EVEN AS THEY were urged to keep all options on the table, it
seemed to be a foregone conclusion that the House panel that started
work last week on a plan to reduce property taxes would recommend
changing the state constitution.
It shouldn’t be.
While it might turn out that some constitutional tweaks are
needed to deal with the problem that rising property taxes cause
some homeowners, the changes being talked about by both House
leaders and senators undertaking a similar task are
irresponsible.
The most popular ideas are limiting how much a home’s taxable
value can be increased by reassessment, eliminating reassessment
altogether and capping property tax rates. Slightly less popular,
but even more alarming, is eliminating property taxes
altogether.
Limiting or eliminating reassessment shifts the tax burden to
people whose property values are not increasing rapidly: When you
lower property taxes for one group, you have to raise them for
everybody else, unless you want to starve essential local services.
Beyond the practical is the philosophical problem: Allowing some
homes to be taxed at less than their actual value undermines the
extremely sound idea that property — toward which local government
services are geared — should be taxed based on its value.
Arbitrary caps on tax rates, imposed by the Legislature or even
by the public through a constitutional referendum, do something even
more destructive: They disenfranchise voters, by allowing folks in,
say, Greenville, to tell folks in Lexington how much they can spend
to run their county or their town. If you’re going to do that, you
might as well just abolish local governments and have the
Legislature run the police and fire departments, handle garbage
collection and zoning decisions and other local tasks that affect
our daily lives.
Of course, eliminating the property tax altogether would likely
have the same effect, because it’s almost certain that the
Legislature would replace the property tax with a sales tax, and
it’s hard to believe that the Legislature would let local
governments have much discretion about how high to set the sales
tax.
Frankly, local governments shouldn’t have much discretion when it
comes to sales tax rates. It’s better for the economy for those to
be relatively uniform; it’s also better that they not be too high
relative to other states. But they would have to be too high in
order to replace property taxes. And the rate would have to be
continually increased, because changes in U.S. spending habits mean
we’re spending a smaller and smaller percentage of our income on
taxable goods every year.
Fortunately, it’s difficult to amend the constitution. And there
are rational and well-thought-out ways to address the problem, from
adopting “circuit breakers” that give tax credits to the poor (as we
already do for the elderly) to closing sales tax loopholes and
taxing more services as part of a plan to have the state take more
responsibility for school funding. Solutions along those lines take
more work to develop, and they generate more opposition from the
politically powerful. But they also can form the basis of a real
solution — one that does more good than harm. They’re the type of
things legislators should be looking at, rather than the quick
non-fix of radical constitutional changes.
