Property Tax Inequities Hurt Us
[Reprinted from the Los Angeles Times, 20
In one of his debates with Richard Nixon in 1960 John F. Kennedy said
that the property tax was practically exhausted as a source of
revenue. "On this assumption he advocated vast new federal
expenditures for local facilities such as public schools.
It is a pity that Nixon did not remind his opponent that it was the
federal Income tax, not the property tax, which had reached the point
of diminishing returns. Mr. Kennedy has admitted that in asking for
tax rate reductions this year.
The soundest of nil principles of taxation, expounded ever since Adam
Smith, is that a tax should bear as lightly as possible on the sources
From this, the inference can be drawn that, the best and most
equitable tax is one which bears heavily upon unearned wealth. Let us
bring this principle home to our great urban centers, which are
demanding so many federal handouts for local improvements.
Those cities and their suburbs have not grown efficiently and
attractively. They have sprawled over great areas, with much of the
land therein either vacant or occupied only by obsolete buildings.
A major reason for this is inequity in taxation. Property taxes
almost universally are levied upon both buildings and the land under
the buildings. Generally the land is under-assessed and new
improvements are over-assessed for tax purposes.
This enables holders of unused land and. slum property to reap
profits as the communities grow around them. Show me a. vacant piece
of land or a slum and I will show you that the owner is speculating on
getting a large profit when he sells, an unearned profit.
Most of the great American fortunes in the past and to a degree in
the present have been made by holders of land. They have not improved
the community. They have profited by the growth of large populations
in their areas.
To cure this inequity and to raise more money for local services such
as schools, hospitals and streets, and also to stimulate private
housing, two factors should be considered. The state and local laws
should differentiate between the tax on land and the tax on
Also, in the assessing of properly, a heavier burden should rest upon
land and lighter burdens should be placed upon improvements.
Since the more immediate method of reform is in assessments, a very
comprehensive study is about to be issued on the subject by the
Advisory Commission on Inter-governmental Relations.
This commission was created by an act of Congress and is composed of
governors, members of Congress and mayors. It has a very large and
competent research staff.
Its chief concerns are those areas of government is which local
communities, states arid the federal government all have interests at
the present time.
And its aim is to see how far the states and local governments can
carry the responsibilities which properly belong to them.
The new study is on the reform of the property tax. The commission's
report points out that the amount raised now from the property tax is
more than $20 billion. The assessed value of property subject to the
tax, determined by assessors throughout the country, is more than $350
billion. But this represents a market value of three times that
amount, of more than $1 trillion.
With this vast wealth now under-assessed and inequitably taxed, the
commission regards reform in assessments as a major step toward
shifting responsibility back to the states and local communities.
At the present time the business of assessments is probably the most
unsatisfactory of all government operations. Assessors are in large
Assessments are ridden with favoritism, special considerations which
are not relevant to raising revenue, and the lack of training and the
incompetence of assessors.
A major need is to establish assessment machinery by state law so
that assessors will be trained, professional people removed as far as
possible from local political or economic interests.
It is hoped that by such reforms it may be possible to check the
growth of federal control of local affairs.