USA Today cheerleads for state tax cuts.

[Karmadillo]

Certainly wouldn't want to let states accumulate surpluses, or, even worse, start building new schools or improving public transportation or encouraging alternative energy or otherwise making citizens think government existed for their benefit. It's "our" money, so give it back so we can use that $140 rebate to free ourselves from the nanny state and buy that vacation home we so richly deserve.

http://www.usatoday.com/news/nation/2005-11-17-state-taxes_x.htm

Soaring state tax collections have created momentum for tax cuts in 2006, when most governors and legislators will face voters.
State and local revenue rose 7.2% in the first nine months of this year, the biggest jump since 1990, according to the U.S. Bureau of Economic Analysis. Spending is up 6%, the most since 2001.

Three years of strong revenue growth have left many states with large surpluses. New Mexico is looking at a $1 billion surplus. Florida expects more than $3 billion.

Even financially troubled California took in $3.4 billion more than it spent in the budget year that ended June 30 — the state's first surplus since 2000. California's deficit was erased by a 13.2% revenue increase.

"Every month we're surprised by the good news and say it has to slow down. But it hasn't," says Arkansas Gov. Mike Huckabee, chairman of the National Governors Association. His state had record revenue in October and expects a $200 million surplus this year.

more...

[acmejack]

1. Nothing in Arkansas needs fixing

Everything there is wonderful, so I imagine there is no need for a surplus. Got stay in the race to the bottom, Texas is building up a formidable lead.

[gizmo1979]

2. Yeah schools are a-one.

what a joke.

[Karmadillo]

5. Strange how a major media outlet forgot to raise that issue.

Just couldn't think of a thing to do with that money except give it back and cut taxes.

[dcfirefighter]

3. Good Taxes, Bad taxes.

Generally, states within a region must compete with each other for the lowest taxes:
income taxes will drive earners across borders
sales taxes will drive sales & sales jobs across borders
property taxes will stifle development

However, in this last one, there is salvation. Property taxes can be separated into two taxes, one bad, and the other at least neutral, if not good. Property taxes on buildings and machinery (improvements) are bad: they make buildings more expensive to own, keep housing supply low (expensive), and stifle business improvements. Removing them increases building starts and renovations, especially on downtown vacant and underbuilt lots. This makes rapid transit more viable, and boosts employment, if only in constructing and maintaining these buildings.

Property taxes on land values are at least neutral. They tend to slow the value appreciation of real estate while providing public revenue. If the public revenue is used for public investment, which in turn increases land values, the taxes pay for themselves. By the nature of wealth distribution, particularly real property wealth, these taxes are inherently progressive. In the few cases where a retired person on a fixed income owns his house, his ownership can be protected by a homestead exemption - though by increasing the availability of housing units, the retired person may benefit from selling his house and purchasing one more suited to his retired life - and keeping the difference.

In the extreme, such a land value based property tax could fund an entire state budget, with a surplus. Residents and potential employers would pay very little to purchase the sites they need - they'd pay the tax rather than a mortgage. (Land values are inversely proportional to their rate of taxation - you can trade values for future taxes and vice versa). They'd pay nothing in income taxes (meaning 5-10% more disposable income for everyone), nothing in sales taxes (meaning 1-5% more disposable income for everyone), nothing in building taxes (meaning more homes and places of business). Employment would be very high, and the cost of living would be low. Government revenue would be HUGE.

Unfortunately, in an 'ownership society' everyone has their piece of the crumb and will defend it, despite the earth is ours to share, and an elite few 'own' many multiples of their fair share.

[Hope springs eternal]

4. How would you determine what a piece of land is worth?

I would assume a lot in Manhattan is worth far more than an acre in Montana. But how do you determine this? Buildings can be assesed. Can land???

[dcfirefighter]

6. By assessment:

Most jurisdictions currently assess land separately from improvements. Certainly there are potential errors, though, in general, if your parcel is pretty similar to your neighbor's, the tax should be pretty similar as well.

Generally, sales information, which must be disclosed, is collected and statistically assessed, and incorporated into a model. The taxable value is announced, and taxpayers are given an opportunity to appeal their assessments. If it became worthwhile, the assessing agency could purchase a property, clear it, and then auction it.

Alternatively, how do you determine what 'income' is for an income tax? - The IRS doesn't even know that answer.

