I have heard arguments for and against property tax. Those for are almost always the same. The government needs money to run, and it has to come from somewhere. Some claim that taxing property is reasonable, because people with property obviously have money. Some of these claims are valid, for instance, the government does indeed need money to run. Others are absurd. How can anyone expect someone who has just paid obscene amounts of money to buy a house to have any left for taxes? In the U.S., people who own property are typically making payments, which often means that they have less discretionary than those without. The claims against property tax typically hinge on the absurdity of charging people money to retain what they already own. This argument is so strong that most people see no value in coming up with any other argument against property tax. I want to look deeper. I think we need to understand where property tax comes from and what it purpose is, before we can really understand whether it is right or wrong.
From an American perspective, there should be two problems with property tax. The origins of property tax are based on two fundamental assertions. The first is that the government owns all land. In Old England, the government was the king. The king "gave" land to nobility, but the king still owned the land. When land was granted, what was given was the right to hunt, farm, and rent the land (along with some other rights). What was granted was the use of the land. So long as the land was part of the country, it belonged to the kind. As such, it was seen as entirely reasonable for the king to charge a tax to anyone granted rights to the use of land. The land was his land, after all. In the U.S., there is no king, and the government does not own all land. The Fifth Amendment to the Constitution acknowledges this by requiring the government to compensate land owners fairy if the government must take land from private owners (the government does have the right to take land under certain circumstance, but the government must pay for it, and private citizens have the right to hire their own appraisers and challenge the government if they think the price is lower than the value). This first fundamental assertion is not valid by U.S. law, so it is not valid to argue that land owners owe some kind of rent because the land belongs to the government.
The second fundamental assumption is that land generates profits. When a person was given a title and land, he (almost solely males were given titles; females had to marry into a title) did not usually have a lot of money. If the land granted did not generate a profit, a property tax would generate no value, and the land would immediately be repossessed. No property tax would have lasted very long if the land did not generate profit. Land granted to nobility typically had several means of generating profit. The first, and maybe original, means of generating profit was farming. Lands came with serfs that farmed. The serfs were taxed on their production (depending on the period and the landlord, this could be a percentage or a set amount). Later, landlords would allow more wealthy freemen (non-nobles, often merchants, artisans, or clergy) to rent housing and land. These typically generated enough profits for nobility to live quite comfortably, in addition to paying a property tax. Given that the lands produced significant profits, it also seemed entirely reasonable to charge a property tax. This assertion is also not valid in the U.S., and it is especially invalid in the modern U.S., where a majority of landowners are only living on the land, not profiting from the possession of the land.
The two fundamental assumptions used to justify the creation of property tax are no longer valid. This is even true in England. It may be questionable whether the king owns the land or not, but the English government no longer treats the land as if it is owned by the king. Further, many nobles have had to sell their land, because the land no longer generates enough profits to pay the property taxes. It is a travesty that property taxes ever came to exist in the U.S., given that the major reason the U.S. declared independence against Britain was to escape economic oppression. As mentioned, the Fifth Amendment to the Constitution even grants protection to the private ownership of land. Perhaps the biggest travesty, however, is the fact that governments feel entitled to steal the property of private citizens because they cannot afford to pay property tax on land that is not owned by the government and that does not generate any profit.
So, what about the argument that the government needs money to run? This is a true and valid argument. The government must have some form of income, and taxation seems to be the only fair and safe means of this. In my opinion, the only fair form of tax is income tax or sales tax. Both of these tax on profit that has already been realized, not on profits that are expected or assumed. Similarly, these taxes take more money from those who gain more money, which is fair because they have more to loose and thus benefit more from the protection that the government provides.
In the past, I have been opposed to the idea of a graduated income tax, on the grounds that a flat tax already taxes the rich more than the poor. If all things were just, I would still hold this opinion, however, I have seen clearly that they are not. In the U.S., it is not only common practice, but it is even taught in our educational institutions that it is the right of the rich to rob the poor. Employers are no longer expected to pay fair wages. Inflation has far outstripped increase in wages. The lower and middle classes are robbed of their time for paltry wages that do not even pretend to reflect the value of their labor to their employers. In the past few years, I have learned through both research and reasoning that our economy and country cannot survive on a flat tax, because our lower class is no longer paid enough to survive without welfare. Many conservatives argue that eliminating minimum wage would fix this, and the economy would ultimately balance more fairly. Given the extremely high unemployment rate, I can guarantee this would not happen. Many employers would lower their wages, and since there is a surplus of labor, the wages would remain low. They will not lower prices unless they cannot sell without doing so, and the fact that they are still selling fine even when a lot of people cannot afford the goods is evidence that this will not occur. If more people get jobs, good will sell better, not worse, and prices will increase further, further widening the gap between wages and costs. Many liberals believe that increasing minimum wage will fix this, by forcing employers to pay fair wages to the poor. This is also not true. Businesses will react to increased wages (and have, in fact, already done so in many industries as a reaction to our recent economic crises) by automating processes and eliminating human labor. Changing minimum wage is certainly not going to fix anything. At this point, fair taxation necessarily means taxing the rich at a higher rate to provide for the lower and middle classes what the rich have robbed from them. Property tax does not accomplish this, because not all rich people own property and not all property owners are rich. The most effective measure of wealth is income. A graduated income tax, handled properly, can be an effective way of enforcing fairness where the rich refuse to do it themselves.
Property taxes are beginning to suffocate our middle class. Thankfully, there is no Federal property tax, and not all states charge property taxes, but there are still many that do. There are also many cities in the U.S. that charge property tax. During the housing bubble burst last decade, some cities were made painfully aware of this problem when people who could not pay their property taxes were unable to sell their homes and were forced to let the city take them. The banks were unwilling to repossess the houses because they were not worth the back property taxes owed. Whole neighborhoods of large cities were left abandoned, and squatters took up residence in the abandoned houses (further reducing their values). The lower class cannot afford property in the U.S., and in many places in the U.S., the middle class cannot afford to retain property, because their local or state governments charge them large amounts of money for the privilege (it is not a right if strings are attached) of owning land.
If a government needs money to operate, it should charge income or sales taxes. These do not infringe of the right to own property. They are inherently fair in the fact that they charge approximately only what people can afford to pay (presuming they are reasonable). I would also assert that they are better for the economy, because they do not suffocate middle class landowners who are not profiting from their land. We have clearly not eliminated all of the economic oppressions our forbearers fought so hard to escape. This particular one is not only oppressive and harmful, but it is also obsolete. We can do better.
