans live, often without proper roads and water and sewage systems. “They tell us the spaceport will bring jobs to our people, but it all sounds very risky. The only thing we know for sure is that people will pay more taxes.”

Posted on April 6, 2007  Posted to Budget & Tax Policy,Cato@Liberty,Economics & Economic Philosophy,Government & Politics,Science & Space,Tech, Telecom & Internet,Welfare & Workforce

How Dumb Do They Think We Are?

For the past six years Democrats have railed against President Bush’s gimmicky, deceptive, wildly unbalanced budgets. Now that they control Congress, they have the power to write their own budgets. And what have they come up with As the Washington Post explains,

Senate Democrats unveiled a spending blueprint yesterday that envisions a massive expansion of the nation’s health-insurance program for children, as well as billions of additional dollars for other domestic priorities such as public education, veterans’ health care and local police.

Despite the additional spending, Sen. Kent Conrad (D-N.D.), chairman of the Senate Budget Committee, said the proposal would virtually erase the federal deficit within four years without raising taxes and produce a surplus of $132 billion by 2012.

It’s not true that politicians never learn anything. Conrad and his colleagues have learned a great deal from Bush and his budget spinners.

Posted on March 14, 2007  Posted to Budget & Tax Policy,Cato@Liberty,General

The Government Is Not the Country

The Washington Post reports,

“Three of the last five years, there’s been no budget for this country,” [Sen. Kent] Conrad said in an interview.

Actually, for the past 218 years, there’s been no budget for this country. The country is a vast, sprawling nation of 300 million people, millions of businesses, and more than 100 million households. The country is not a corporate entity, and it has no budget.

On the other hand, there is supposed to be a budget for the federal government, and Congress is indeed derelict in failing to pass one. But politicians should not forget the distinction between the country and the government.

Posted on March 14, 2007  Posted to Budget & Tax Policy,Cato@Liberty,General,Libertarian Philosophy

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