Every Tax an Income Tax
The problems with it are manifold (some enunciated in the comments section), but Tom Sgouros’s analysis of property taxes brings to light an interesting conceptual matter:
However, consider the question, “how much property tax do the richest 11,900 people in Rhode Island pay?” With the data I have, I can’t say for sure, but I can put a maximum figure on it. The maximum would be where the top 2.5% of income earners paid the top 2.5% of property tax bills. And here’s what I find: the top 2.5% of residential property tax bills is a hair under 9.9% of all the residential property taxes collected in the state. This is about $150 million.
Again, the top 2.5% of households earn 31% of all the income, and pay 40% of the income taxes. But when you add property taxes in (those are the two biggest sources for supporting state and local government) you’ll see that with 31% of the income, they pay a bit more than 20% of the taxes — at a maximum. Like the property tax, the other taxes we levy are also regressive, so if someone feels like adding in the effect of sales and excise taxes, this 20% number will go down.
What Sgouros makes eminently clear, here, is that, to the progressive, every tax should be a form of income tax. The top 2.5% of households pay 29% more as their share of income taxes than their percentage of income. The top 2.5% of property-tax payers fork over 296% their per capita share of that tax base. In other words, to Sgouros, a “fair” property tax wouldn’t be based on the property, but on the person who owns it and his or her income.
Seen from the perspective of a go-getting Rhode Islander, this approach would require that they pay more for the very same house as they strive to improve their situations. Consider: What would you do if advances in your career bumped up your property taxes? What if the growth of your company resulted in a compounding of the tax on your place of business?