Thomas Molitor
I’ve been out knocking on doors in my House District 23 and trying to win over Republican voters in a three-way primary race while at the same time trying to avoid dog bites at the doorstep. House District 23 has five precincts in Sandoval County and 10 precincts in Bernalillo County.
This week, I happened to hit the streets of the Northwest Heights the same day the Bernalillo County assessor office mailed its “notice of valuation” to homeowners.
It wasn’t dog bites I had to politely perform a political pirouette away from this week; rather, it was irate taxpayers wanting to know why their rates continue to be hiked after three straight years of dropping house values.
A friend of mine from my college days as an economics major tells me he thinks one of the most fundamentally unfair and destructive taxes levied is the property tax. Without any regard to your income, he says, if you own a home you are subject to a tax on the value of that home. The value is determined by what goes on in your community.
Accordingly, if someone in your neighborhood sells his or her home, your home’s value is affected by the sales price. If prices are rising, then the value of your home rises. However, if values start falling, like they have pretty much in every community in America these past three years, the government seems to ignore the decline.
A tax magnet
For a homeowner, a house can be a tax magnet that creates an economic hardship for its owner. For example, in Sandoval County this year we (I live in Corrales) have the county government levying a property tax, a flood control district levying a property tax, a bond issue for a new hospital levying a property tax, as well as the predictable bite coming from schools and fire districts.
I’m not a CPA or a tax attorney, nor have I ever had to balance a municipal or county budget, but the disconnect between actual income and the property tax rate seems really damaging in these tough economic times for New Mexicans.
My friend (who went on to get a Ph.D in economics and so has a lot of time to think about such matters) is trying to convince me that the property tax needs to be abolished.
He argues the fundamental idea behind the property tax is antiquated and only relevant in the time when we were an agrarian society. In the 1800s, when there was no income tax and it was considered none of the government’s business how much money anybody made, the property tax served as a proxy for one’s income. This made a lot of sense then, because it was logical to assume that the citizen farming 80 acres had a higher income than one farming 40 acres.
Today, however, the homes of most Americans are not their source of income, but merely where they live. Why, then, he argues, take more money from a citizen with a 3, 500-square-foot house than one with a 1,200-square-foot house?
It would seem that one of the elementary principles of prudent taxation is that, in order to avoid harming citizens, taxes should take into consideration the individual’s ability to pay. Today, one’s ability to pay depends far more on one’s income than on the size of one’s home. He says, “to continue taxing people as if their house were generating their income is absurd.”
He may have a point.
Pay up or lose your home
Regardless of whether a person is employed or unemployed, or living on Social Security, the taxing jurisdictions can raise money to satisfy budgetary shortfalls and, if you don’t pay, you lose your home.
In the Southwest, the property tax system has been used to tax minorities out of their neighborhood so affluent residents can “gentrify” areas. Few of the original Hispanic residents can continue to afford their homes, some of which have been in their families for more than 100 years, because the property tax is based on the valuations of the fancy new homes being built in adjacent neighborhoods.
It does follow that property taxes do jeopardize homeownership. On the surface, it appears once a person has paid off the mortgage on his or her house, then he or she owns it free and clear, but this isn’t so. If the homeowner falls on hard times or is on a fixed income that gets eroded by tax hikes or inflation and can’t pay his or her property taxes, the sheriff comes and confiscates the house.
In reality, a person doesn’t really “own” his or her home completely, but in effect “rents” it from the local government that permits him or her to keep it only so long as the “owner” continues to pay taxes on it.
Hiding from the drop in property values
Would the revenue from our income tax and sales tax be able to cover the total loss of property tax revenue?
Hardly. But there are a lot of tax reform schemes floating out there that do merit policy discussion in next year’s legislation session: income tax vs. consumption tax vs. sales tax vs. flat tax vs. means tax. Though, admittedly, understanding how eliminating one affects the others does get my head spinning.
But the main message people have been telling me as I walk my district is simply that we have more government than we can afford and that the state and counties look to the home and to the homeowner inside to fund its expanding activities.
One could make a strong argument that property tax-based governments are hiding from the massive drop in property values, and as a result, are living on borrowed time until, finally, the real world of the 20 percent to 35 percent decline in home values catches up with them in Bernalillo and Sandoval Counties.
Meanwhile, a lot of people are being put to the wall to pay rising property taxes when their incomes are a fraction of what they used to be.
Any wonder why people are so angry about government?
Molitor is a Republican candidate for the state House of Representatives, District 23.