I believe there is a way that provides the government the revenue it needs while protecting the ownership of our homes. A consumption tax at the time of the home sale.
Every year, the government presents us a bill for our property taxes. Even if we already own our home, we must pay the bill.
Property taxes will always be with us. That’s because by law, all Tax Entities in the County (currently there are 44) are guaranteed the prior year’s property tax revenue regardless of overall property values. This means when property values change, there is neither an increase nor decrease to their budget. The tax entities get at least what they got last year. There is no zero-based budgeting…Perhaps something to consider.
Each year some citizens face losing their home if they can’t pay their property taxes. Think about it…why does the government charge us a fee to live in our home? We don’t really use our property like we used to many years ago, when we were farming or raising cattle. Today, most people don’t generate income from their property (excluding rental income but, remember the tenant pays the taxes not the owner). So, when you work hard all your life and pay off your home, you don’t really own your home. If for some reason you can’t pay your property taxes…the government will seize your property.
Now in fairness, the government is compassionate…Tax Relief programs do exist to assist the elderly, low income, disabled, blind, and veterans. If you belong to any of these categories, you may be eligible for a reduction in taxes.
Because property taxes help to pay for a variety of public services, I would never suggest eliminating those services by eliminating the property tax. But I wonder out loud…is there a better way? A way that gets the government the revenue it needs while protecting the ownership of your home.
Could revenue from a consumption tax on the sale of property replace the current and future revenue required for these public services?
Let’s take a look…
For purposes of making this as simple as possible, let’s take a home valued by our county assessor at $400,000. The property tax on this home would be approximately $2,000-$3,000 each year. Over a 30-year period, assuming it does not go up, (which we know it will) it would total $60,000-$90,000 in taxes. This is a lot of money and I believe more than the local government needs from an average household. But the purpose of this idea is to show how a consumption tax, ensuring that the government can never take your home, will equally fund the replacement of property taxes.
Every time a piece of property is sold, a consumption tax would be paid at the time of the sale. This tax could be paid up front with the down payment or wrapped into the mortgage and financed…never to face an annual property tax bill again!
Here is an example.
Let’s take this same $400,000 home. Every time this home is purchased, a consumption tax would be paid. If this tax was 5% then the consumption tax would be $20,000. (As the value of the property increases and the sale price increases in future sales, the consumption tax revenue would increase as well).
Now you might be saying that’s a far cry from $60,000 to $90,000. However, you must calculate how many times this home would be sold over a 30-year period. Statistically, the average family moves 3-5 times in a 30-year period. Using this as the marker this would mean that the same $400,000 home would bring revenue in the amount of $60,000 -$100,000.
Now again, I think this amount is more than the government should have per household and we need to lower the government’s impact on our income, but this shows that replacing property tax with a consumption tax will more than pay for the needs of the State and Counties.
I would recommend a LOCK on the percentage allowed for the consumption tax so politicians couldn’t ever raise the rate.
You might say, “why replace property tax with a consumption tax if the revenue to the government is the same or more?” Well, this reason is the entire point! With property tax, even when you pay off your home, you still must pay an annual tax and if you cannot pay that tax the government WILL take your home.
With a consumption tax, ONCE YOU PAY OFF YOUR HOME, NO ONE CAN TAKE IT FROM YOU…EVER! Your truly own your own home.
God bless America!