With all the hoopla over the presidential election, gone almost unnoticed are measures that will be on ballots all over America next Tuesday to limit or roll back property taxes. It's the biggest tax revolt since the 1970s.
No wonder. Property taxes across America have been soaring -- according to Deloitte and Touche, by an average of more than 10 percent between 2001 and 2003 alone. They're rising mainly because more and more responsibility has been heaped on towns and cities -- which rely on property taxes to pay for a lot of things that states and the federal government used to help pay for. Call it trickle-down taxes.
The federal tax cuts of 2001 and 2003 left a big hole in the federal budget, meaning that the feds can't or won't fully fund programs like No Child Left Behind, which requires schools to take sometimes expensive steps to improve themselves. Federal support for states has also dropped, so there's less state aid to towns and cities. Well, someone's got to pay for schools and roads and parks and public safety. So by default, the tax burden has fallen to the bottom of the food chain. Local property taxes have borne a lot of the brunt.
This wouldn't be a terrible thing if Americans with different income levels lived together in the same towns. But the fact is, we're segregating more and more by income into separate localities. We've got rich towns where almost everyone is a high-paid professional living in a bulked up McMansion; middle-class towns where everyone earns $40 to $80,000 a year and has a ranch house or condo; working-class towns where most live in two-family houses or small single homes; and poor towns where many are unemployed or in minimum-wage jobs and rent the place they live in -- and of course, their landlord's property tax is passed along to them as part of the rent.
So as local property taxes pay for more, and as we continue to segregate more by income, the quality of the services we get -- schools, roads, parks, police, fire -- increasingly depends on the income level of the town we live in. Local property taxes now provide about half the money used to pay for schools, for example. So schools attended by kids from families earning, say, $20,000 a year don't have nearly the resources of schools attended by kids from families earning $100,000 a year.
In order to afford half-way decent public services, property taxes in poor and working-class towns have to rise more than property taxes in wealthy places. But as they rise, a tax revolt is brewing, because these families just can't afford it. Yet if they don't pay more, they won't get better schools or other services.
Here's a radical suggestion: Abolish the property tax. Substitute another form of tax on wealth that's fairer. For example, instead of a local property tax, how about a national wealth tax? Say, one-tenth of one percent of someone's total wealth, per year. The proceeds would be sent back to towns to pay for schools and other services, according to a very simple formula -- the number of people living there. Simple ... and fair.
Robert B. Reich is a Prospect co-founder.
