This story is unbelievably damning. The Washington, DC, city government sells small debts for property tax to private investors. The investors are empowered to go immediately to court to foreclose on homes worth orders of magnitude more than the property tax debt. The investors are also empowered to bill the homeowners for the legal expenses incurred in trying to take their homes away. If the homeowner can't pay the exorbitant legal bills on top of their sometimes quite minor original property tax owed (with interest), the home is sold, and the investor who purchased the lien gets everything. Not just collecting the original property tax owed. Not just collecting interest on the original property tax owed. Not even collecting only those things plus their own exorbitant legal fees incurred trying to take the home away. Everything. The entire value of the home.
The one small "reform" that has come to this despicable system is that the relevant bureaucracy has recently chosen, of its own kind graciousness, to stop selling liens that were originally less than $1000. But that could change at any time. It was just "to manage the caseload."
Those hardest hit in these situations are elderly people or mentally disabled people who don't understand what is going on or who are already in nursing homes. If they don't have someone sufficiently on the ball to manage their affairs, the whole situation can snowball and result in the loss of the home. In a case highlighted in the story, the son of a man with dementia eventually discovered that his father owed $317 to the city and paid it, but the home was taken anyway, because the son couldn't afford the additional $5000 in legal fees charged by the company that had bought the lien.
I really don't much care whether I might seem to be "agreeing with the liberals" on this one. This is heinous injustice. Let the liberals feel angry because it is taking the homes from the poor. Let the conservatives feel angry because it's a collaboration between government and private investors to take homes from the most vulnerable. Let us all be angry because the laws permitting it are manifestly draconian and wickedly unjust.
Why cannot sensible reforms be put into place? Beats me. The people of DC should be pounding on the doors of their councilmen to demand them, though. Let's call it a bipartisan issue. For once. But get it fixed, people, right away. If this doesn't count as oppressing the poor as prohibited in many-a Bible verse, I don't know what does. And let's just say that God frowns on that and promises to avenge it.
Comments (125)
Reforms are impossible because DC is a third world country within our nation's borders. It is culturally closer to Mugabe's Zimbabwe than most of mainstreet America. This is a city that is actively trying to imprison tourists for carrying spent ammunition brass in their vehicles or on their persons. If you think I'm exaggerating then just look up the news on that one.
DC is not reformable until we get a federal judiciary to acknowledge that the Bill of Rights applies there completely without "reasonable restrictions" because the whole city is federal territory (ain't not federalism claim to protect them from the Bill of Rights). DC is the only city in the country where constitutionally speaking, it ought to be lawful to carrying a M16 with grenade launcher down the street, but it is in practice one of the most hostile cities in the country to the Bill of Rights.
Posted by Mike T | September 17, 2013 1:02 PM
Though in fairness, Lydia, this scenario could play out literally anywhere there are property taxes. People lose their houses in every state that has property taxes, but that's considered fine by most people because there isn't an investor cashing in on it. Nevermind the fact that it doesn't really matter in the end how they lost their house since the property tax system makes it possible and easy for those that can't pay.
Property tax is the easiest, sneakiest way for local governments to do most of their financing because tax competition at the local level is incredibly easy. You can work in an incorporated town, but live in just the county for example. That makes applying income tax hard and applying sales tax even harder since you can easily avoid excessive local taxes by shopping in another town.
I don't know what the solution is for DC (I have ideas, but they involve deportation of 600k civilians to Northern Alaska) but for the states I think it would be to apply a flat income tax at the state level and have the state distribute the revenues to the municipality where you claim residence for state income tax purposes.
Posted by Mike T | September 17, 2013 1:15 PM
Well, we could start with something really simple like not selling the lien to investors. As a last resort and only for bills over X amount, allowing the *city itself* to go to court to foreclose on the house and then *only* for the amount of the tax bill plus carefully calculated interest and *strictly capped* fees. The rest of the money from the sale has to go to either the homeowner or, if there is a mortgage, the mortgage holder (and the latter only for the actual amount owed). Nobody could make a killing on the process, and foreclosure would only be a way as a last resort for the city to get the taxes paid.
Liens should not be profitable if the purpose of the law allowing a lien to be placed is allegedly just to recoup the taxes. The ability to place such a lien should have only the function of getting the taxes paid, not making anybody (either the city _or_ an investor) big bucks.
Or the city could be given other, both less profitable and less destructive (to the person), ways of recouping unpaid income taxes, such as getting a judicial order to garnishee wages or other income, again, just for the amount owed plus interest and, if absolutely necessary, some minimal fees.
Posted by Lydia | September 17, 2013 2:41 PM
The simplest solution is to just abolish property taxes. As Mike indicates, they are insidious devices for financing city corruption. Let's do away with them.
Posted by Paul J Cella | September 17, 2013 5:38 PM
I am almost positive there is an error in that article.
There is no way the tax-lien statutes allow a lien holder to retain the proceeds of a forced sale in excess of the debt itself, interest, and expenses of foreclosure. The statement in the story that a homeowner lost his equity because the lienor gets to keep "everything" cannot be the law. That is not the law in any American jurisdiction.
Rather, as the article accurately suggests, tax liens have priority. The lienor gets paid before the mortgage lender, then the mortgagee gets paid, and then any remaining proceeds go to the homeowner. It is simply not true, as the article insinuates, that the foreclosure of a tax lien ipso facto terminates the fee holder's interest in the property.
Of course, that doesn't make the described system hunky dory. We've known for over two millennia that tax farming is subject to abuse. (This is essentially the system that garnered tax collectors such derision in first-century Palestine.) It was a common arrangement in medieval economies and was abused there. Why are we surprised now?
The control that ought to exist even within the system as it's designed is a reasonableness analysis on fees and expenses. No one should be getting remotely $450 an hour to do foreclosures against pro se homeowners.
Posted by Titus | September 17, 2013 5:52 PM
Titus, I don't know what to think. I agree with you that it would still be extremely bad even without terminating the entire interest in the home, but that's what the article says. It doesn't even say "priority." The most explicit quotation, which I gather you're responding to, is
I agree that the "trumping" phrase is unclear. What could it mean if not that the lien holder gets _paid_ first? But then there is the explicit statement that the homeowner was stripped of the equity "because tax lien purchasers are entitled to everything." That sounds nuts, but that's the statement. And the claim throughout the story that Coleman was "left with nothing" definitely seems to imply that they didn't sock away a tidy little nest egg of the extra that was left over from his $197,000 home. If he didn't owe a mortgage on that home, and if the bill his son couldn't pay was $5000, then obviously he would have been left with a lot more than nothing, probably enough to set him up in another home.
If you're right, the article is outrageously misleading, but the actual outrage that remains in the system is the fleecing going on by the lawyers for the outlandish fees.
Posted by Lydia | September 17, 2013 7:10 PM
I am with Titus, with a qualification. There is no law anywhere in the U.S. that says the lienholder gets the value of the liened property: they get the value of their lien. If such a law existed, no lender would make a loan against real estate or any other tax lienable property. It is one thing to be subject to the super-priority of a tax lien, another thing entirely to have your loan wiped out because the "tax lien holder gets everything."
Two qualifications: If no one else bids on property in a foreclosure sale, a lien holder can generally (rules vary) bid the value of their lien. In that case not because they "get everything", but because their paultry bid was the high bid. I would be curious how DC's bid process works.
Two: I did a little poking in the statutes and found a provision that appears to work as follows: If a winning bidder defaults on their payment of the purchase price, a portion of their deposit is forfeited to the city and the property flips over to the city as well. A tax lien purchaser takes all of the rights of the city. This is a situation ripe for abuse. One example: I create two companies: Screw the Poor, Inc. and Screw the Poor, LLC. Okay, that's probably too honest, how about STP Inc. and STP LLC. STP Inc. buys tax liens. When the properties are foreclosed, STP LLC buys the properties and pays a deposit. STP LLC doesn't pay the balance due. Under the law, apparently, STP Inc gets 20% of the deposit and the property, free and clear.
For those interested, the relevant statutes are:D.C. Code § 47-1347, and D.C. Code § 47-1303.04
http://www.lexisnexis.com/hottopics/dccode/
Full disclosure: I am an attorney, I work in finance; I am not licensed in the sewer known as Washington D.C. and the above reflects a few minutes perusing the D.C. statutes books, not any real effort to understand the law. But it sure does smell.
Finally, Lydia, why would anyone think you were siding with liberals? D.C. is a city dominated by leftist Democrats. Though I am sure someone has figured out it's all G.W. Bush's fault.
Posted by John L. | September 17, 2013 11:29 PM
Thanks, John L.
Your argument concerning mortgages is quite compelling. If the article were correct in its most natural reading, why would anyone ever give a mortgage? The collateral of the property could potentially be made worthless by a tax lien.
I hadn't thought of the possibility that the same company that has the tax lien might try to buy the property at the foreclosure auction for a pittance. Nor, of course, about your other tricky idea, taken from the statutes. The second idea (the really devious one) would be even more clever, because STP LLC might bid a normal amount, rather than a pittance, and hence might out-bid regular bidders in an open foreclosure auction. Openly bidding low-ball only works, of course, if nobody else wants the property more than you do, so that might not work for the lien-holder to get the property free and clear as an asset. But in that second plan, STP LLC doesn't actually _pay_ the normal amount that it bids. It deliberately defaults.
That could plausibly result in a situation where the original property owner--the one who got foreclosed on because he didn't pay his $134 in property taxes or what-not--really does end up with nothing, because what is ultimately actually paid for his property in the foreclosure auction isn't enough for there to be any extra left over for him. His property might in some sense have been worth $197,000, but nobody actually pays $197,000 for it in the auction, because STP LLC outbid the competitors (maybe they bid $197,000) but defaulted.
A truly devious scheme.
In all honesty, I doubt that that was what happened to Coleman. I'm beginning now to think that the author of the Washington Post column was just confused. Maybe Coleman still had a mortgage, not much equity in the property beyond the mortgage, and the lien-holder and the mortgage company between them ate up the sale price at the auction, or virtually all of it, leaving him with nothing. But that's just a guess. Maybe somebody has indeed figured out the type of plan you outlined for getting properties for merely the purchase of the lien. The story does say that several of the companies operating in DC have been in trouble in other states for some sort of law-breaking in connection with lien purchasing.
Posted by Lydia | September 18, 2013 9:58 AM
I think y'all may be missing a key qualification here:
No mortgage lender was involved here. It's possible that they have some sort of sneaky mechanism that works in these cases where the house is paid off.
Posted by Mike T | September 18, 2013 1:34 PM
Lydia,
Your note about the error of the writer is the most likely. I have never read an article in a newspaper about a subject I know something about that didn't have grievous errors.
The crimes several of the folks were involved with was bid-rigging, i.e., colluding with others to cheat a third party.
We should also recognize the underlying problem: the voracious appetite of government at all levels for revenue now. Historically, small tax liens were collected, along with interest, when the property was eventually sold. Buyer, or most often buyer's mortgagee, would have a title company check for any clouds on the title and up would pop the tax lien. At closing, a portion of the buyer's payment would be set aside to satisfy the lien. Cities and counties would then only worry about the big amounts, and those they would go after themselves. But the aggregate dollars in the small liens add up and by selling them, the city can get money today rather than at some uncertain time out in the future.
Posted by John L. | September 18, 2013 4:47 PM
Mike T. makes a very good point. It's really difficult to see how this worked, unless perhaps the lien purchaser really had worked out the sneaky deal John L. suggests involving more than one company and fake bidding at the foreclosure auction. Or unless the DC laws about liens are so bizarre that it's amazing anybody can ever get a mortgage in DC, for reasons our legally savvy commentators have pointed out. Or unless the story is wrong on point after point after point--not just about lien-holders "getting everything" at the foreclosure sale, not just about Coleman's being "left with nothing," but also about his having bought the house with cash.
John L. makes a good point, and the story emphasizes that DC is unusual in being so aggressive on foreclosures to collect small tax liens--whether carried out by themselves or by allowing investors to purchase liens and go after foreclosure immediately themselves.
Posted by Lydia | September 18, 2013 5:02 PM
No, no. Too hasty altogether.
First, property tax has an extremely long history, and while it can engender abuse, it's not any more so than any other tax. Abuse follows the money, wherever the money is, there you will find abuse.
Secondly, taking the taxing power away from towns and counties is DIRECTLY contrary to subsidiarity. Local communities have to have the power to tax their own people in their own way.
Thirdly, in a way - as Mike inadvertently points out - allowing yourself to be subject to a town's property tax IS EXACTLY a form of voting with your feet. Since you can be taxed by a sales or income tax even when you don't live in the jurisdiction, choosing to live in THIS jurisdiction is, ipso facto, more like a positive choice to accept its property tax. Fleeing your work place's income tax rate (or your home's sales tax rate) by going over the border is a negative choice against the rate in the place you are fleeing rather than a positive choice FOR the place you are shopping in.
Fourthly, there is no good principle for denying taxing property. The only thing you CAN tax is wealth, you cannot tax lack-of-wealth as such. Given that you are going to tax wealth, you can either tax the getting of it, or the having it, or the getting rid of it. Our system taxes ALL THREE: income tax and certain excise taxes (on mined ore for example); property taxes; and both sales tax and the federal estate & gift taxes for getting rid of it. You cannot point to a principle identifying why only SOME of these should be taxed to the exclusion of the others, because there isn't one. The only principle available is to tax "however is the greatest benefit with the least deleterious effects", and all three lend themselves to so many different systems of application and details of results that there is no PRINCIPLE to delineate one of the three as always and everywhere the only right way to go, or as always the wrong way.
