It's odd that this would be suggested now, when falling property values are killing the tax revenue across the USA. The government just adjusts the tax rate every year so they have adequate funding. Of course, why limit the tax to land, why not tax all property, like my county does to my business? Even if I lease a printer, I end up paying a surcharge for keeping it here. Property tax sucks.
I think a consumption tax is much more reasonable, with the end goal of increasing exports in mind.
> It's odd that this would be suggested now, when falling property values are killing the tax revenue across the USA.
Actually, falling property values are not killing tax revenues in CA. Because of Prop 13, the taxable basis for a lot of property is less than the market value, so the taxes on that property will continue to go up.
Yes, the property taxes paid by recent buyers will go down because their taxable basis is decreasing with market value.
The net result is that the hardest hit areas are seeing a modest decline in property tax revenues.
Before Prop 13, CA govts simply adjusted the rates to keep revenues stable/increasing when property values dropped. When values increased again, the rates didn't go back down, thus ratcheting revenues up.
It's very different in my county in VA, assessments are done every year on commercial and residential property. So, the revenue drops quickly if the tax rate isn't increased. They actually did drop the tax rate as values were rising, but not enough to prevent a $315M gap this year, even with a 12% increase in the tax rate. http://www.washingtonpost.com/wp-dyn/content/article/2009/06...
The scenario is different in CA and other locales with only event driven reassessments, but prop 13 and similar measures only provide upside protection for the consumer, there isn't downside protection for the state.
Actually, there is downside protection for govt, and we're seeing it now.
The downside protection is in the property whose taxable basis is lower than its market value. If the taxable basis tends to grow slower than the market value, some basis will be going up even when overall market value goes down.
And then there's the question why govt should have downside protection. I don't.
Ah, but then you just go challenge the assessment. The taxable basis should always reflect the market value. In any case, the downside protection for the property owner in prop 13 is the 2% cap on annual increases.
The government really shouldn't have downside protection, it's just more evidence as to why property taxes aren't a very good basis for taxation, as the original article suggested and I disputed. Property had the distinction of being a more stable asset price, but when the market rose abnormally, government got fat off of the proceeds, and is now paying the price as capital is being reallocated from property assets.
I think a consumption tax is much more reasonable, with the end goal of increasing exports in mind.