Property Tax Confusion From Terry Madonna

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I agree with the position Terry Madonna is endorsing in this op-ed on HB 1776 – the bill that would move education finance to the state level – but I think this section is mistaken:

What about the simple property tax is so atrocious, so flawed, and so defective that we ascribe to it most of the contemporary problems of financing public education? That’s a good question, one to which entire libraries are devoted.

The (very) short answer produced by legions of public finance experts is that the property tax is grotesquely unsuited to modern times.

It is unfair (i.e., regressive), expensive to administer, difficult to assess accurately, disconnected from the modern economy, and politically repugnant to most taxpayers. These defects and many more are the bitter fruits of the much-hated property tax.

Of all America’s major taxes, including the income and sales taxes, the property tax is the worst by any measure you care to use.

Like most discussions of property taxes in the media, Terry’s analysis suffers from a failure to distinguish between land and buildings.

It’s true that most public finance experts agree that the property tax is one of the worst taxes there is, but there is equally widespread agreement that the land tax is one of the best taxes there is.

Most municipalities mush the two together, taxing the land and improvements on the land at the same millage rate, but it doesn’ t have to be like that.

Also, while it’s true that the prevailing method of reassessment is expensive and prone to inaccuracy, the Actual Value Initiative (AVI) proposed in Philadelphia proves this does not have to be the case. If more Counties shift to AVI, and use selling prices to reassess, that’s going to be much less expensive and highly accurate.

Finally, I am not sure what Terry means when he says real estate taxes are “disconnected from the modern economy.”

To my mind, making better use of expensive land is the most high-impact reform we can make to boost economic growth in America. And the best way to encourage people to make more productive use of expensive land is to tax people based on how much land they use. I would argue that it’s never been more important to use land well than it will be in the coming decades, and land taxes have never been better suited to financing government services.

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