Taxing through a certain method ought to relate to the purpose of the taxes, if possible. If the NEEDS covered by a taxing process relate more to your property (or your person) as it is than to your income as it comes in, then it makes more sense to tax the property than your income, doesn't it? A person who is retired and living in the McMansion they bought 20 years ago is still using basic county services whether they have current income, why should they go tax free? Sure, roads and such are used more for commuting than any other one necessity by the average person, maybe those expenses should be paid by income taxes...wait, they often are paid for at the state level by income taxes.
That said, there are clearly ways to go about taxing property wrongly, and DC has found one of them.
Had I my druthers, I think maybe I would allow the place where I work the right to tax my income there - exactly and precisely to the extent they give me the right to vote there. And likewise for the place where I live - they can tax my property if I can vote there. Shopping is a little too fleeting an event for sales tax to be subject to the same rule. (In the long run, I would also push for employers to make it a positive concern of work/pay pricing that they encourage you to live very near where you work - and pay you accordingly. But that's way too ideal for this discussion.) DC would have been fixed ages ago with this method - all the workers who commute into the city for work would have voted differently than the residents.
Posted by Tony | September 18, 2013 7:16 PM
Fair enough, Tony. You've persuaded me.
What's galling is that most municipalities are driven to extract, frequently from all three -- precisely in order to augment other people's wealth in order to secure their political loyalty. Something close to 20% of my city's (rather steep) property taxes go straight to funding the public sector union pension plan that was overpromising and underfunding for years.
Nor should we ever forget how vital is this peculiar revenue structure is to the architecture of finance. The property taxes of millions of middle class folks, sunk into enormous, ill-managed, borderline corrupt institutions of investment, form a major portion of the buy-side of securities markets, whose losses in turn formed in the impetus for massive government intervention and manipulation of markets. Nor should we delude ourselves that any of this is over yet. Yesterday Bernanke declined to even dial back the Fed's monthly purchase of financial assets.
Posted by Paul J Cella | September 19, 2013 5:24 AM
Tony,
Subsidiarity is not automatically a given. It does not follow that Northern Virginia ought to be allowed to violate our second amendment rights because all of the transplanted liberal scum from other states feel guns are icky and dangerous. I think Virginia is quite right to tell them to get stuffed by abolishing most local control on firearms. Now on taxes, the problem we have is that the state hasn't freed up the muncipalities to tax everything but property ownership.
As to your argument about the retiree, it is likely wrong on several levels:
1. The retiree is probably not using many, if any, local services that don't either have their own user fee (water utility for example) or excise tax.
2. Public schools are the biggest drain on local revenues; retirees usually have no kids to send to them.
3. Roads are maintained mainly with excise taxes.
Why should the retiree, who was already heavily taxed on his income, now pay taxes to maintain his quality of life in his property? You want to give him an income again? Raise interest rates so his retirement savings generate real income again. That'd be good for the economy for many reasons.
Here's one principled reason why property rights ought to not be taxed: it makes you less of a property owner. When you have to pay a tax to maintain a right, the right disappears the moment you cannot pay for the tax. If there were a "Bill of Rights tax" which would remove your constitutional protections if you couldn't pay it, I doubt you'd disagree that this is a change-in-kind to the sort of protection provided. Nothing in it would be a right, merely a privilege that can be done away with by a simple raise in rates that someone cannot pay.
Posted by Mike T | September 19, 2013 7:01 AM
I've always thought, like Tony, that variations among property taxes were one of the few ways in which local govt. still mattered, which makes them not such a bad thing. Also, it allows a teeny bit more local control of the public schools and local variation among public school quality,which is somewhat of a good thing, though I would always make it a large priority not to send my children to public school anyway.
Obviously, the DC approach to property taxes stinks to high heaven. It ought to be possible to do what John L. discussed regarding small liens on property for taxes rather than what DC is doing.
Posted by Lydia | September 19, 2013 9:04 AM
Assuming this article is entirely correct, the difference between DC and almost every other jurisdiction is only in terms of how far they've empowered the buyer of the lien to go. Aside from that, there is nothing particularly different. There really is no difference between an investor backed by US Marshals greedily kicking a 76 year old poorish retired marine out of his home and a sheriff's deputy doing the same thing in EveryTown America. In both cases they resulted from the same origin: an unpaid property tax bill. We're just supposed to be moved to greater anger because profit is involved. Admittedly it is even worse on a spiritual level, but I doubt the old man would care who is kicking him out rather than why.
Which raises an interesting question. Should people from Maryland be allowed to vote in Virginia if they can be taxed here? I don't see any prudence in that. Assuming voting were paid to property and income taxes, it would be possible for people to vote in both states simultaneously which would be very bad for people who live and work in one jurisdiction.
Zippy has a great post that touches on this view of authority and government. Suffice it to say, you are mixing up all government authority into one monolithic authority to make your case. What the federal government can do does not justify what a municipality can do and vice versa because they are distinctly different governments with different functions. For example, estate and gift taxes are far more easily justified at the state and local level than the federal level because an estate tax applied locally keeps the money where the family may still live. It has at least the possibility of being applied within the same community where the estate was built, whereas a federal version effectively amounts to a redistribution among the entire country. Similarly, local tariffs are not only unconstitutional but also damn near nonsensical as they'd be such a burden on trade as to hurt the local economy more than help it.
The difference between those taxes and property taxes is that they are all transaction costs or a tax on productivity. Property tax, unlike all of them, directly targets ownership and reduces ownership to something one can only have if one pays a tax. It does have a transformative impact on the nature of ownership of real property, but considering the reluctance of most W4 writers to acknowledge that no fault divorce radically transformed the very nature of civil marriage, I doubt I'll make much progress by showing that property tax imposes severe limitations on the extent to which anyone can be said to own the property it touches.
Posted by Mike T | September 19, 2013 9:34 AM
I don't have the book at hand, but Tony, didn't Mueller discuss property taxes in Redeeming Economics? I recall what he said as making a great deal of sense, but I don't remember the details.
Posted by Nice Marmot | September 19, 2013 12:36 PM
Well, Mike, he might care if he were being kicked out if he were going to get a chunk of change at the end of the day--his section of the value of his property after it was sold at the foreclosure sale and the lien paid. If it were a well-advertised auction, he might be able to buy another house with that money. He wouldn't be left with nothing.
But here's a question: If you don't pay your state income tax for some reason, how is that recouped? Presumably not by putting a lien on your property.
Posted by Lydia | September 19, 2013 1:40 PM
Lydia, I could be mistaken, but when your house is seized for failure to pay property taxes you don't get a dime from the sale. The whole property is forfeit to the municipality.
Posted by Mike T | September 19, 2013 1:59 PM
Paul and Mike T. (especially Mike T.),
I had always taken Tony's view of property taxes but you've given me some pause with your smart thoughts on the matter.
Mike T.,
Let me just say that I'm typing this while chuckling as I find it quite remarkable that you managed to work in a reference to your special concern while talking about property taxes. You might be one of the most interesting characters we have around here.
Posted by Jeffrey S. | September 19, 2013 2:08 PM
That's exactly how income taxes are enforced. In fact, the law in most jurisdictions is such that the taxing authority enjoys priority lien status even without complying with the notice requirements for filing liens that apply to private creditors.
Back to the issue of the accuracy of the article, the only thing I find easier to believe than that the DC government is beset by corruption and abuse is that a journalist wrote an article about a legal issue that contains a glaring, inexcusable error. John L. is not alone in noticing this phenomenon.
Again, this is not the case. Foreclosures, whether for mortgage debt, tax debt, or to satisfy a judgment, are lawful and constitutional only to the extent that the creditor takes the value of his debt. There is no constitutional principle that allows the state, or any other creditor, to retain the proceeds of seized property above the value of the debt and the expenses of execution. That's simply theft. (Granted, the principle is of limited utility when speaking of residential real property, because having a house is worth more than having even the home's full value in cash, because of transaction costs.) The only way the government gets to seize property (and here it may be more useful to think of "value," as opposed to the physical seizure of the parcel) beyond the value of a tax lien is if it convicts the owner of something and gets a forfeiture judgment.
John L. is right that a creditor can generally bid his debt at a foreclosure/lien/execution sale, and take the property without putting cash on the barrel head. But in every jurisdiction there is a mechanism for challenging the sufficiency of the price paid at such a sale. If a lienor successfully bids a $400 tax lien on a piece of property with a market value of $200,000, he is going to have problems keeping that property.
Of course, as with so many things, in that context the creditor can walk away without a scratch unless he's challenged, especially in non-judicial foreclosure states (where a judge doesn't have to sign off on a foreclosure). So if a property owner doesn't know his rights or can't find someone to represent him in asserting them, he can be victimized. This describes a lot of people who are in danger of losing property at tax sales.
Posted by Titus | September 19, 2013 3:18 PM
What can I say... I like to draw parallels.
FWIW, Zippy commented that he generally considers my position on that issue correct.
To me the issue is quite simple:
A right I have to pay a tax to continue lawfully exercising is not a right. It is a privilege at best. You can call it a property right; I can call a ham sandwich The Honorable Senator from the Great State of Puerto Rico. Saying it doesn't make it so no matter how strongly we align our chakras and mentally shout "si se puede."
Likewise an "authority" that can be unilaterally abolish by the arbitrarily removal of consent of the one subject to is not an authority. It is something else. I'd call it bull#$%^ but YMMV on that one.
If you think I'm trying to get another jab in at no fault divorce with that last point, go back and search some of my comments about how easily the government can revoke your property rights today. The key to ending no fault divorce and civil asset forfeiture might lay in causing a case of "let's you and them fight" between a man's ex-wife and the local drug cops.
Posted by Mike T | September 19, 2013 3:19 PM
Civil asset forfeiture pre-trial notwithstanding.
Posted by Mike T | September 19, 2013 3:21 PM
He makes a large point of putting taxation of "property resources" (or income) on the same footing as taxation of labor resources or income. No subsidy to either one, in theory.
In our system of government, we make super-laws, i.e. the constitution, to restrict the powers of government as such. Such provisions of the basic law (whether federal or state) are not properly speaking taking away powers properly belonging to lower-level governments, they are a way of saying THESE so-called powers don't belong to the government at all. Once you have said it at the state level, obviously the cities and counties are bound by that observation. Rules against unwarranted search & seizure or constraint of personal gun ownership are made to put these acts outside the control of lower level governments precisely because they are outside proper governmental authority. That's not a violation of subsidiarity, it upholds the subsidiary rights of private citizens.
Well, that is how the tax is enforced. Mike, you are setting up an impossible quandary. If taxes cannot be enforced against property, then every tax cheat in the world can simply make his main holding property and thumb his nose at government. All you have really pointed out is that ownership of property is not USUALLY so total and absolute as to defy a taking by government for just debts. That's what most ownership means - ownership in the face of these claims but not in the face of those claims. In fact, virtually all jurisdictions the world over have allowed that the sovereign can indeed take property for just debts, (and for some other causes) whether tax or otherwise. The biggest exception I know about is that in merry old England in a some cases (mainly for nobles) the title to land granted was unusually complete, so that they could retain property even against such claims. However, that grant stopped being given some centuries ago.
I don't hold with the statists who say ALL property rights are rights only because and so far as society decides to grant claims. I think property rights can precede social rules about them. But I also accept that property rights are subject to social demands, because man is social by nature. Therefore, where the state has a just cause for constraining a person's property rights, his cry of "but it's MINE, I tell you" cannot hold against the state. And just taxes, all forms of just taxes, are exactly that: just cause for taking away part of man's property. That the property be real property is significant but not overwhelmingly so.
No, I don't think so. I was mostly talking about the general principles of taxing, which (of course) apply across jurisdictions because they are general. I can get into the fact that the federal power is limited by the Constitution, but since the main issue here is at the state and local level, that should be irrelevant. State powers to tax are plenary, and so should local powers within their sphere except to the extent appropriate state level laws restrict them in ways that don't abrogate subsidiarity.
Softly, Mike, softly. As I suggest above, it gets to where governmental powers and individual rights intersect, and generally we tend to accept that governmental powers encroach on individual capacity to rule one's own within limits, BOTH the encroachment and the limits specified by the common good and man's good.
Posted by Tony | September 19, 2013 7:31 PM
Last night my cousin was in from out of town and I had the good fortune to be invited to dinner with him and my father and brother at one of Chicago's newer fine steak restaurants. I arrived early and decided that the proper thing to do before digging into my steak dinner was to order a vodka martini, which I later discovered (when it was served to me) is really about three good drinks in one (it is served with the shaker) and comes with a price tag of $21.00. Now, the martini was delicious and did compliment the steak dinner nicely, but it was definitely excessive.
Reading through Tony's last comment I fear that I just had another $21.00 martini courtesy of Mike T. -- although truth be told I was thinking some more about this subject today and in particular this comment from him:
"The difference between those taxes and property taxes is that they are all transaction costs or a tax on productivity. Property tax, unlike all of them, directly targets ownership and reduces ownership to something one can only have if one pays a tax."
