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Politics of State Taxation: Don't Let Cheap Politics Trump Good Government

Posted on September 24, 2007 by David Brunori

David Brunori (Photo by Michael Leclair)Georgia House Speaker Glenn "James" Richardson (R) is proposing to eliminate the property tax in his state. He would replace the lost revenue (only $8 billion) with state aid and more local option sales taxes. The additional state revenue would be raised by expanding the sales tax base to include services and many necessities such as food.

We know what would happen in Georgia if Richardson's plan is successful. Without an independent source of revenue, local governments' power and authority would be curtailed. And that is a terrible outcome. Local governments in Georgia, like in all states, are more responsive to their citizens than is the state government because they have the ability and flexibility to provide the services those citizens demand. And that requires the ability to raise and lower taxes.

Georgia local governments are more efficient than the state at providing local services because local government officials know the costs and benefits of those services. Relying on political leaders in the state capitals to fund local police, fire, and ambulance services and schools almost guarantees that those and other essential local public services will be inadequately funded. Do you think the Georgia General Assembly would fund schools, police, or libraries to the extent the average citizen wants or would be willing to pay for? Fifty years of political science research suggests it would not.

That theory is so well grounded in American political thought that it is incredible that responsible people would suggest otherwise. When your streetlight is out, your potholes are unfilled, and no one is answering 911, who will you call? Gov. Sonny Perdue (R)? Richardson? You might as well call the president of France. No fiscal control means no political control.

In the end, local governments would be at the mercy of the legislature. When times are tough, legislatures always cut local aid first. And there is the problem of legislative control over local government spending — all central funding comes with strings attached.

Of course, Richardson is a state political leader. What does he care if his plan undermines local government? Be wary when state politicians offer gifts they won't have to pay for. But that has been the trend. Politicians have made similar proposals in Florida, South Carolina, Indiana, and other states.

Why is Richardson proposing such a monumentally bad idea? He is taking advantage of the unpopularity of the property tax. People hate the property tax because politicians like Richardson keep reminding them to hate it. Every public finance scholar will tell you that the property tax is the best method for funding local government services. But learned opinion has never held much sway with those who demagogue on tax policy.

Don't get me wrong — there are problems with the property tax. But is the property tax in Georgia the source of much unhappiness? Georgia has modest property tax burdens, at least according to the not-so-liberal Tax Foundation. The state ranks 37th in terms of property taxes as a percentage of income and toward the bottom in all other measurements of property tax burdens. Until the speaker came up with his radical plan, there was very little public outrage over property taxes in Georgia.

Richardson — and other state political leaders — should address the real problems presented by property taxation. If the concern is that property tax burdens are growing faster than income, lawmakers should adopt circuit breakers to protect low- and fixed-income homeowners. If the fear is that Grandma will be forced to move from her lifelong home because of rising property taxes, deferral programs should be adopted to protect her.

Roulette (Tse Ka Yin/EyePress News)But in the end, control over the property tax rests with the people. If the citizens think their property taxes are too high, they should consider what they are getting in return (quality of schools, infrastructure, and so on). If the citizens still think property taxes are too high, they should demand that the taxes be lowered. If the tax remains too high, the people should vote their local elected officials out of office.


Another Monumentally Bad Idea


Am I the only one who thinks the idea of a state government owning a casino is ridiculous? Kansas Gov. Kathleen Sebelius (D) wants the state to open up a full-service casino. Sure, there are mounds of research showing that gambling is regressive and addictive. Sure, a lot of folks find it morally reprehensible.

Sebelius would rather play the part of Moe Green (the mythical figure who founded Las Vegas in The Godfather) than raise taxes. I can understand that. Few politicians have the courage to say no to gambling and yes to taxes. But must the state own the casinos? Can't Sebelius just turn over the operation to Donald Trump or Harrah's or some mobsters out of Chicago?

Someday you will read political science texts that list state government operations as higher education, highways, prisons, and casino management. That does not seem right.


That's a Job I Want


I read in the Texas newspapers that the head of the Teacher Retirement System — a government employee — will earn $904,500 next year. I bet that's a lot more than the average teacher in Texas makes.

Good for CBPP

The Center on Budget and Policy Priorities released a report on the Internet Tax Freedom Act. The high-tech industry has been claiming since at least 2005 that online access taxes would "destroy" the Internet. The CBPP's report shows that states that tax Internet access have the same rates of online access as states that do not. The CBPP also found that access taxes are imposed in every country that has higher levels of citizen Internet use than does the United States. The CBPP gives the debate over the Internet Tax Freedom Act a shot of veracity.

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The Politics of State Taxation is a column by
State Tax Notes contributing editor David Brunori, who welcomes comments at dbrunori@tax.org.