Commenting to my property-tax-related post, this morning, Mike678 articulates a point that one hears from time to time, and being a sucker for discussions of political philosophy, I think it’s worth responding in a post, rather than another comment.  Here’s Mike’s comment:

No connection, Justin. If there was, would it be OK if the town’s taxes increased because my house was valued more this year than last?

The cost of Gov’t doesn’t go down because home values do. The cost of Gov’t should be based on the services provided–services that the majority want, not what the Gov’t bureaucrats think it should provide.

To respond, let me start with obvious propositions with which I’m sure Mike would agree.  There are all kinds of connections between the value of people’s property and the taxes they pay on it:

• The taxes are based on the property value, after all.
• If you improve your property, and its value goes up, your taxes go up.
• If you let your house fall apart, and the value goes down, your taxes go down.
• If your neighborhood holds its value while the value goes down elsewhere in town, your neighborhood’s taxes go up.
• Generally speaking, if your taxes go up or down, the values will go down or up inversely because potential buyers will be able to spend less or more on a house and maintain the same monthly payment.

If we’re thinking more in practical terms, if there’s no connection, why tax property, rather than income or capitation? It seems to me that the property connection creates incentive for the local government to keep the values up.

So, in general, yes, I think a town’s expenses ought to go up and down with the values; the idea that the services voters want should be considered separately from the material wealth of people in the town introduces the very problem that Rhode Island faces so frustratingly.  We’re well — far, far — beyond governments’ maintaining the roads and ensuring some basic safety services, and the government should have to make some decisions about spending when the people in town are losing money. Otherwise, you get what we largely have, which is one group of people using institutional advantages to take money away from another group of people for its own use in a perpetual, self-reinforcing cycle.

Here’s my concise view of how this ought to work: We should concentrate on the rate, not the levy, and in general, year to year, the town should get what the property values produce. If the values skyrocket, then the political process should kick in to lower the rate. If shrinking values (and, therefore, shrinking taxes) really cut into services, then the political process should kick in to raise the rates.

The problem is that the system we’ve allowed to develop makes government the untouchable sector. That’s why so many people have abandoned private civic society and pushed to inject their priorities into government; it means such priorities are the very last things compromised in an economic downturn, no matter how superficial they are. Maybe this made sense when the government was limited to basics, like roads and police, but that’s clearly no longer the case. People in the state are struggling, and yet, we’ve tens of millions of dollars for politicians to blow on speculation, pet projects, and experiments.

In Rhode Island’s state of civic decay, we have to flip that. We have to add flexibility to government budgets, and the only way to do that at the local level is to get back to putting families, and their finances, first, not government. We do that by linking government’s welfare to taxpayers’ welfare, not the other way around.

Sure that can go too far, but we’re not even moving in the right direction.