How is this any worse (taxing ownership) than the idea of taxing productivity (income)? In both cases it seems like the government is going after someone who is pursuing a virtuous activity (being productive or owning property) but how else can a government function if productive citizens don't agree to get together and fund the government? I think Tony gets it right here:
"I think property rights can precede social rules about them. But I also accept that property rights are subject to social demands, because man is social by nature. Therefore, where the state has a just cause for constraining a person's property rights, his cry of "but it's MINE, I tell you" cannot hold against the state. And just taxes, all forms of just taxes, are exactly that: just cause for taking away part of man's property. That the property be real property is significant but not overwhelmingly so."
And he's right for the same reason the man could cry about his income "but it's MY SALARY, I tell you -- I was paid a fair wage" cannot hold against the state when it comes to income taxes.
Posted by Jeffrey S. | September 19, 2013 10:16 PM
Tony is wrong because contrary to his assertion there is a defining difference between property taxes and all other forms of taxation: no other form of taxation is transformative to the very nature of the thing being tax the way property tax transforms the property claims of the alleged owner. Furthermore, contrary to Tony the state's claim to your property in all other forms of taxation is incidental to their claim to the debt burden. If you fail to pay any other state or federal tax, the government only seizes your house to pay debts if that is the final recourse. So really, no other form of taxation can be directly compared to property tax.
In fact, if you look at how the IRS, state tax agencies, etc. treat all other tax debts relative to your real property you will rarely see any desire to dispossess you of your real property if there is any alternative. They are doing nothing more than governmental debt collection. Like a private debt collector, they'd much rather you pay in cash or sell off luxury items to quickly raise the cash so they can move on. Here, the government asserts a claim that is literally no worse than what the bank claims when you take out a mortgage (especially a second mortgage). The only difference is the involuntary nature of the debt when talking about tax obligations.
The only way an income tax could become transformative to the act of producing income in such a way as to be unjust is if it changed the relationship between the man and his work. To my knowledge, only Sweden ever got there in the non-Communist world and they got there more by accident (at one point I believe they discovered it was possible to be taxed over 100% of your income, but again it was accidental and they changed the laws).
Whether or not the tax is transformative ought to be the ultimate bright line test if a tax is just. Think about it. If a worker spends overwhelmingly most of his time working to pay normal taxes, that quasi-slave relationship with the state is indicative of a method of taxation that is unjust because it means he's now not working primarily for his good and his family's good. Something similar applies with the direct taxation of property ownership.
Posted by Mike T | September 20, 2013 7:19 AM
What you are calling the nature of the tax I am seeing as the particular method of enforcement if you don't pay your tax. Enforcement of collection is a different government action than imposing a tax.
Of course the city or county also would rather you pay in cash or sell of other assets quickly to pay off the property tax debt. IN THE EVENT THAT YOU DON'T, the difference here is that they go directly to your property instead of sitting around looking at all the other possible assets and income to grab. Of course, since most people will gladly accept garnishment of wages and/or sell their boat and furs in order to keep their house, the fact that you haven't paid your taxes on your house suggests that the county or city might not have all that much success trying to squeeze those other things on you, and (in some jurisdictions) they are just going directly to the solution that lies in back of all the other attempts that the feds and state are going to use as well. But not all jurisdictions operate that way, some attempt other collection approaches too. Here is part of Oregon law on the matter:
In addition to these liens being devised as a collection tool, the lien can extend to more than the property subject to the tax. Here is part of Texas law:
If all taxing authorities, including feds and states, can go after your real property for any taxes (thus converting a claim on income into a claim on property), and if they typically do so after looking for other assets first, and if some local jurisdictions do the same with property taxes as well, then as a matter of principle I am not seeing that property tax is a fundamentally different sort of thing. Collection methods are prudential matters handled differently in different jurisdictions, and if one leaves in place the option of going after wages or bank accounts before trying to take real property while another skips the nonsense and simply liens on your property taxed, while another goes after all available property, those acts are distinct from the tax itself. And it seems a bit of a semantic shell game to say that state income tax ultimately enforced by a property lien is not "transformative" if a city property tax enforced the same way is called "transformative."
Property taxes are as old as the hills. Neither ancient Christian moralists, nor Christian economic theorists, nor our Founders who objected mightily to taxes imposed wrongly, saw anything wrong with them in principle.
Posted by Tony | September 20, 2013 8:35 AM
I'm inclined to agree with Tony on this one, and the fact that other taxes can also be collected by a lien on real property is a point I was trying to ascertain by asking. I do think that it's much less draconian to garnishee other property or income first, and the thing about the DC situation is that they don't even appear to be trying this.
As John L. pointed out above, plenty of municipalities don't even attempt to collect relatively small tax liens right away. They just bide their time until the property sells. So aside from anything else, DC is not showing that degree of restraint and patience.
Capping the lawyers' fees is something that absolutely _must_ be done.
I admit to being intrigued by the mystery surrounding just how accurate or inaccurate the original article is. I haven't posted an update to correct my post because all I have is the reasonable-sounding assurance of two legally savvy readers (with argument) that it *cannot* be right that the lien-holder automatically "gets everything" at the house sale.
Obviously, _if_ that is true in DC, that has to be the number one first and foremost reform to be made.
Next priority, capping legal fees.
Third priority, making statutory the rule that the city isn't going to sell a lien on a home for minuscule property tax debts.
Posted by Lydia | September 20, 2013 9:56 AM
That's an interesting way of saying that you choose to ignore the point because it contradicts your argument. You said:
I said there in fact exists one because making property ownership contingent upon paying a property tax, that is a tax directly on the claim of ownership of said real property, fundamentally changes the true nature of the property claim. We have a term for a property relationship wherein one enjoys possession and use of property contingent upon a recurring fee: lease.
The founding fathers are hardly a real authority on taxation considering part of their casus belli was a tax burden substantially lighter than what the middle class pays today. Being a Protestant, I also don't find the opinions of ancient Christians intrinsically binding on me.
Posted by Mike T | September 20, 2013 9:56 AM
The argument from authority is, of course, a weak one relatively speaking. But whether the Founders' tax burden was heavy or light has nothing to do with the fact that they found the *manner* of taxation a partial causus belli. If they were wrong to find it so, then perhaps they wouldn't count as an authority on the matter, and if they were right then they do. But even apart from the revolution itself, they succeeded in establishing the concept of a governmental order that has been much admired and copied, and in that order left property taxes quite untouched without even a murmur of protest.
The opinions of ancient Christian Fathers don't have to be "binding" in order to be used for influence and insight. It would be an odd position for a Christian to take to simply ignore the commentary of everyone from Augustine right back to St. Paul as being altogether irrelevant.
No, I was not simply ignoring the point. The rest of my post brought forth the argument against it, in the form of counterexamples: (1) Non-property taxes are enforced by liens (and taking of) real property, and (2) property taxes are sometimes enforced by first grabbing other assets, and (3) property taxes are sometimes enforced by liens even on property not under the tax obligation.
In the first example, where income taxes are enforced by taking property, the possibility of the state or feds of imposing a lien on property for a non-property type tax means that the "ownership rights" inherent in the property itself are generally limited by other principles, including principles about just debts, and governmental capacity to reach to property for something not directly related to that property ownership. What you are seeing as a limitation on property ownership rights are limitations as effects from broader principles than those of property tax. And therefore it is not specifically "property taxes" that are creating a "contingent interest" or a secondary interest (as in a lease) as those are properly understood, unless ALL property EVERYWHERE always is really only contingent and secondary interests.
In the second and third examples, since the authority laying down the property tax sometimes goes after income or other liquid assets first, and sometimes extends liens even to property not subject to the tax debt, the governmental capacity to reach and affect your ownership of goods is related more to the JUST DEBT than to specific property being taxed. Which points to a general principle that affects all ownership rights, not just those of real property: your "rights of ownership" of all assets of whatever sort are limited by overarching obligations for debts as well as overarching requirements of the state in justly pursuing your goods. I could have elicited a fourth example for that last point: the fact that the government can walk in and "take" your legitimately held home for a military installation or a road (and pay you its worth) means your ownership rights, while real, are not absolute and are subject to limits under the authority of the state both as an interested party itself (on behalf of the common good) and as an enforcer of other narrower quasi-public or private interests.
It is not specifically in virtue of _property_ taxes (potentially) being enforced by a lien on that property that your ownership rights in that property are limited by other principles. The ownership rights would be so limited even if the property tax were enforced exactly the same way income taxes are enforced.
Posted by Tony | September 20, 2013 11:46 AM
Mike T.,
I did some digging and came across this article from Ed Feser, "Classical Natural Law Theory, Property Rights, and Taxation".
It doesn't directly address your concern about the "transformative" power of taxation on the claim of property, but I think he speaks to it indirectly by arguing that the natural law argument for property rights is not really altered by just taxation (write me if you want the whole article -- I downloaded it from the journal when they made it available for free -- it costs money now):
Posted by Jeffrey S. | September 20, 2013 11:47 AM
Tony, I think we're starting to talk at cross purposes here but I don't disagree with most of your limiting principles. I am objecting to property taxes not on the method of enforcement but upon the very idea that the state ought, except in exigent circumstances, be allowed to step in between property owners and their property on a recurring basis. Limiting principles alone are not enough to change the fact that by stepping in in that capacity, the state is essentially turning ownership into a lease from the state. There is nothing magical about the common good, limiting principles, etc. that carves out an exception here.
Posted by Mike T | September 20, 2013 1:29 PM
And the fact that (in some jurisdictions, anyway) the state does not "step in between" property owners and their property regularly, or on a recurring basis, for *property* taxes - any more than it does for income taxes - means that it isn't qua property tax that it happens "on a recurring basis" in other jurisdictions either. If the sense of "on a recurring basis" is taken to mean as soon as you have a delinquency (which, itself, isn't on a scheduled basis), they slap an automatic lien, then that's a function of how that jurisdiction carries out the property tax enforcement because other places don't do it that way. So it isn't a function of property tax as such.
Posted by Tony | September 20, 2013 2:33 PM
Or, to put it another way, if property taxes were enforced the same way income taxes were, then they wouldn't constitute any sort of "stepping in between" a man and his property that Mike is opposed to. But in many ages and places, that's just what has happened with property tax, so it isn't a function of being a property tax but a function of a particular style of enforcement.
Posted by Tony | September 20, 2013 3:28 PM
Tony, I've made it quite clear to you that I find the very concept of levying a tax on property ownership, irrespective of enforcement, to be that "stepping in between." You object to that, finding no impairment to your property rights because the state claims the right to tax you and impose a lien on you (or seize the property outright) if you don't pay. You are free to feel that way, but please... stop twisting my argument.
Most of this has been an exercise in contradicting you here:
Most of your arguments have been about trying to find a way of showing that the concept of the state levying a tax directly on the ownership claim has no impact on the ownership claim. You've even gone so far as to make it sound like the only issue is the enforcement mechanism, but that doesn't change the fact that a reasonable person can say that letting the state levy a tax on the ownership claim is making the ownership claim subject to the taxation which intrinsically impairs the claim. That you may not agree with that assertion doesn't mean you are right and authoritative here.
But what amuses me about this argument is that you object to me supporting DC's legal right to dispossess these owners entirely of their claims because I agree with DC that if they do in fact have the authority to make the ownership claim subject to and impaired by the tax then DC has the right to do as it pleases in the face of long-term non-compliance. Taking the entire value of the property is no more unjust than making someone pay a massive income tax burden with penalties and interest. It may be extreme to take a man's home over a $134 tax bill, but if you agree with them that the property claim is subordinate to the tax claim then it is a matter of ought versus must with regard to what value the government should remit to the owner once they dispose of the property to satisfy the tax bill.
Posted by Mike T | September 23, 2013 7:15 AM
To put it another way, this is how I see this sort of issue:
“Churchill: "Madam, would you sleep with me for five million pounds?" Socialite: "My goodness, Mr. Churchill... Well, I suppose... we would have to discuss terms, of course... "
Churchill: "Would you sleep with me for five pounds?"
Socialite: "Mr. Churchill, what kind of woman do you think I am?!" Churchill: "Madam, we've already established that. Now we are haggling about the price”
When you've agreed to cross a line that should ideally never be crossed, you cannot say to the next man he cannot cross it more than you. Reasonableness does not make a violation of principle something other than what it is; at best it mitigates the violation to a degree. That is to say Obama and King Jong Un are both guilty of the same criminal moral claim to being able to kill their own people without a trial, but Obama is less criminal because he's only killed a few people we know of whereas Kim Jong Un and his family have killed several orders of magnitude more.
I actually deplore the claims in the article probably more strongly than anyone else here, but that is precisely because I find property tax dangerous and deplorable so the extent to which there is profiteering only makes it worse. The only time I could defend them would be in a true state of emergency, but then we might disagree on that too because in such a situation I would generally grant the state immunity from justice obligations regarding taxation.
Posted by Mike T | September 23, 2013 7:31 AM
(This is an on-topic continuation of a line of thought from this thread)
What I find interesting about Tony's long, drawn out arguments about how a property tax is that it is not accepted by the Supreme Court with respect to inter-government taxation via McCulloch v. Maryland. The Supreme Court ruled plainly that the power to tax is the power to destroy which means among many things the power to tax a federal military base carries the potential of taxing the military so heavily it must forfeit the base under the same laws as we would forfeit our houses. Absent McCulloch v. Maryland it is likely GSA would often get served tax liens knowing how badly the federal government budgets.
