The Property Tax Scandal in The US

One of the kinds of taxes in America that really represents a scandal long overdue to be part of the national agenda for change, is the property tax. Here in the United States we use a whole bevy of different taxes to pay for what our Federal, State and local governments do for us. Today I’m going to focus on what the local tax system is. That is by local I mean towns, cities, villages…how do they pay for the things they’re supposed to do? Like public schools, local police, and fire departments, health care, and so on… maintaining pollution-free streams and the public parks, and all of that. The answer is our local communities basically rely on one kind of tax more than any other. It’s called the property tax. And it’s very interesting, here’s how it works. Every city or town has something called the Tax Assessor, and that person’s job is to go around and measure the value of homes, land, stores, factories in the community, property – “real property” it’s called – and then to advise the city fathers and mothers so they can decide how much tax rate to apply to that property and the person who owns the property is required to pay a tax on the value of the property every year. And that’s how cities and towns raise a good bit of the money they need to provide all those local services we all rely on. But here’s the interesting thing. It’s called the “property tax” but it shouldn’t be. Because it doesn’t apply to all property, and therein lies the scandal. It applies to some property, but not to others. and there’s no reason for this. Let me explain. The first kind of “property” that’s taxed is land. The second kind: structures built on land (a home, a store, an apartment house, a factory). And then other kinds of property are sometimes included (an automobile, a boat), even sometimes the inventory of a business. So those kinds of property are subject to tax. Every year, the owner pays a small percentage of the value of that property. And that’s what the city and town or village use for public education, fire, police and so on. Here’s the scandal: there are other types of property and they’re not taxed. Let me explain. If you sell a house – let’s say, it’s worth $100,000 – and you take the $100,000 and instead of a house you use it to buy stocks and bonds. You had a $100,000 of property before in the form of house. You have $100,000 of property now in the form of stocks and bonds. But here comes the trouble. What’s the property tax on stocks and bonds levied by cities, towns and villages in the United States? Zero. Nothing. We don’t have a property tax. We have a property tax that exempts what is called “intangible property.” Property you can’t touch, like a piece of land, or a structure. We don’t tax it. We did as a nation in the past. In many cities and towns, if you go back far enough, you’ll discover that there were property taxes on stocks and bonds. I remember learning that the first tax ever levied in the state of Connecticut was on the stocks and bonds of a canal that was built way back in the early days of the State. But we don’t do it anymore, hardly anywhere in America, and that’s a scandal. Two reasons: (1) the people who owned most of the stocks and bonds in the United States are, of course, our richest citizens. Most of us cannot afford a house or a home, let alone stocks and bonds. If American working people have any wealth, it’s their home. Very few have a significant amount of stocks and bonds. Those are highly concentrated. Which means a property tax that exempts stocks and bonds is a property tax that exempts the richest amongst us, for which there is no justification; Second point: think about it. The wealth in this country in the form of stocks and bonds is in the many, many trillions. A tiny rate of taxation – 1%, half of 1% – would generate a huge amount of revenue for this country at a time of economic difficulty; very valuable. And it would come only from the richest and it would take a very small percentage of their stocks and bonds. It is a scandal that we have not addressed this unjust property tax system long ago.

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