Wednesday, April 15, 2009

Brave man seeks to strike at the root of a problem

Former Salem City Councilor Bill Smaldone has an interesting op-ed in the SJ today. Reminds me of the old Thoreau saying: "There are a thousand hacking at the branches of evil to one who is striking at the root."

I appreciate his willingness to tackle the issue, but differ greatly here:

For restoring services and preparing for the future, property taxes are inadequate and unfair. Flat and regressive, they hit all residential property owners at the same rate, regardless of income. New fees or targeted sales taxes also won't suffice. One must get to the root and change the system. Options include replacing the residential property tax with a graduated income tax for those who live and work in the city.
The idea of increasing our dependence on the income tax is really, really bad, no matter how well-intentioned. Salem is already the epicenter of destruction from Oregon's foolish over-reliance on income taxes now -- at the state level, just when the economic cycle turns down and we could use a stable source of funds to make counter-cyclical investments, our tax revenues plummet.

Moreover, the problem with income taxes is that they discourage exactly what we spend a lot of money and energy trying to encourage. Relying on income taxes is like driving a car with your foot jammed on the accelerator and brakes at the same time. You wind up working against yourself and damaging the vehicle at the same time.

Much better is the afterthought idea he tosses in: "Or one could consider other choices such as taxing underutilized land." Now, that is a good idea. Undeveloped land in the urban growth area should be taxed as if it were developed at the highest economic use value. Instead of rewarding speculators who hold land off the market with low taxes, we should tax the land as if they made the maximum investment that the zoning allows, so that they will either develop the land or sell it to someone who will. This has the effect of bringing a lot of idle land onto the market (reducing prices), promoting investment while reducing sprawl. Best of all, it puts the taxes in alignment with the economic development policies we're trying to promote, instead of making them work in opposition to each other.


filbert said...

While I understand your suggestion to tax undeveloped land at it's highest economic value (if it were developed), it might also have the effect of spurring unnecessary, ill-timed, or ill-conceived development. Idle land is precious - as idle land, especially within a UGB.

Progressive income taxes, however, can shelter the fragile without crippling our economy. Those who have more must accept the obligation to give more. The attitude that "It's mine; I earned it, and no one's going to take it away" begs the question, who, then is your neighbor's keeper? I believe, as Theodore Roosevelt said, "This country will not be a permanently good place for any of us to live in unless we make it a reasonably good place for all of us to live in."

Walker said...

If idle land within the urban growth boundary is precious (and I agree with you that it is), then it should be taxed accordingly. Instead, we tax it so lightly that people are encouraged to speculate with it, holding it off the market while pressure builds to develop less-suitable land.