On some level, the Supreme Court has recognized that the ability to levy taxation on property claims is intrinsically a capacity to destroy those claims. So hypothetically or not, the Supreme Court has recognized that in all times and places the power to levy a tax is a power that imposes upon its target a range of potential consequences from the inconsequential to existential harm. Thus the ability to levy a tax on property ownership claims is always an imposition, no matter how light, on the ownership and use of the property. The state is always between them when it claims the power to do so.
Now this may not seem to be saying much. You could say the same is true of income taxes so high they destroy an incentive to work, but then one could evade them by growing food, making things and bartering (include quid pro quo labor for labor agreements). Short of the income tax morphing into a taxation on labor and the refinement of materials, it does not have the same black and white effect on income as property tax does on real property. Someone with existing property can support themselves with alternative economic arrangements, whereas being unable or unwilling to pay property tax leaves you with the option of renting (then someone else must pay it via your payments) or pitching a tent on public land where camping is permissible. The totality of its impact is simply not comparable to other taxes in that respect.
Posted by Mike T | September 23, 2013 11:07 AM
I haven't read the comment thread, but this has been going on for decades, and not just in DC. The original version of that book was written back in the nineties. I first learned about this "investment vehicle" more than ten years ago. There are even special investment funds set up specifically to take advantage of the way tax lien law works in different jurisdictions.
Posted by Zippy | September 23, 2013 7:09 PM
In the comments/reviews on the book Zippy links, one commentator says,
"If the debtor doesn't pay off the lien, you get the home and foreclosing is not all difficult."
I notice that he does not say, "You get the value of the home up to the value of the lien plus interest plus your fees," but "You get the home."
I realize this is just some guy writing a book review on Amazon, but the very existence of the book does tend to confirm the original article.
I can't help wondering: If the lien-holder simply gets the value of the lien, why would people invest in buying them? Unless, perhaps, the interest rates set by statute were so exorbitant that by the time you went through the foreclosure process a bunch of interest would have racked up and you would get a hefty return on investment anyway.
But it really doesn't seem like much of an investment just for that.
I have to say that this does support the original article's actual statement--namely, that the lien-holder gets the home, period. I acknowledge the arguments that have been made against that interpretation. E.g. Why would any mortgage entity give a mortgage if his mortgage could be trumped by a lien-holder who gets the home without paying off the mortgage? Good question. Nonetheless, in return I would ask, "Why is lien purchase considered a great investment if all you get when you foreclose is the value of the debt?"
Posted by Lydia | September 23, 2013 10:45 PM
Here is an interesting article, less emotional than the Washington Post.
http://money.cnn.com/2012/07/10/real_estate/tax-liens/index.htm
Some quotations:
(Emphasis added)The article doesn't specify the mechanism by which the lien-holder "gets the home," but it looks like that really is correct.
Posted by Lydia | September 23, 2013 10:56 PM
And here is a discussion of the procedure in Colorado.
http://www.coloradodreamhomes.net/Web/AR423303/Blog/tags/?tag=Tax+Liens&IDXSESS=elrvv96oubcsvn46s1ea904a82
So in other words, the lien-holder holds the lien for a certain number of years, during which it's racking up possibly double-digit interest and lawyer's fees. At the end of that time, the lien-holder applies to the County to be given the property outright. Various notifications are made, and if the property owner or somebody else doesn't pay the cumulative debt, interest, and fees, then the property is granted by the county to the lien-holder outright.
To my ear, that sounds like the kind of process that could really be going on. How it interacts with a mortgage isn't clarified, but that it could result in the lien-holder getting the entire value of the property, over and above the debt, yes.
And here is an attorney saying the same thing, specifically regarding the DC situation.
http://thekojonnamdishow.org/shows/2013-09-09/foreclosure-free-all-district/transcript
She (Savage, the attorney) does address the mortgage issue. A caller asks what happens to a mortgage if a lien purchaser gets the property outright.
So it appears that the answer regarding a mortgage is that the mortgage company is given an opportunity to redeem the lien, to make sure it doesn't lose its opportunity to keep getting its mortgage paid by the homeowner. Presumably at that point the cost the mortgage company paid would be added to the mortgage owed by the homeowner. That's my guess, anyway.
Posted by Lydia | September 23, 2013 11:13 PM
As I understand it the rules are Byzantine and vary by county, or sometimes even township. Investing frequently involves personal trips to the county clerk; the on-site labor-intensity and geographic inconsistency (even within a state) are the biggest barriers to making this a hedge fund "asset" class, though again there are a few who include tax liens. And yes, tax lien "investors" are typically hoping for that "big score" where they get (say) a $200k property after investing only $10k to buy up the liens. Because they are tax liens they trump and even sometimes nullify private liens like a mortgage or mechanic's lien.
The tax man always gets paid first and best; this is a way for private individuals to buy into the police power of the tax man, and it has been around for a long time.
Posted by Zippy | September 24, 2013 7:19 AM
Well, now I'm glad I didn't update the post, which I considered doing, to reflect the (in itself, entirely reasonable) incredulity of my more legally knowledgeable readers. It turns out that the original story was correct on the most shocking point--namely, that the city will in the end simply *given the whole house* to lien-holders if neither the homeowner nor anyone else with a "right to redeem" pays off the ballooned lien including the exorbitant interest and fees.
Zippy, thanks for the tip on the book. After seeing that I found additional confirmation and even explanation of how it works with mortgages in DC.
Posted by Lydia | September 24, 2013 8:55 AM
My main point is that this isn't some new tyranny in DC. This is how things work and have worked all over the place for a long time - probably since operations people first realized that they could factor receivables, and the finance side that sprung up in response to factoring demand started offering to "factor the receivables" of counties and municipalities.
Lawyers and laymen may express incredulity or outrage; but if you want to know how things really work, ask an investor.
Posted by Zippy | September 24, 2013 9:24 AM
Lydia,
So does this affect how you, Tony and Jeff view property taxes now? As I mentioned before Zippy added his input, one of the fundamental differences between other taxes and property taxes is that you may be dispossessed of your property only to service the debt and to that extent alone. That is, the IRS makes no claim on the entirety of your equity. They only claim the right to force you to liquidate to pay the balance of your debt whereas states and municipalities claim the right to completely dispossess the owner outright. Therefore unlike other taxes, the result of a failure to pay is outright confiscation, not liquidation with the balance (minus penalties and interest) being remitted.
Posted by Mike T | September 24, 2013 10:14 AM
I don't have time to go back over the articles, but what they seem to be saying is that many other jurisdictions have instituted various reforms such as capping lawyers' fees, not taking homes for original debts less than x amount, setting up payment plans for homeowners to redeem the lien, and the like, but that these have not been adopted in DC. In fact, the original article from the Washington Post says that some of the speculators buying liens in DC have been prosecuted for violations in other jurisdictions. Also, what appears to be somewhat new in DC is that previously it was a longer process to go to foreclosure and that this has been streamlined now. The investor can go directly to foreclosure after a very short period of time (six months, I believe).
So, yeah, it's not something new and not just in DC, but DC is somewhat worse.
Posted by Lydia | September 24, 2013 10:16 AM
Mike T, do you know whether state income taxes work the same way--that is, that you can only be forced to liquidate to pay the taxes owed plus interest and penalties?
To me, that's one of the three most outrageous things about this whole thing--just turning over the property to the lien-holder. The others are the credit-card-level interest and the obviously excessive lawyers' fees. (The Washington Post article especially zeros in on the last of these as something relatively new in the DC system.)
However, I should say that I don't see why the property tax inherently has to include this complete dispossession. Why could it not be statutorily reformed so that the lien-holder can only foreclose for the value of the lien? Lien-holders might still choose to "invest" in order to get interest, though I don't see why interest rates should be so high, either. But there's nothing inherent in the existence of property tax as such that requires such a draconian enforcement. Or so it seems to me. In fact, it's so wildly draconian that, as you see, the lawyers among my readers assumed it was unconstitutional and unlawful to turn over the entire property outright to the lienholder. It seems that should be able to be changed, and certainly should be.
Posted by Lydia | September 24, 2013 10:20 AM
I had some thoughts a while back on what makes property taxes different here (and in the comments). It is connected to my understanding of usury: income and sales taxes involve levies against actually existent transactions in the sovereign's currency, whereas property taxes involve levies against merely hypothetical transactions. Whether that makes property taxes intrinsically immoral or not is one thing; but they are most definitely essentially different from income and sales taxes.
There may well be recent changes in DC, but there are thousands of different counties and municipalities in which tax lien "factoring" has been going on for decades, with all the variation one might expect in thousands of different jurisdictions.
Posted by Zippy | September 24, 2013 11:33 AM
I can see that property taxes are different in kind; I'm not therefore convinced that they are inherently unjust.
The astonishing thing about the practice discussed in the main post (which I acknowledge does not only go on in DC, though apparently it goes on at an accelerated speed and with exceptional rapaciousness in DC) is the ability to confiscate the entire property in payment of a tax debt, though the value of the property is far beyond the value of the debt. I could understand how this might happen if a property owner has definitely placed the *entire value of the property* as collateral for the debt. In the case of property taxes, of course, the property owner has done nothing of the kind. It therefore seems entirely arbitrary and hence unjust for the government entity to give the entire property to the lienholder because the property owner has defaulted on a debt. There is no rationale to it, as witness the fact that the property itself could have any value at all, up to millions of dollars, yet the lienholder can be given the entire thing, lock, stock, and barrel, simply because he owns the lien and the property owner cannot pay the demanded (much lesser, though inflated) sum. I cannot imagine any possible rationale for that, and for that very reason it seems to me only arbitrarily connected to property taxes as such. If a law allows lienholders to be given the entire property, it's possible in principle that a state would also sell liens for state income tax and write a law that the entire property would be given to the lienholder if the property owner could not redeem the lien for the stated sum. So one of the most shouting injustices, to my mind, in the present case doesn't seem to me to have any particular logical relation to property taxes, though apparently it's not done for other kinds of taxes.
By the way, some of the other articles I found stated that cities can do this for delinquent sewer and water bills as well, which are bills for actual services the homeowner has used, so again, this isn't even connected to taxes only.
Posted by Lydia | September 24, 2013 11:41 AM
I'm not excusing it. I'm just pointing out that it is commonplace and has been for a long time, and I very much doubt that there is anything qualitatively new in the DC story.
Posted by Zippy | September 24, 2013 11:54 AM
Well, again, it may be a quibble over a concept like "qualitatively new," but here is how the lawyers were addressing that question:
And here is a similar point from the now-vindicated original article:
Posted by Lydia | September 24, 2013 12:59 PM
There can be new rules (waiting periods, interest rates) in DC without the practices being qualitatively new in general across all jurisdictions. The story seems to be about DC, not thousands of other jurisdictions. I remember reading about 50% effective interest (interest plus penalties) in some jurisdictions years ago, for example.
The point is that while this may be an outrage, it certainly isn't a new outrage. That may or may not be difficult to accept, but at least I've pointed it out.
Posted by Zippy | September 24, 2013 2:50 PM
I'm just glad you've pointed out (in effect) that the original story doesn't contain a massive, central error. I was practically losing my nerve and thinking I should retract it because everybody seemed to think it couldn't be true. So thanks much for the help.
Posted by Lydia | September 24, 2013 5:20 PM
Mike, I am not suggesting that a county power to "step between" (in some sense) a man and his real estate by taxing the real estate isn't a form of power to alienate or remove a portion of his property rights. I agree that it IS such a power.
I am instead saying that the power to do so over real estate is not DISTINCTIVE to property tax. A tax on income is a tax on your property, just not on your real property. It constitutes a power to come between you and your property, it limits your capacity to grasp and hold your income in whatever form that income comes in (and the IRS explicitly taxes income of "whatever form" and is a tax also on a direct exchange of service for goods). A tax on gifts and estates does something similar, though it can be roundabout (if you give away all of your property (real or otherwise) to the last ounce, the IRS will swoop in on the recipient and take part of the gift value away as tax.) All tax is a tax on what you hold in your possession, and inherently carves into your ownership rights over those things.
I would have the same objection to DC's law, or any law that taxed property in such a way as to remove COMPLETELY a man's holding of property, that I would have to a 100% income tax rate - very strenuous objections indeed. But the fact that a 100% income tax rate is unjust doesn't imply that income tax is inherently unjust. Nor does a property tax that completely alienates a man's property being unjust imply that partially alienating his property bears the same problem.
This isn't the right place for Zippy to get into a big fight with me over monetary theory, but just for the record there are different theories about money than as "the sovereign's currency." In addition, there have been times in the past when the forms of money in circulation were not under the sole control of the sovereign. Next, there have been times when property taxes (the amount of tax determined by total property) were paid or exacted in goods rather than money anyway. Further, when there is indeed a sovereign currency, most or all taxes will be stated in those terms, but that doesn't mean the taxing authority runs by and in the authority over the currency: my city may tax my income but it has no authority to print its own money and does not designate the tax in "city scrip". Nor is it clear why a tax must be based on transactions: the Jewish Temple tax appears to have been on the sheer privilege of being a Jewish male - paid by Jesus in a Greek coin. Let it suffice, here, to simply note that a theory that property tax is unjust on the basis of monetary theory is going to be an even larger and more difficult debate than that of property tax considered of itself.