[WCGreen]

7. The problem is that as more and more federal programs

are cut back, more responsibility falls to the states....

That is why state govenrment has exploded in size over the lst thirty years...

[dcfirefighter]

8. I don't have a terrible problem with this...

Many Progressives fear a race to the bottom with this; if counter-productive taxes are the source for state spending, they'll be right.

However, if non-harmful taxes are the source for state spending, we'll witness instead a race to the top: as more of the Rents are diverted from private hands to public ones, economies will improve, and standards of living will rise.

[WCGreen]

9. States and localities need to just say no....

To all the subsidies they dole out to companies....

[dcfirefighter]

10. Exactly

In my idealized state / locality, businesses would be attracted by:
1) low real estate costs (unimproved real estate values having been traded for annual improved real estate taxes, few buildable sites witheld by speculators)
2) low building costs (no building taxes)
3) low operating costs (no business property taxes, no business income taxes)
4) low crime (very low unemployment)
5) high education (well funded schools)
6) high public infrastructure (well funded)

For example, using the District of Columbia's budget (state & local) and taxable property assessments, and an EXTREME iteration of the taxes I favor: the entire DC budget could be replaced with taxes against land values and certain oligopoly / monopoly auctions (utilities, taxicabs, liquor licenses, etc.).

No State Income Tax
No Sales Taxes
No taxes on buildings

If the taxes took the full value of unimproved taxable land, DC would roughly have a $3B surplus. If they used $1B/y to improve public transit, not only would they recoup that in higher land rents, but they'd be able to free up some of the ~50% of land area devoted to automobiles.

This $2B surplus could be returned to the 550,000 DC residents as a $3600 / yr citizen's dividend. (actually, I think i'd prefer to 'Rebate' federal payroll taxes, but that's another matter altogether)

The lack of income tax, the employment opportunities, and the increase in housing stock would likely mean that the population of DC would return to, and probably exceed, it's 1950 population of 800,000. This would push ground rents still higher, probably INCREASING the annual dividend, and improving the services provided by the government.

Note that public and social improvements already raise ground rents, it's just that for now, we pay them to the landlord or to the guy who owned the land before us. He gets to keep them. These rents are decided by supply and demand. If we raise the rate of taxation against land values, this doesn't change supply or demand, and hence the final price remains the same. Additionally, the 'price' would be paid annually, rather than at once, and so, in most cases, would be further reduced by the lack of an interest payment on a mortgage.(Actually it reduces demand, and hence prices, a little, because land is now less valuable as a speculative investment).

Race to the top.

[MercutioATC]

11. Actually, you don't even need all of that.

All my city has is #s 4,5 and 6. We just had a developer build a $420M mixed-use development (with no tax abatements).

[dcfirefighter]

Good for you

I'm willing to bet that your town is very expensive to live in.

[MercutioATC]

13. Some of the lowest property taxes in the county...

Great schools.

The only Ohio suburb with a AAA rating from all three rating organizations.

Great city services.

Our public library is #1 in its population group in the nation.

City income tax phases out related to the amount you pay where you work. I pay 1.9% where I work, so I pay zero city income tax where I live.


I'm in the "cheap seats" of this community. My house isn't big (2,000 sq. ft.) and sits on a 1-acre lot. I bought it for $175,000 a little over three years ago. I pay roughly $1,350/half in property taxes. The housing market here ranges from $150k-$1.5M+.

[dcfirefighter]

14. Is it more expensive than the other Ohio suburbs?

Your house is impossibly inexpensive for the DC suburbs. What pays for the good schools? Sounds like a nice place.

[MercutioATC]

15. Yes and no. We have a great mix of housing.

The city's on the small side (about 33,000 residents). All of the newer housing is $250k+ and most newer developments are $350k+. However, there is older housing stock (with bigger, nicer lots) that can be had for $150k-$250k.

The city developed a master zoning plan about 35 years ago and, either through impeccable planning or amazing luck, has wound up with an excellent mix of residential, commercial and industrial properties that generate a LOT of money for the city.

My only complaint is that we're not as racially diverse as I'd like.

The stats:

http://www.cityofwestlake.org/

[dcfirefighter]

12. Good for you

I'm willing to bet that your town is very expensive to live in.