Thursday, March 09, 2006

Sam's Hole In One-And-A-Half

My esteemed colleague Sam Karnick comes oh-so close to the central point about assessments and property tax liabilities in his recent post, although it must be said at the outset that the arguments that he does muster are utterly correct. But in terms of standard public finance principles, the real argument is that government has specific functions to achieve, and is supposed to conduct them "efficiently," that is, at minimum cost. (Please stop giggling.) Accordingly: Rising assessments should be accompanied by falling property tax rates, so that only the needed revenues are raised. Sam hints at this with his "because they can" point---which is clearly correct, in that governments exercise their monopoly powers as well as anyone---but the larger point is that government is not entitled to some share of rising wealth, or more crudely, to have its thumb in every pie. As for the economic burden (or "incidence") of property taxes, that is a story for another day; suffice it for now to say that the homeowners sending the checks to the government do not necessarily bear the (full) incidence of the tax. Off to Berlin Saturday to talk about the Chinese economy. Bratwurst and beer, and oh happy me.

6 comments:

Hunter Baker said...

Try the curry ketchup. It's smashing on a brat in a bun. I discovered it in Freiburg and have been missing it ever since.

Matt Huisman said...

Government is always looking for cover when raising tax revenue. Whether it be hiding payroll taxes as an employer's expense, weekly deductions rather than a year end summary or budget cuts that are really cuts to the rate of increase.

The dramatic rise of property values is the latest example. Why settle for cost of living type increases when the soaring property values provide cover for extra tax revenue?

The Classic Liberal Anonymous said...

Government is always looking for cover when raising tax revenue.

Good point.

What will happen when the alleged "real estate bubble" bursts? Are local govts going to go broke?

It is in the best interest of local municipalities to keep property values high. This goes hand-in-glove with the "open space" laws that many cities are passing.

Matt Huisman said...

What will happen when the alleged "real estate bubble" bursts?

I hadn't thought of that CLA, although reassessments on the downturn probably take a little longer to 'process' than they do when values are rising.

[BTW, still holding my breath on that bubble bursting...it's been what, at least 5 years in the making? Should be any day now - no doubt about it;)]

Are local govts going to go broke?

Probably, but that's going to be the case no matter how much revenue they generate.

The Classic Liberal Anonymous said...

Probably, but that's going to be the case no matter how much revenue they generate.

Ha!

Devang said...

governments exercise their monopoly powers as well as anyone

I'm baffled by the conservativeness of that statement, baffled. I don't see why we even bother with a democratic government if that's true...