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Archive for the ‘Taxation’ Category

I’ve recently had a discussion on the News-Miner site over the proper application of taxes.  My opinion seemed to raise some people’s ire, though I don’t think it’s that radical: taxes can be, should be, and in fact already are being used to direct social behavior.

Somebody wrote a letter to the editor condemning the proposal under consideration to replace the City of Fairbanks property tax with a sales tax.  (For those who don’t live here, the City of Fairbanks covers about 32 square miles, has a population of 35-40,000, and sits within the Fairbanks North Star Borough, which is larger than Rhode Island, Delaware, or Connecticut and has a population of 95-100,000.  Even counting smaller communities within the Borough, it’s clear that most people here live outside the city.  The City and the Borough have different public officials, offer different services, and assess their own, separate taxes.)

I tend to oppose sales taxes: even with exemptions for food and medicines, they inevitably hit the poor harder, since 3% of cost is much harder to bear for someone below the poverty line than for someone in (say) the upper 25% of earners.  I expect they also tend to reduce commerce, or drive it to those places with a lesser tax — in our case, to the commercial areas outside the City but within the Borough.

If the proposed sales tax is only within the city and replaces city property taxes, then won’t it encourage people to (1) buy residential property within the city and (2) locate their businesses outside the city?  (I’m no economist or expert on taxation, so please tell me if I’m off the mark.)  While I like the idea of drawing more people into the city to live, I also want them to be able to do business here.

My suggestion — that taxes should be used to encourage some activities and discourage others — raised some people’s bristles.  Yet how can it be otherwise, if it’s a correct premise that people on the whole will avoid activities that require them to pay more in taxes and will prefer activities that allow them to pay less?

Obviously, it depends on the activity — but it’s no accident that governments (from local to national) offer tax incentives that they think will encourage economic growth.  I think that it’s also the logic behind exempting non-profits from taxes: non-governmental agencies do a lot of good work, but they’re less likely to do it if they have to pay heavy taxes, and most likely if they need pay none at all.

If you’re going to have taxes at all, there is no “neutral position”. There is no “just run the government”.  There is no “leave people alone”.  Every tax has an effect on people’s economic behavior.  You don’t want taxes being used for social engineering?  Too bad; they already are.

Unfortunately, for large parts of our tax structure, it looks like the social “engineers” were working blind, or didn’t have clear instructions from the firm that hired them.  Now we have a set of largely accidental blueprints for a haphazardly built structure, much of which appears to be constructed on shaky ground.

For example: Currently, buildings are assessed at a greater rate, and count for more of our property tax, than land. (My house is assessed at $131.19 per square foot, while the land is assessed at $3.50.) This provides an incentive for people to live on large plots of undeveloped land and to keep the assessed value of their houses low. And, since assessors usually judge only by external appearances, it provides an incentive for people to keep their properties looking ugly and run-down.

Whether meaning to or not, we have chosen to promote large, undeveloped lots (and the resulting increase in driving time, since people will live farther away from each other) and an ugly, degraded human environment.

As an alternative to that structure, I would support a local tax that was based on the total number of automobile-miles traveled by any car owner living in the Borough — perhaps a product of the miles traveled and the gross vehicle weight, since automobile travel both (1) pollutes the air and (2) furthers the disintegration of community life. And I would support a property tax that was based on lot size rather than building value, since the current tax structure promotes large lots, few capital improvements, horizontal rather than vertical growth, and land speculation.

For now, though, set aside the particulars of what I think should be encouraged or enabled.  The core of my argument is:

  1. Various levels of government are necessary, money is needed to run them, and that money is raised from taxes.
  2. Every tax on a behavior (including the purchase of a product) discourages that behavior (not for every individual, but at the aggregate level), and the lack of a tax encourages it.
  3. Therefore, the very existence of citizen-funded government results in some activities being privileged and others being de-privileged — by virtue of the tax structure alone, completely independent of the criminal code or the mandates of particular government programs.
  4. Since taxes already have this effect, we may as well be deliberate about how they are applied. We should have some social principles in mind.
  5. The guiding principle for taxation should be promotion (or enabling) of the common good.  (I’m fond of the Constitution’s language about more perfect Union and general Welfare — but I recognize the fallacy of appealing to authority.)  At the very least, taxes should not encourage activities that promote selfishness at the expense of the common good.