Posted by Tony | September 24, 2013 9:42 PM
I see nothing objectionable about dispossessing a man entirely if you embrace the logic of property tax. You've conditioned his ownership claim upon paying a tax. The state has merely revoked his claim and taken possession of the property. It is now their property and as the new property owner they can sell it for whatever the market will bear. Requiring them to give him equity would be an infringement upon the state's new ownership claim in the house, that is to say you would be violating the government's property rights to make them remit any percentage of the equity to the old owner. It would be almost like forcing a new home buyer to give the previous owner a cut of the next house sale's profits.
What you want is to be able to say that a tax on the ownership claim does not condition the whole ownership claim upon ability to pay the tax. Clearly, most local governments don't agree with you on that, and I cannot fault them for insisting that you cannot have your cake and eat it too. They claim no percentage of the equity, they claim the property claim outright ransomed annually by the property tax payment.
Equity is just a matter of convenience that lets us have a firm basis for liquidating an ownership claim or to describe degrees of claim when a property has multiple lawful owners. It is a red herring here, and it is a mercy when some local governments limit themselves to it under the property tax regime.
Posted by Mike T | September 25, 2013 7:37 AM
If we follow that form of argument, it would seem that anyone who says a poll tax is not an intrinsically unjust type of tax is logically committed to concluding that the government can justly take a citizen's head (since "a tax per head" is where the phrase "poll tax" comes from) if he doesn't pay the poll tax, because the very existence of the poll tax makes his possession of his head conditional on paying the tax. Something seems to be wrong with the argument. :-)
Posted by Lydia | September 25, 2013 8:18 AM
Mike T:
Property tax is a 100% levy. It is just spread out over time. So folks who are comfortable with its morality must think that it makes a difference when 100% appropriation happens in slow motion.
Posted by Zippy | September 25, 2013 8:26 AM
Every year I have to pay something to the state of Michigan for the "privilege" of owning a car. Suppose it were the case that, if you add together all the registration fees all the owners pay on this particular car over the lifetime of the car before it is junked, this adds up to the sale value of the car at some particular point in its lifetime. For all I know, that may be true. After all, the car sometimes has a fairly low value, and the initial registration fees are higher. Does that mean that the state is confiscating the car in slow motion? Myself, I don't think so.
Posted by Lydia | September 25, 2013 9:08 AM
Lydia,
A poll tax is not a literal tax on the head. It is structured as a generic tax obligation that everyone must pay upon penalty of prison. It is thus a quite different claim. Now if a poll tax were literally structured in philosophical and legal claim as one where the government had recourse to kill you for non-payment, society accepted this, and then people like you complained that suddenly the government began slaughtering the poor over $100 tax debts I'd still tell you to get a grip. Why? You accepted their claim, now you're just pissed that they meant it.
Posted by Mike T | September 25, 2013 9:14 AM
You pay to drive the car on public roads, not to own it. Though some states do have "personal property taxes" that apply to cars, in which case yes, it is in fact a 100% levy in slow motion.
Posted by Zippy | September 25, 2013 9:15 AM
Registration fees are user fees, not taxes. The government only makes you pay them to get your car onto public roads. You're perfectly free to build a private race track and drive your uninsured, unregistered ferrari 100mph until it runs out of gas. The DMV won't even touch your property claim.
Posted by Mike T | September 25, 2013 9:16 AM
Virginia is one of those states. I have to pay a DMV registration and a county property tax. Virginia also levies a sales tax on the purchase (including person-to-person IIRC). As a matter of fact and law, I can terminate my registration and the DMV will not touch my car.
Posted by Mike T | September 25, 2013 9:18 AM
Mike, the whole point is that I (and I suspect Tony and others) simply disagree that the deep, real, philosophical meaning of a property tax is that the city or the county "has recourse" to take your property away altogether, as opposed to alienating it merely to the extent of the amount of the tax owed and/or interest. So this argument is simply question-begging.
Posted by Lydia | September 25, 2013 9:45 AM
In other words, I and I suspect most people who have accepted the rationale and justice of property taxes all our lives have accepted foreclosure solely as a combination of enforcement (a threatened punishment for non-payment) and collection method. But neither of those justifications means that we have tacitly accepted complete dispossession (somehow, without knowing it), any more than acceptance of a poll tax means that one has accepted execution as a punishment for non-payment. As a punishment for non-payment, complete dispossession is obviously grossly disproportionate to the crime. As a method of collection, complete dispossession entirely undermines the very notion that the amount owed is a specific amount, set by statute, as opposed to the unspecified amount which simply is the value of the property, whatever that happens to be. In other words, as a method of collection, complete dispossession is lawless.
So, no, we have not "accepted their claim" if the claim is supposed to be a right to completely confiscate the property from a given owner. That's exactly what we're saying we don't accept. And you have not shown otherwise.
Posted by Lydia | September 25, 2013 9:54 AM
What is magical about complete dispossession over a one year period versus complete dispossession over a longer period? Mike T is correct that if you accept property taxes at all, you inherently and necessarily accept complete dispossession.
Posted by Zippy | September 25, 2013 10:03 AM
John Marshall's famous dictum that the power to tax is the power to destroy would seem applicable here, but I do note that "to destroy" is not precisely the same as "to confiscate."
Posted by Paul J Cella | September 25, 2013 10:50 AM
No, Zippy, I simply disagree. For many reasons. For one thing, no one owner is dispossessed by the mere payment of the tax. He and his family may own it and even pass it down in the family until the civilization crumbles. For another thing, we can easily imagine a rate low enough that it would not add up to a hill of beans even over several hundred years and ten different owners, so the entire "dispossession over a period of time" cannot be an essential feature of the tax, since it is contingent on the rate in relation to the value of the property. For a third thing, the value of the property in question varies widely over time, so there is no canonical value to which to compare the total amount of taxes paid over many decades by many owners (or by one long-term owner). For a fourth thing, there is no good rationale for adding up all the taxes that everybody ever pays (or even that a single owner ever pays) on the property and comparing it to some value the property has at a given point in time in order to claim "gradual dispossession." I could go on and on with all the things that don't make sense about the claim that yearly tax on a piece of real property amounts to slow-motion dispossession.
And finally, I've already answered Mike T. that his comments are simply question-begging. The actual confiscation highlighted in the main post is something that I say is unjust either as a punishment for non-payment or as a collection mechanism, since it collects an indefinite and non-specified amount far in excess of the actual amount owed by statute. Therefore, accepting the power to levy the tax does not mean accepting the justice of confiscating the property.
Posted by Lydia | September 25, 2013 11:34 AM
I would add, Paul, a couple of things: First, if the "power to tax is the power to destroy," Marshall was not saying that this applied in some special sense to real property tax. (He wasn't addressing real property tax.) Second, one is not obligated to say that the government is just or right in destroying anything which it may legitimately tax. Marshall's dictum does not mean that anyone who acknowledges the legitimacy of the power to tax something must thereby logically agree that it is right and just that the government entity destroy that thing. See, again, my comment above on the poll tax, which I still maintain was entirely to the point. The legitimate power to tax one's existence is not the rightful power to destroy one's existence. If I say that a sales tax is a legitimate exercise of government power, it does not follow that I must not complain if the government nationalizes all business and all power to generate sales transactions. And so forth.
Posted by Lydia | September 25, 2013 11:43 AM
Lydia:
He and his family may own it and even pass it down in the family until the civilization crumbles.
As long as they re-purchase it from scratch every couple of decades. So they can own it for as long as they can afford to continue buying back from the government it over and over again, as the government confiscates it in tranches.
Look, you might not like it, and you can stamp your feet about it all day without changing the reality. If you accept a 100% tax on property levied over 40 years at 2.5% per year, you accept 100% dispossession by the government through the taxing power. This is fundamentally different from taking a percentage of new income or new transactions as they occur. It is also fundamentally different from penalties, user fees, and other hoo-hah.
Now some folks might conclude that yes, after all, 100% dispossession by the government can be just, not as a penalty or anything but just as a straightforward tax. Others might conclude that property taxes are unjust.
But you have to take one or the other, and you most definitely do implicitly accept one or the other.
Posted by Zippy | September 25, 2013 11:43 AM
Zippy, I already anticipated and answered what you have just said, giving specific reasons. I note that when you refer to "re-purchasing it from scratch every couple of decades" you must be assuming a specific value of the property and also a high enough property tax rate such that this selected value is eaten up within a fairly limited number of decades. Both of those things are related to points I have already made. I also pointed out what seems to me the multi-layered arbitrariness of adding up property taxes over time and comparing these to the value of the property at a point in time. I have also made what I do consider to be (pace Mike) the legitimate analogy to poll taxes in order to point out that taxing the existence of something and one's relation to that thing (be it a piece of real property or one's head) is not the same thing as "confiscating it in tranches" nor the same thing as confiscating it at all. I call what I have already done "reasoning." There is no law that stops you from calling it "stamping your feet," but that don't make it so.
Posted by Lydia | September 25, 2013 12:23 PM
Maybe we can all just agree that property taxes in actually existing American polities are very often excessive, unjust, and peculiarly conducive to corruption and oppression; and that DC's collusion with shady lawyers and finance firms is a particularly egregious instance of this injustice?
Posted by Paul J Cella | September 25, 2013 12:36 PM
What I said is that the deeper meaning is that they are making your ownership claim contingent upon payment of the tax. That is the state has claimed authority to cancel your ownership claim and they do in fact cancel it with frequency. You and Tony are mistaking the remittance of equity during liquidation after the fact for some sort of continued property claims. If the state cancels your property claim, you have no intrinsic right to even a cent of the equity because it is now the property of the state.
Posted by Mike T | September 25, 2013 12:43 PM
Lydia:
... you must be assuming a specific value of the property ...
I'm not assuming it. The assumption of it is right there in your own discussion. Property taxes necessarily are based on a specific value of the property. That's where the rate comes from, and is the only foundation you have for suggesting that there are reasonable rates and unreasonable ones.
You are butting your head against reality, not against me.
Posted by Zippy | September 25, 2013 12:43 PM
They are based on a specific value of the property in a given year. But that year's property taxes are based on that year's value. Except in my state, where it's even better for the homeowner, because between purchases the taxable value of the home can go up only by the CPI, which is usually outstripped by the housing market. But even in the more typical situation, the taxable value of the home _varies_ from one year to the next, which means that it makes no sense to _add_ all the taxes paid out over _many_ years in order to claim the home is being gradually confiscated by taking "100% of its value." Of which value? The value it had at the beginning of a 40 year period (say) or the value at the end? Or some value in between? And how does one pick non-arbitrarily? Since the value of the property will usually rise gradually over the 40 years, even adjusted for inflation, the total amount taken doesn't amount to 100% of the value the property has at the _end_ of the 40 years, since the earlier amounts taken were based on a lesser value. Given the assumption you made of 2.5% of value (in a given year) over 40 years, what has been taken is, it is true, going to be more than 100% of the value the property had at the _beginning_ of the 40 years, but why pick that value as the important one for deciding that the property has been "gradually confiscated"? After all, the person who owns the home at the end of the 40 years owns something of greater value than he (or whoever was the owner) owned at the beginning of the 40 years, so from whom has 100% of "the value" been confiscated? The whole calculation is meaningless. Whether 100% of the starting value is taken or not over the next 40 years, and whether the value at the end is greater than, less than, or the same as the value at the beginning, depends on fluctuations in the housing market over the 40 year period and also on any changes the homeowner makes to the property. The entire "add it all up and claim confiscation" procedure is pointless. Meanwhile, the millage rate itself will vary over time, usually with the needs of the city, which throws in another confounding factor.
Posted by Lydia | September 25, 2013 1:09 PM
Lydia:
Are you seriously contending that, "because complicated," perpetual property taxes levied on a given property never actually aggregate to a value greater than the value of the property? Is this something like Zeno's Paradox? Does that mean that 100% confiscation is morally justified as part of the ordinary tax power of the government (not fines etc) as long as the procedure used to carry it out reaches some minimum threshold of incremental complexity?
Posted by Zippy | September 25, 2013 1:19 PM
I mean, mathematically, even if it is complicated, perpetual recurrent property taxes do in fact add up to greater than the value of the property at some point, unless you believe that the value of property grows without limit and exceeds the rate of accumulation of the tax. Eventually the curve is going to cross break-even.
So we've all agreed what we are at that point, and are just haggling over the price.
Posted by Zippy | September 25, 2013 1:24 PM
I'm contending that, since the real value of the property changes over time, it is pointless and arbitrary to pick a value of the property at a time t, hold that constant, wait until the property taxes add up over time to _that_ value, and then claim that this means the property taxes consitute confiscation of the property.
_Which_ value of the property? You keep saying "the" value of the property, like there is some one value, but there isn't. The market value of the property is changing all the time, and the property taxes (usually) change with it, though in some cases (as in my state) they may be capped by something that is typically below it.
The whole thing is a kind of cherry picking. You add up the property taxes, possibly continuing over multiple owners (!), until they come up to some value which is greater than a particular value of the property, and then you say, "Voila! So this tax is like confiscating the property." The calculation itself seems to me meaningless. It's like saying that "God" spelled backwards is "dog." So what? I can add up one set of numbers and make it come out equal to or more than some other number, and so what? A poll tax, levied on a man and all his descendants to the nth generation, might easily add up to more than the total that the first man earned and possessed in his entire lifetime, and so what? So I made one number come out more than another. That doesn't mean that the poll tax constitutes confiscation of the first man's goods and 100% of his income!
Posted by Lydia | September 25, 2013 2:03 PM
Lydia:
Any sane and defensible selection for the value of the property will work. Aggregate property taxes will exceed that value at some point, if the current owner continues to own the property. It is therefore a 100% appropriation, in tranches, over some period of time.
