Reform Tax Policy

Edward J. Dodson

[Reprinted from the South Jersey Courier-Post, 24 August, 2006]

We are in the midst of a heated debate over the amount of money spent by government at all levels. Some people propose capping or eliminating the property tax in favor of an increased state or a local income tax. Others want even higher sales taxes.

The ability to pay is an important consideration, but so is equity and its impact on behavior. Tax incomes and businesses too heavily, and those who can will leave. They already are doing so.

Tax sales too heavily, and people will drive across state lines, for example, to Delaware, or make purchases online.

Taxing property essentially penalizes people for investing in job-creating or maintaining their property. However, the property tax is really two distinct forms of taxation: one on land and the other on improvements, such as buildings. The tax on land values is a very appropriate and equitable source of government revenue.

Land has value because of the amenities provided by the community, by public investment.

A land-only property tax would be the ideal, with the annual tax based on the annual rental income the land would yield if leased.

The least politicized way to put such a change in place is to transfer responsibility to a state agency. Where it is handled at the state level (for example, in Maryland) the process is not subject to local political pressures.