Of course, the question of what constitutes the common good is a thorny one, and there will be no absolute consensus in a community of 100,000.  But the difficulty of the discussion does not excuse us from having it, nor does the impossibility of absolute consensus excuse us from the obligation of collective, deliberate self-determination.

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Today’s challenge: Can you think of five ways that government spends money better than you could?

There is an oft-used conservative talking point — or rhetorical flourish — that we (the “taxpayers”) know how to spend our money better than “the government”.  It is a talking point that masks selfishness and reeks of anti-civicism, and it deserves to be challenged whenever it is brought up.

First, I should say that “conservative” is a woefully imprecise word.  A person can be conservative about any number and variety of things, and “liberal” (its presumed opposite) about any others.  It is an injustice to the endless variety of human thought to put each person into one of two camps.  Nonetheless, those well-known politicos who claim that “you know how to spend your money better than the government” tend to fall into the political camp that gets called conservative — so, for lack of a better and well-accepted term, I’ll use that one.  By no means am I trying to demonize those who call themselves conservative or attempting to categorically dismiss “conservative” values (whatever they may be).

The first thing I dislike about such a viewpoint is that it presumes a divide between the people (or “we the people”, as many like to say when affecting a patriotic idiom) and their government.  It presumes that “the people” and “the government” are two separate entities, with conflicting agendas.  Now, I agree that institutions often make self-preservation and self-aggrandizement their primary missions, and that they do not always serve their constituencies with perfect selflessness or efficiency.  Yet I don’t think that means we have any call to take an adversarial posture toward government.  In fact, just the contrary: an entrenched adversarial posture toward government will only incline people to pay closer attention to its shortcomings and abuses and to ignore its many advantages and triumphs.  It will incline them to disengage from the political process, rather than to put their energy toward its improvement.

My wife and I both enjoy the married life: in both the short term and the long term, we receive advantages.  Although at times we feel constrained by our mutual obligations, there are plentiful opportunities we can pursue because we have each other’s support.  When conflicts arise, we often feel the urge to withdraw from each other and avoid whatever difficult topic got us into trouble in the first place.  However, our experience (and that of countless others; I’m not pretending to be unique) has been that engaging with our difficulties helps us to become “re-enfranchised”, while disengagement only allows problems to fester and lets us continue believing the worst of each other.

Whether you believe government is “us” or believe government is “them”, you’re taking part in a self-fulfilling prophecy.  Unfortunately, since the belief is held individually but the effect on government only comes from large collective action, it’s easy to be convinced of your own powerlessness and to take the government-as-adversary stance.  Collectively, we have the power to prove ourselves right — though only in the long haul.

The second thing I dislike about the position that “you know how to spend your money better than the government” is the excess to which people take the idea of “their” money.  I am all in favor of private property and private enterprise.  But too often people are of the opinion that, because something is “theirs”, they (1) are not indebted to others for it and (2) have no responsibility toward others with regard to its use.  This is a philosophical question that I don’t have time to address adequately here.  Suffice it for now to say that those who hold the extreme form of this belief suffer deficits of gratitude and social responsibility.

The third thing I dislike about that belief is that it is just plain ignorant.  There are absolutely scads of things that “the government” (that is, the people acting collectively) can accomplish better with “my” money than I can.  Here are five:

  • Mail delivery.  For all its faults, the United States Postal Service does a marvelous job of delivering letters and packages with good speed.  I cannot deliver all my mail by myself — who has the time? — and private industry would exclude many small, out-of-the-way places, or charge exorbitant fees for mail delivery to or from Fairbanks.
  • Public transportation.  Helping people get from home to job to shopping to recreation and back home is a fantastic investment in economic development.  If I had to get everywhere on my own, I would spend extra hours each day between work and home, or spend extra hours’ worth of my labor to afford the private automobile to take me back and forth in a timely fashion.  Private enterprise would try to make ridership as expensive as possible, thus shutting out the young and the poor.  Of course, even a private auto is worthless without…
  • Transportation infrastructure.  The buses I enjoy — or, in other cities, the trains, trams, and other means — would go a lot slower over trees, rocks, and mud, as would our private automobiles.  Do you think that private industry would do so well at laying down and regulating streets, roads, and tracks?  Do you think I could do it on my own?
  • Safety regulation.  One relationship that I think is naturally more adversarial than that of citizen and government is that of employee and employer.  Businesses showed for too long (and they continue to do it!) that they would imperil employees to no end while it resulted in corporate profits, absent the regulation by and sanctions from government.
  • Disease tracking.  I shudder to think what levels of disease (or other public health hazards) might ravage our communities without the information gathered and processed by the CDC.

The above have three things in common: (1) I couldn’t do them on my own.  (2) Private industry could not be relied on to do them.  (3) Were there non-profits in charge of providing the same, high-quality services, and were they reliant on voluntary donations, they would flounder.  Fall flat.  Perish.  People are too short-sighted to give voluntarily and sufficiently to all the agencies that would do them and their societies good.

Can you think of ways that “government” can spend “your” money better than you can?  Go on — just name five.  Let them be large or small.  Have fun with this!  If you approach government with an attentive mind and a grateful heart, it shouldn’t be hard.

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Tonight (Tuesday, March 25), the FNSB Planning Commission will have a public hearing on the Vision Fairbanks plan for downtown’s revitalization. Below is my prepared testimony. (I’ll have to keep the pace up to deliver this in under three minutes.)

***

Good Commissioners,

I realize that matters of taxation fall outside your official purview, but you do have the power to reduce one unjust tax, through your recommendation to the Assembly: the Fairbanks Citizenship Tax. You may not have heard of it, since doesn’t appear in our Code of Ordinance, but it’s quite real. It is the monetary price a person or a family must pay for first-class citizenship in our Borough.

Our land use in the Fairbanks North Star Borough is essentially suburban. I don’t mean that Fairbanks is a suburb to some larger city, as Eagle River is to Anchorage. The essence of suburban development is that different kinds of land uses are kept separate: retail and commercial uses may be allowed in one place; civic uses like schools and government offices in another; recreational uses in still another; and residences kept separate from them all. In the Borough, there is some small overlap of uses, but, by and large, we have zoned them apart.

The result of this is that the various needs a person might have to meet throughout the day are kept far apart — farther than is reasonable to walk. The person who cannot afford to buy and maintain a car has a choice: spend all your free time walking, bicycling, or busing from one remote destination to another, or stay shut up at home.

And it will not do for us to shrug off car ownership as just part of the cost of living here. I have seen the price of car ownership estimated from 15 to 30 percent of annual household income. And, with all the extra idling we do in the winter, I wouldn’t be surprised if the figure for the Interior were much higher. According to the 2000 Census, the median household income in the Borough was about $49,000. If we spend 25% of our household income on the care and feeding of cars, that amounts to over $1,000 a month — the equivalent of needing an extra 270 gallons of fuel oil — just to participate in society.

That is the price we are asking for first-class citizenship. That is our unwritten tax.

The Vision Fairbanks plan is a major first step in addressing this inequity. By combining residential, recreational, civic, and commercial uses tightly, it allows us at least one area of town where people may meet a wide variety of needs within only a few minutes’ walk. It is a plan for a complete traditional neighborhood and a true city center.

While not all people in Greater Fairbanks would like to live in such a neighborhood, they won’t need to in order to reap its benefits: under this plan, downtown will in time become a “one stop” destination that saves the time and money of those who come there. It will enlarge the world available not only to those who cannot afford a car, but to those too young, too old, and too infirm to drive.

So I urge you to say “no” to the Fairbanks Citizenship Tax, and to say “yes” to downtown planning that does justice to all our citizens.

Thank you for your time.

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