It looks to me like you are pleading antiessentialism with respect to value, now. I think you should just concede that Mike T has a point. But I'm not holding my breath.
Posted by Zippy | September 25, 2013 2:10 PM
Lydia, I can think of an easy example of where you are wrong: condos in hot locales. You had properties that were worth $500k getting taxed very high and then dropping down to $50k in value. Since property tax rates usually shoot up to match most of the lost revenue, it takes little imagination to see how such a condo owner could quickly pay over 100% of that temporary valuation of $50k in property taxes. Is the condo worth $500k, $50k or something else? Market says it's now worth $50k. Might be $100k 6 months later and $20k when the whole building is sold at an auction. At that moment, the government could easily have taxed over 100% the actual value of the house.
Most of the "natural increase" in value is really just inflation anyway outside of more competitive locales.
Why? This is essentially what you have to do when calculating capital gains tax. If you spend buy a stock in 2013 for $15/share, again in 2014 for $12/share, again in 2014 for $10/share then sell it for $20/share in 2015 you have to add up your expenditures, average them over the total number of shares and then pay a tax on the delta if it is positive when you go to sell. If you buy a house at 20 and sell it to someone at 80, your property tax very much counts as a cost against any profit you take unless you think the amount you spent to hold the property should not count toward profit from holding it.
Posted by Mike T | September 25, 2013 2:11 PM
Think of it like this Lydia, if you applied your argument to most federal taxes it would land you before an IRS special agent, if not in prison.
Posted by Mike T | September 25, 2013 2:13 PM
I assumed we were talking about market value, since that's what property tax is allegedly pegged to in any year. Since when is anyone an essentialist about market value? AFAIK, market value is by its very nature not an essential sort of thing. In fact, if you argue against your property's valuation for property tax purposes in a given year, you hire an appraiser to estimate how much it would sell for in a given year. Of course this isn't an "essential" amount! It's just an empirical question about what you could sell the property for.
Mike T.
Doesn't that just prove my point about cherry picking? You're saying yourself that the market value of the property is varying wildly, then picking one of the low spots in that wild variation, applying it to a point in time when the market value is varying more rapidly than the assessments for purposes of property taxes, and then saying that in this particular circumstance the property owner could "quickly" pay more in property taxes than that relatively low-point value of the property. Again, to me, this is self-evident cherry-picking and therefore seems quite irrelevant to any argument about the essence of property taxation per se.
Well, no, that isn't what you _have_ to do. That's just one allowable method, called, IIRC, dollar-cost averaging. Another allowable method is FIFO, in which you pay taxes on the capital gains on particular stocks based on their real cost basis when actually purchased.
And one calculates one's profit first and then one pays *well under 100%* tax on the profit. (The real problem there is that capital gains taxes are not indexed for inflation, which they certainly should be.)
Moreover, Mike, your entire point regarding calculating taxes is relevant only to a given owner of the stock. Nobody is adding up the taxes that many multiple owners pay over many decades and comparing that to some market value of the stock, no matter _how_ one calculates the market value of the stock. Certainly not (good grief!) by using dollar-cost averaging across the entire time period that these many owners owned the stock.
Literally _averaging_ the value of a piece of real estate over a period of fifty years (or more) is a totally crazy method to come up with some kind of "real, essential value" for the property in that period, given the vagaries of the market. Even when people do do dollar-cost averaging in stock sales, nobody is under the illusion that there is something holy about the number one comes up with. It's just a convenience the government allows you to use for some tax purposes.
And the statement that property tax must add up "at some point" to more than the value which the property had "at some point" is going to _have_ to be based on a calculation which goes beyond a single owner. It must at least potentially include multiple owners, because the property could in theory change hands every single year!
Posted by Lydia | September 25, 2013 2:42 PM
Ferrous Cranus.
Posted by Zippy | September 25, 2013 2:52 PM
Mike T., even if one brings the average market value of a home over a time period into the calculation (which I don't see why one should), what exactly is your claim? Is your claim that it usually/always/often happens that, if we average the value of a piece of real estate over a period of time and then add up the _actual_ property taxes paid in that same time period, the latter will exceed the former? But this must be counterexampled all over the place. I can tell you for a fact that it isn't true in the case of my own home, which I've owned for nearly twenty years. In fact, it isn't even remotely close to being the case. Is your claim merely that this _could_ happen or _sometimes_ happens? But if that is all, that is merely an accidental function of the (quite high) millage rate that happens to obtain for that type of property in that jurisdiction. So it can hardly be of the essence of the meaning of a property tax! I don't see what it would prove about the deep, philosophical nature of property taxes even if you could come up with some particular example in which that happened. (The fact that some income in some places and times is taxed at 100% also doesn't show that income tax is inherently confiscatory.)
Posted by Lydia | September 25, 2013 3:13 PM
Mike T., to return to your earlier comment:
Well, I don't know whose "deeper meaning" you have in mind here. Clearly, since DC and other jurisdictions _are_ simply confiscating property beyond the tax owed, they _are_ making the ownership claim contingent altogether upon payment of the tax. That's what I'm saying is plain wrong, unjust, and should be changed! What you have not shown is that that kind of radical contingency of the entire ownership claim is of the essence of any tax on the value of real property. Your arguments simply don't show that. Certainly it isn't shown by the fact that various jurisdictions *do in fact* unjustly confiscate the entire property to pay a much lesser tax owed. That is precisely what they ought to change. But it would still be possible for them to charge a tax on real property without having that statutory authority. You yourself have stated that such an authority isn't in place for liens for other kinds of taxes. Just make property taxes the same as other types of taxes as far as what happens if property is liquidated to pay the tax. There is no reason why that could not be done in law.
Posted by Lydia | September 25, 2013 3:18 PM
Regarding the investment points, the point is that the most straight-forward way to calculate whether or not you acquired additional value (aka profit) from a transaction is to calculate all of the costs related to acquiring and holding the investment leading up to the time of selling it. It requires no imagination to see many scenarios in which the payment of property taxes added to the cost of acquiring in the first place will mean a net loss over time for the home owner. Adjusting for inflation this is almost certain unless you buy a house in an area that becomes really hot property when you go to sell.
So the point that Zippy made stands. Over time, property taxes plus your initial capital outlay will, given sufficiently long ownership, result in a loss for the typical home owner.
Taxing a right makes the right contingent upon payment of the tax because there exists no free exercise of that right independent of the tax. What you and Tony are upset about here is the method of enforcement, which is ironic since that is what Tony said upset me. Enforcing property taxation your way is better, but in the same sense it is preferable to be kneecapped for not paying protection money on your house than to be murdered for it. What Zippy and I are saying is that you and Tony find kneecapping (gradually eating all possible profit and then putting the owner in the red) is ok.
Posted by Mike T | September 25, 2013 3:58 PM
Speaking for myself here, I am saying that if you think it is acceptable to beat up people for not paying protection money then you have no right to complain why it escalates to murder. As Churchill said, at that point we're just negotiating prices for a night with a pretty lady.
Posted by Mike T | September 25, 2013 4:00 PM
And neither Zippy nor I said otherwise. However, I don't think you and Tony would be so sanguine about a property tax on stock because the devastation to owner value would be too obvious. It is less obvious because housing profits are much longer term and thus more ephemeral because of the role inflation plays. Adjust most houses for inflation and I doubt you'll find many people making a profit.
You don't have to, and that example is not a good parallel to mine because mine involved additional capital outlays to buy new equity in a company whereas yours involves merely gauging the price.
You're correct. It is not an infallible number vouchsafed by the Lord for accuracy. It's *gasp* good enough for government work!
Posted by Mike T | September 25, 2013 4:12 PM
Fellas, seriously, this is getting macabre.
This is unquestionably true. So what? On what grounds am I obligated to reduce property to its liquidation value, or its medium-market value, or even its inflated bubble value? A piece of real property, of all things, may be illiquid but still very valuable. The commercial transaction that renders it, for purposes of the seller, liquid does not exhaust its nature or value.
Again, this undoubtedly true in some cases. But big whoop. Property is at once a higher and lower thing that a financial asset. It resists subsuming abstraction.
Look, I'm prepared to vote with anyone who favors lower property taxes, or favors the elimination of property taxes, or even favors the constitutional prohibition of property taxes. I'm prepared to grant that abuse of the property tax structure of the West authorizes total opposition as a political posture.
What I'm not prepared to say is that, for instance, property taxes on local Italian Catholic lords to fund the Holy League, organized and financed by Pope St. Puis V to repel the Turks at Lepanto, would have been intrinsically immoral as the policy of a statesman (Pius was among the West's greatest statesmen, by the way).
The duly-constituted sovereign holds the power to tax. Not gonna back off that even if my old friend Zippy calls it foot-stomping.
Posted by Paul J Cella | September 25, 2013 4:23 PM
Whoa, wait a minute, Mike: So is your point now not that property taxes eat up 100% of the value of the property (however one calculates the value of the property) but that the property taxes (often or usually) eat up 100% of real profit, indexed for inflation, from ownership of the home over time?? Those are completely different claims, and you need to decide which one you are making your argument from. The former was the point Zippy originally brought into this conversation. Notice, he said above
That is not a point about eating up profit from ownership at all.
The question about whether property taxes eat up 100% of _profit_ gained over the period of ownership is different. That statement may often be true, though not always, and of course there are other things that will go into eating up that profit--for example, city utilities charges which to a large extent one cannot escape (and for which one's home can also be seized, apparently), costs of property maintenance, etc.
If your argument now is about eating up profit rather than "amounting to the value of the property," then I'm certainly going to say that this does not entail the conclusion that property tax is in its essence confiscation of the property itself, either in slow motion or otherwise.
Posted by Lydia | September 25, 2013 4:45 PM
Paul:
Then you've taken one of the two options which exhaust the possibilities. Either property taxes are intrinsically immoral in general or a 100% confiscation via tax - tax, not penalty or other flim-flam - is not intrinsically immoral.
Embracing the latter isn't wildly unreasonable.
What is wildly unreasonable is doing so implicitly while attempting to maintain the pretense that one is not, which is what Lydia - who, in her zeal to contradict everything Mike T says, has been reduced to claiming that her own home has no sane, determinate, reasonable value at all against which to measure the property tax levy - has been doing.
Posted by Zippy | September 25, 2013 4:48 PM
A 100% tax is not, in fact, a confiscation. If my house is worth 200K and the govt taxes me 200K for it but I pay with other assets, I still have possession. Theoretically, there is no percentage level that mandates by iron logic confiscation.
Expropriation is a different thing than taxation.
For the record, I do leave even expropriation within the potential orbit, so to speak, of legitimately sovereign activities of the statesman. I guess I'd throw even more strident limitations around such a policy than that of property taxation.
Posted by Paul J Cella | September 25, 2013 5:00 PM
Paul:
A 100% tax is not, in fact, a confiscation.
Yes it is. Because if you don't raise the money independently to pay, they take the property. De facto they take it first and you have to buy it back, or lose it. (That's the whole tax lien part). Furthermore they set the price -- and the way you can tell who is the seller is by asking who sets the price.
Mike T is right here: accepting property taxes is accepting confiscation through the ordinary tax power, up to and even exceeding 100% of value. I'm just arguing that his interlocutors ought to acknowledge that, instead of dancing around it and pretending they have some magical Third Way.
Posted by Zippy | September 25, 2013 5:27 PM
I understand that if you're not liquid, you're gonna lose properties. But if you are liquid, you can endure even excess of 100% property taxes, or 100% any kind of tax.
Now, lest I feign to dance around, I will acknowledge that, theoretically, the sovereign that may legitimately tax property may legitimately tax property at 100%; supposing my interlocutors acknowledge that, if no sovereign can ever justly tax property, no possible circumstances exist where a sovereign ever justly taxed property. All possible instances were evil.
Posted by Paul J Cella | September 25, 2013 5:45 PM
Sure. Acknowledged.
Posted by Zippy | September 25, 2013 6:01 PM
Zippy,
"Embracing the latter isn't wildly unreasonable.
What is wildly unreasonable is doing so implicitly while attempting to maintain the pretense that one is not, which is what Lydia - who, in her zeal to contradict everything Mike T says, has been reduced to claiming that her own home has no sane, determinate, reasonable value at all against which to measure the property tax levy - has been doing."
I don't read Lydia's responses that way at all. Over time, what you say (and of course Mike T) about property taxes is just mathematically true -- keep taxing a piece of real property at some rate and eventually the government will have $X that is equivalent to the value of that property at some given time T. And at any point if you can't pay the tax, the government is within its rights to go after your property and sell it out from under you in order to get the money they are owed. Fair enough.
But Lydia's larger point about the practical application of all of this seems to hold -- there seems to be no reason the government couldn't try other means to collect their taxes (e.g. garnishing wages). As Lydia says:
Again, let's go back to the question of income taxes -- on the one hand, if you never worked, I supose you could avoid such a tax (or if you got all your income from capital gains or from some other exotic method). But if you do plan on working and don't pay taxes you could end up in jail -- denied your liberty all because you refuse to give the government your justly derived wages. What is the deep philosophical difference between the income vs. the property tax if in both cases you are at the mercy of a coercive government? And moreoever, if the government is just and working for the common good (use your imagination), then what Ed Feser says about the natural law and taxation would seem to apply -- although I don't think he address the specific question of property versus income taxes. But this idea that we are taxing a "right" when we tax property but not income -- I guess I don't see why going out and earning a wage (under government restriction via tax) shouldn't be considered a right but owning property should be (under government restriction).
I'm trying to see why you consider the two to be philosophically so different.
Posted by Jeffrey S. | September 25, 2013 6:46 PM
Zippy, if the dilemma you are giving us is that, if we allow the existence of property taxes at all then we must not complain or must allow it to be right and just, for any given sovereign to confiscate the property, then I call this a false dilemma, and no amount of phrases such as "dancing around" is going to make it anything other than a false dilemma. To my mind that is _exactly_ parallel to saying that anyone who allows for the possibility of a just and legitimate income tax "must not complain" or must allow it to be right and just if a given government entity takes 100% of a man's income, not as some due punishment for some evil act, but just because it can. Since the latter is obviously a false dilemma, the former is as well.
As to my allegedly holding that my home has "no sane, determinate, reasonable value at all against which to measure the property tax levy," no, I have never said that and do not say that. I have been very careful in what I have said. I don't know if it's just too much for you to read through it all, but let me try one more time: The property tax levy is allegedly made against the value *at some time t*. But your claim as I understand it concerns the added takings of property tax *over a time period* which includes many of such t's. The takings of property taxes are, each of them, usually tied to the supposed market value (which is itself supposed to be an empirical rather than a Platonic value) *at that time*. I am arguing that it is arbitrary to pick the value at any one of those times t and then simply to add up all the property taxes over some large number of years t1-tn until the taxes add up to more than the value at t. Such a calculation has no meaning whatsoever. The property taxes will almost never add up to the market value of the property at the *end* of that time period, because it will have risen over the time period. And picking the value of the property when it had some *lower* value and then including in the sum property taxes levied on it when it has a *higher* market value (and pegged to that higher market value) just to make it all add up to the lower value is obvious gerrymandering. The entire process is senseless.
Now, *if* my property does have some more essential, Platonic value over and above its market value at any given time t, then as Paul points out that value is usually *much greater* than the market value.
So whether one ties this to market value (which is not essential but empirical) or to higher-level True Value, in neither case is there a good argument that the government is really, usually, definitely taking the whole of that value from a single owner over a period of time.
Moreover, just to complicate things further, Mike T., to whose defense you have come, has now slipped into talking about something *entirely different still*, namely, whether property taxes eat up all of one's _profit_ in capital gains from owning the property over the time period! Which hasn't been your point anyway.
Posted by Lydia | September 25, 2013 7:21 PM
Well, no, that's looks like a mis-characterization to me. You always have the option to just pay the tax when it's due, and then there is never a delinquency and never a lien. It is only after you failed to meet an (otherwise presumptively just) obligation that the lien comes in.
Going back to a point Mike made early this morning (what do you guys do all day that you can mess around here instead of working?): since the federal government can put a lien on your property and force its sale in order to pay INCOME taxes, your logic would imply that the income tax also creates a "condition on the ownership of his property." And yet you are OK with income taxes. In some places and times a man's property would be taken as forfeit if he would not serve in the military at need. I would say that all property ownership has "conditions" upon it, and one class of them is connected to all of your just social obligations, including debts, taxes, military service, etc.
There have been 100% income tax rate brackets at times, and oddly enough I don't find myself thinking of them as intrinsically wrong. Britain did it WWII for income over a certain threshold. I don't see any way of describing them (in Mike's parlance) other than as a "condition on the property" earned, such that the state simply confiscated every extra dollar you earned over X amount. Your property rights in your wages over X were severely impinged.
I could even imagine a means-tested 100% tax on the ENTIRETY of your income, if you were proven to have plenty of other assets to live on, in similar emergency (war) conditions. Actually, a similar thing happens in emergencies when an official commandeers your property outright for some urgent need, it's just that with a 100% income tax its a more drawn-out emergency.
While property tax constructs may have some superficial similarity to a lease with annual payments, there are points of departure as well. Property ownership (as long as you pay the tax - or 'lease' per hypothesis) means you have all rights over it except those rights excepted out by general law, whereas a lease general enumerate rights that you have and the "rest" of the rights, whatever they are, are left to the owner. There are other distinctions that could be added.
The issue of a tax gradually eroding the property so that the entirety of the property is "confiscated" is more complex than at first appears. For one thing, how is it that even after my property (after receiving it from my father and his father before him) is still here in my hand and worth something after 100 years of paying tax on it?
But we can simplify a few points by hypothesis to try to get at the core problems. Assume, for instance, that both the money and the property values remain static, permanently. That takes fluctuations in price out of the picture.
It seems to me a bit silly to suggest that the tax rate is ABSOLUTELY irrelevant to whether you call it "dispossessing" a man's property. If John's rate is 50% per year, and Bill's is 1% per year, and Kate's is .001% per year, While we might well call John's rate a "spread out form of dispossessing", at least loosely or imperfectly, but I think that saying to Kate "well, in 100,000 years the state will have swallowed up the entirety of your property value so they have dispossesed you, just slowly" is a bit silly. Which gets us back to Paul's point about being able to meet the tax out of other assets being not entirely insignificant. And
Posted by Tony | September 25, 2013 7:41 PM
Talking about consumption of profit is only an easy illustration of the principle that taxation consumes the value that an owner has in the house. Profit is a form of value. It is surplus value. It is just a flavor of value. It is not something essentially different from value because its essence is value.
Now I will grant you that you can do your book keeping such that it is feasible to not consider property tax a cost against any profit you'd make by selling your house. However to be consistent, you'd have to never consider any home improvement to be a cost either, which should be obviously foolish accounting.
You don't need to track shifts in the value of your house because the only time you will take a profit or loss on the equity in your house is upon liquidation. Thus it makes no sense to worry about the fluctuations in the value of your house along the way so long as you have an end point in mind where you can sell it to your advantage. However each tax payment you make along the way ought to be considered a cost against any profit claimed unless you want to engage in magical-liberal accounting of the sort that has lead our political class to conclude that unfunded liabilities ought not to be counted as a part of the federal debt.
But you know there is another problem here. A property claim can be expressed in either a boolean fashion which is the purest, primal form (I either possess it or I don't right now) or in terms of title and equity. You can disagree with us on the former and that is quite understandable. I have even gone so far as to acknowledge the legitimacy of how Tony could disagree with that because his terms are very different from mine. However, if you choose equity you are stuck also fighting standard accounting methods and let us be quite clear here, even if the house changes ownership every property tax period, whoever owned it at the time prior to the sale is still taking a hit on their equity.
Paul,
Regarding the Holy League and similar emergencies I said:
I think war powers necessarily intrude upon the social aspects of property rights as they do on all individual freedoms. I'd also say that during that war the Holy League would have been justified in a targeted assassination of the Sultan since he has assumed a war footing where it would be murder in a time of peace.
Posted by Mike T | September 25, 2013 8:10 PM
Jeff:
How collection is done or enforced doesn't change what recurring property tax is, any more than spreading it out into tranches changes what it is. And what it is can't be changed in a game of label-shuffling.
An income tax is a one-time levy against one specific piece of property (that paycheck right there). A property tax is a levy against one specific piece of property which recurs in perpetuity, exceeding the value of the property within a finite period of time.
It is like the difference between purgatory and Hell: one is intrinsically finite and the other isn't.
It's been nice chatting y'all, but I'm out.
Posted by Zippy | September 25, 2013 8:39 PM
Tony, I think this is an importantly sane comment. Moreover, of course the home certainly won't exist, nor will that taxing authority, in any recognizably similar form in 100,000 years, and in a far shorter period, Kate won't own it either. So who, again, is being dispossessed? And that's even granting the simplifying assumptions for the sake of illustration that neither the market value nor the millage ever changes. All of which, it seems to me, simply confirms my point that the calculation by which we add up the property taxes over a span of umpteen years and see that they come to x sum which is greater than some value of the property is a meaningless computation and makes an extremely poor argument for the conclusion that property taxes, as opposed to other taxes, are in their essence a form of dispossession or confiscation.
Posted by Lydia | September 25, 2013 8:45 PM
Mike,
Sure. Tell me something else I didn't know. I just think it's silly to say that this fact or any of the other facts thus far adduced somehow can be parlayed into, "The government is really dispossessing you of your property slowly over time."
As to whether you do or don't possess your property right now, like so many things, it depends on how one defines one's terms. There are always conditions on one's possession of one's property. Heck, where I live I can be fined by the city if I don't mow my lawn or put the garbage bin close enough to the house, so those are conditions on my property right there. In theory, I could refuse to mow my lawn, refuse to pay the fines, and eventually have the property foreclosed on to pay the fines! So one rarely owns anything absolutely and unconditionally, and it's arguable that one _shouldn't_ own anything absolutely and unconditionally. I can think of lots of things I shouldn't be able to do with my property. That hardly makes any of these things intrinsically wrong or unjust, whether they be property taxes or nitpicky rules about how long is too long for a lawn.
Posted by Lydia | September 25, 2013 8:55 PM
It would be obviously REAL "dispossession" if the state actually registered a claim on 1% of your actual property each year, instead of demanding an amount equal to a 1% assessment. In 100 years the state would actually own your property, and you wouldn't. It would be fair to accept Zippy's claim that slow dispossession is still dispossession.
It is obviously NOT REAL dispossession if the county imposes a tax equal to 1% of your property, takes the tax in money or food or whiskey, and imposes a grab on your wages if you don't pay, and they have no mechanism to put a lien on your property. Failure to pay the tax doesn't impact your ownership of the land ever. Even if you don't pay for 1000 years, you still keep your land. If under no circumstances do you lose your land, then the tax cannot be considered REALLY a form of dispossession.
The fact that the property tax due is an amount equal to value of property is not DIRECTLY identical to a taking of a portion of the property itself. At most, at worst, it is an indirect form of dispossession. (I am trying to be fair here).
Whether we consider this indirect thing to be more properly the same in essence to "dispossession" or more properly the same in essence to the second example above is not straightforward, as is usually the case when something is "in a sense yes and in a sense no". As often as not, the middle thing ISN'T REALLY the same in essence to either end, but is a third thing. For example, in good vs bad habits, one extreme is a vice, the other extreme is a DIFFERENT vice, and the mean in between isn't vice at all in any sense, it is virtue.
Income taxes can be enforced by taking property, and some property taxes are not enforced by taking property. So "enforced by taking property" is not a defining characteristic of a property tax.
If the "dispossessive" aspect has to do with the fact that over time the *amount of tax levied* can accumulate to an amount equal the value of the property, it must be admitted that in doing so we are ignoring the fact that the MEASURE OF THE TOTAL AMOUNT DUE is being equated with THE PROPERTY. That is, we are abstracting from the fact that the property as such isn't the same thing as "X value". Which abstraction is not irrelevant, it IS the issue.
I would suggest that the fact that a property tax essentially measures the AMOUNT of the tax by property, but does not essentially demand a form of payment in any specific form or from any specific source, nor demand the enforcement of the tax in any definite form, means that the "dispossessive" aspect present simply in the sheer tax itself is only validly dispossession in a sense, not simply as absolutely "dispossession without qualification."
The important question would then be whether the qualified sense of dispossession that is valid makes it inherently wrong. And there is no clear reason to say that it is.
Posted by Tony | September 25, 2013 9:50 PM
Tony,
Even then, that would be the case only if we stipulate that the value of the property never changes over the 100 years, which in most cases just simply isn't true. If the value did rise, and if the 1% claim was only 1% of the value in that year, then the accumulating claims wouldn't add up to 100% of the value of the property at the end of the 100 years and possibly never.
But I also quite agree with you that gradually accumulating *claims to ownership* of actual portions of the property is a different thing from a tax which happens to be based on the value of the property which is paid at the time in some form other than a slice of actual ownership of the property. And yearly property taxes are not the same thing as gradually accumulating claims actually to own slices of the property.
To muddy the waters yet further, in some jurisdictions, including DC, elderly people with low incomes can apply and have their property taxes actually reduced fairly heavily! Which means that for them, even the amount owed is not simply a function of the value of the property but also of age and income.
Posted by Lydia | September 25, 2013 10:11 PM
Zippy,
Thanks for your reply -- I hope nothing I said offended you or I scared you away with my ignorant questions. I'm still not sure why an income tax needs to be considered "a one-time levy against one specific piece of property (that paycheck right there)" but a property tax (according to you) "recurs in perpetuity" against one specific piece of property. Isn't the income tax in place when the next check shows up? And the next one, and so on? Once the tax is in place, you pay when you work -- just like you pay when you own property.
Tony,
I think your 9:50 PM comment hits the nail on the head and not much more needs to be said.
Lydia,
I was playing with the math and it is quite interesting as to when the government might have collected enough money to be able to buy a property for its market value (not that they would...and not that this means anything...but I was curious how the math works out). I took a $150K house and assumed a steady rate of 3% inflation. Then I assumed a 3% property tax which gives the government $4,500 in the first year, $4,635 in the second year (because now the property is worth $154,500), etc. After 30 years the government only has about $214K and your house is worth $353.5K -- as you suggest they can't keep up with market values. Now, if Mike T is right and home values don't keep up with inflation then at some point that $214K (or some lower number) will be enough to buy the house. And in other markets, values will do better than inflation and it will be even tougher for the government to keep up!
Posted by Jeffrey S. | September 25, 2013 10:44 PM
Jeff:
Not at all. I'm just not reading other comments anymore because there is no point. But obviously I read yours because, well, you don't waste my time in a ridiculous game of death by a thousand paper cuts.
To your question:
Each time you pay income tax, it is against a different, new paycheck. Each time you pay recurrent property tax it is against the same piece of property. Property tax accumulates without bounds against a specific piece of property, necessarily exceeding its value (under any sane concept of value) at some point in time. Income tax doesn't. Under an income tax you don't get taxed again next year for the money (property) you made two years ago, repeatedly ad infinitum.
Income tax taxes a specific piece of property once. Property tax taxes a specific piece of property recurrently and without bounds.
Posted by Zippy | September 25, 2013 11:52 PM
Yes, it's true that property tax is based repeatedly on the value of one piece of property while different instances of income tax over time tax different pieces of income. But it definitely doesn't just follow from that as night follows day that property tax is in it philosophical essence a form of true dispossession in a way that no other tax is. Tony's point above at 7:41 about the rate is relevant here.
In effect, property tax is a convenient and (fairly) straightforward way for local governments to raise revenue, and to some extent it tracks income and therefore weighs at least somewhat less heavily on the poor, though it has to be tweaked for that purpose and also not abused as in the DC case in the main post and other cases where the poor in particular really are literally dispossessed. See my comment above about jurisdictions that allow the low-income elderly to greatly cut their rates. (One point made by one of the lawyers in the interview I have linked is that DC needs to allow low-income elderly people to enroll in such programs after they get in trouble, ex post facto, because they may simply not have known about them before.) Basing it on the value of property is done in no small part because the idea is to tax local residents who have a stake in the community and whose ownership of property in the community gets them certain benefits provided by that locality--such as police and fire protection, street cleaning, certain tuition rates at the local community college, etc. These benefits are paid for by the tax.
There is plenty of rationale for tying the amount of the tax in some fashion to the value of the property, but it is just a kind of foot-stamping ideology that insists that because this is the case (that the tax is calculated based on property value) and because the tax is repeatable over time it must be a form of confiscation or dispossession.
Indeed, such an insistence is the kind of thing one would more expect to hear from a deeply committed libertarian. It is dyed-in-the-wool libertarians who are generally utterly fierce on property rights, and an absolute opposition to property taxes would fit well with a demand for absolute and unconditional ownership as being the only kind of true property ownership. However, I know that Zippy has expressly spoken out elsewhere against absolute and unconditional ownership (and rightly so, in my opinion).
Posted by Lydia | September 26, 2013 9:13 AM
Zippy,
I think one major flaw that they are not seeing is that local governments are not shy about jacking up the rate when things get bad so Jeff's argument about 3% is specious because their goal is to get a fixed amount of money each year from the tax. If 3% is fine, have at it, but if the economy takes a turn for the worse 9% might be required. If you cannot find examples of locales doing that, then you aren't looking hard enough.
They're assuming a constant rate of taxation, which is simply not a valid assumption so a property tax bill of $5k on a house worth $300k may still be levied when the house's value collapses during a valuation bubble. In fact, the housing we looked at in this area barely budged in estimated property taxes pre- and post-bubble from 2007-2009 in terms of actual taxes paid.
But another problem is, as Lydia has shown, she seems unable to get the difference between a limitation on the use of a property and a limitation on the very claim to ownership. Cases in point being the issue of DMV registration (user fee for access to public roads) and car property taxes and her claims about trash and mowing restrictions. Saying that a restriction on use is ultimately a restriction on the title of property is tautological because literally all law then, even law that has no involvement with property, can then be said to be a limitation on property rights because the state has a theoretical ultimate recourse to revoke title and force liquidation to enforce a criminal fine or a civil judgement.
Posted by Mike T | September 26, 2013 9:30 AM
Zippy is speaking to the practical, actual effect of property taxes. You, Tony and Jeff have consistently denied the effect that property taxes have on investment accounting in a property, mainly because I suspect you know that treating property taxes as a normal expense would show they do in fact consume equity. Zippy is saying that you don't mind the government consuming equity slowly, but hypocritically denounce them for gorging themselves on equity.
What you've never shown is precisely how and why property taxes should be considered something other than as an expense against owning the property in precisely the same fashion as having to invest $20k to redo a roof, paint, install new carpet and appliances would count as a real expense of ownership. What we are asserting is that literally anything you pay toward maintaining a property, voluntary (repairs, etc.) or involuntary (taxes), is an expense.
Posted by Mike T | September 26, 2013 9:37 AM
Mike T., I honestly don't know where you get some of your claims about what I deny or don't admit. First, you get involved in specifics (property tax millage going up), but actually, since the claim that I understand you (and Zippy) want to defend is an _absolute_ claim, these specifics cannot really help your case. For example, you aren't going to say that in Michigan property taxes are _not_ inherently unjust because the state has capped the rise in property value by the CPI unless the property is sold. If I tell you (which is nothing but the sober truth) that my locale keeps a parallel accounting of what the taxable value of the house would be minus this capping (they can use that value if they put in a new sidewalk or something) and that that value went down during the housing crunch a few years ago, you aren't going to be able to say that that locale's property taxes aren't unjust! Because your claim as I understand it is that property taxes are inherently unjust.
Another specific is that AFAIK in any locale you can challenge a valuation in a specific year. We did this the year that we bought our property, because we knew that it would affect all the years thereafter (because of the special capping rule) and that that was the year to fight. We also won. Or if the city's valuation is not taking into account a property value collapse, it can be challenged. By statute, it is supposed to be 1/2 of the fair market value in that year, and all our discussions here have assumed that it is the market value in that year. To switch suddenly to an _inaccurate_ assessment of market value is obviously to change the subject.
As for denying that property taxes are an expense of owning the property and hence reduce its strength as an investment, I have _never_ denied that. Good grief, up above I said, "Tell me something else I didn't know."
What I deny is that this means that the deep essence of property taxes is that they are per se confiscation or dispossession.
Words like "hypocritical" are just pointless insults. Any tax or penalty can be made unjust by being unsuited to the crime, draconian, or confiscatory in its rate or level. It isn't "hypocritical" to say that simply confiscating the entire property for a $134 tax bill is unjust while the $134 tax bill wasn't unjust in the first place. Anymore than it is "hypocritical" to allow income taxes to be possibly just but to denounce Communism. These are not matters that can be decided in some a priori fashion according to which either the type of tax itself is inherently, intrinsically unjust or else any use of it, any rate of it, etc., cannot be criticized on pain of hypocrisy or inconsistency.
I have said again and again and again, until my eyes are just about falling out, that taking the entire property for a specific tax bill is radically unjust because the tax bill allegedly is a statutorily fixed and specific amount, while the property as a whole can have a value that indefinitely exceeds that, so taking the entire ownership interest in the property is manifestly arbitrary and lawless. If we want to talk about what people "can't see," that is one of the things that you, Mike, apparently can't or refuse to see.
Posted by Lydia | September 26, 2013 9:55 AM
Mike T:
Well, I hadn't read the parts of Jeff's comment where he wasn't addressing me directly, when I wrote my previous. (Back in the Usenet days we had what was called a killfile - you could drop certain commenters into your killfile when they were wasting your time, and you literally wouldn't see what they posted. I came to this discussion because I saw the link to me in my Wordpress stats, from you as it turns out, and a ways back in the thread I started running a kind of mental killfile).
Anyway, running specific numbers is beside the point. Usury with a low interest rate is still usury, and the power to levy recurrent property tax is a power to 100% confiscate existing property as tax not penalty, period, for all nontrivial sane understandings of "recurrent property tax" that bear any resemblance to the actual practice in actual reality. IF one proposes that a 100% income tax is intrinsically unjust THEN one must concede that property taxes are intrinsically unjust tout court.
It was just one of those situations where you made a perfectly valid point in expressing that conditional, and where instead of playing verbal asshat ping-pong your interlocutors should have conceded that, even if they had various reservations, you had a point.
Posted by Zippy | September 26, 2013 10:26 AM
Seems to me that in the case of land, the difference between car registration and property tax is not quite as clear-cut, as property taxes can be understood as fees for use. That is, living in a certain area means use of such-and-such public services is implied, and that is what you are paying the property tax for. If these were structured as user fees, then the rich could evade taxes entirely, which most Americans consider to be unjust.
Posted by Matt | September 26, 2013 11:30 AM
I don't recall claiming that they are unjust. I was partially playing devil's advocate with Tony for about half the thread. However, I do think they are generally unjust regardless of the mechanism of enforcement because I completely agree with Zippy's content about them consuming equity. I also think that claiming the authority to tax the very claim puts the state as an actor between the owner and the claimed property by virtue of the tax authority being claimed being on the ownership claim without limitations. In short, they are taxing the very title to the house which is the root of your legal ownership claim in civil society (to use Tony's distinctions between pre-social and social aspects of property ownership).
I also am not intrinsically opposed to nearly confiscatory taxes. For example, I don't think a 90% upper bracket was unjust during WWII even though 90% is close to turning over the entire fruit of a man's labor to the state. As I noted above twice, war powers tend to supercede the state's justice obligations when the war is just or when society is afflicted by a true state of emergency.
The difference is in fact quite clear cut because a car registration does not impede your lawful ownership or private use of a vehicle. It is a fee for a specific purpose: using public roads. It is no more a tax than having to pay a fee to use a gun range on public property like a state park is a tax on firearms.
Posted by Mike T | September 26, 2013 12:57 PM
Part of this also depends on your view of funding public services. I think it is quite reasonable to force a bankrupt municipality to liquidate most of its government services and rely on various private actors. Example, I think it is quite reasonable to shut down the police department or turn it into a skeleton crew that coordinates the posse comitatus. Detroit is having to do this now, and I don't think there is anything wrong with turning the Detroit PD into a small piece of a private, community volunteer-driven law enforcement apparatus since they don't have the money due to their own damn fault to fully professionalize it (you could also say that their being incorrigible failures does not constitute sufficient grounds to negate or limit private property rights).
Posted by Mike T | September 26, 2013 1:02 PM
This is only because property taxes currently have a penalty of seizure of the asset for non-payment. That makes some sense in regards to land, since private and public ownership correlate almost exactly with private and public use. Land is just a different kind of thing than other goods.
Posted by Matt | September 26, 2013 3:21 PM
As opposed to wasting our time with a paper tiger. I suppose a paper tiger has paper claws, with which he can give a thousand paper cuts.
Wait, let's ask a question: what if this county's property tax isn't recurrent? Suppose that they have never levied a property tax in the past, and the occasion this time is a one-time event that is not expected to recur any time soon? Suppose in this instance they levy a 3% property tax. Is it still inherently wrong as a tax? Is it still inherently the moral equivalent to a confiscation of your property?
Well, OK, so on THAT basis a one-time property tax just ISN'T the sort of thing Zippy stands against. What makes or breaks it, for him, is that it recurs in perpetuity so that within a finite time it will exceed the value of the property (or, really, any specific value). So a one-time property tax is not objectionable.
Naturally that leads to follow-up questions: what if, after the county levies a one-time property tax, the same occasion happens (mass flooding 2 years in a row, who could have expected that), and they levy the tax a second year? Well, obviously, 2 years of tax, one after the other, at 3% each, can't amount to the whole value of the property.
Be not angry with me, my lord, if I ask again...after which year does the levy become INTRINSICALLY bad as a tax? In the 3rd year? Or 4th? 7th? Or when it is emplaced in the law as a permanent annual fixture? If at all, it must be the latter, because only then can it be called a "recurring" tax.
Now suppose that the tax had been levied 40 times out of 100 years by one-time enactments before they get around to making it a recurring law. My question becomes: in what year does the tax actually consume the property?
If I pay the tax when due each year, the tax never consumes the property in the sense that I cease to have the property in hand. So in the simplest sense, never. Nor is there any year in which the tax that year is "the rest of the value" of the property at that moment. But those aren't what's meant by the tax consuming the property. So let's ask the question more carefully: in what year does the property tax swallow up an aggregate value equal to the value of the property (making the simplifying assumption that the value of the property and the tax rates stay constant)?
The answer to that would depend on when you start to measure the "aggregate". Until 100 years in, there was no reason to conceptualize an aggregation from one year to the next. So in spite of the fact that in those 40 years taxed I paid taxes in excess of the value of the property, there is no reason to call this a "consuming" or "dispossessing" of the property: in each year, the only tax paid was 3% of the property's value. It is only after the permanently recurring law is passed that we start to aggregate one year to the next conceptually.
Or do we? Suppose, 3 years into the recurring tax period, the county citizens get huffy, institute a new sales tax, and ditch the property tax again. The amount of tax I paid in those 3 years is 9%. The total amount ACTUALLY demanded, due, and paid, does not come to an amount equal to the value of the property. So the conceptual question is this: does the recurring property tax BECOME dispossessive at the time it completes depleting you of a total amount equal to the value, or is it dispossessive during the entire time it will take to dispossess you as long as the tax doesn't change. The latter, I suppose - it is dispossessive all the way along because of what will eventually happen. But because the citizens can dispose of the law in any year, later year's taxes are not yet real, they are only possible. So, how do we say that "what will eventually happen" constitutes a dispossessive tax when they future depletion is contingent? Which would make us go back and ask again: if the tax is in essence NOT dispossessive considered alone in just one year, and only becomes dispossessive by considering many years together, and those later years have not and may not occur because they are the contingent future, is the aggregation of the effects of many years together, all but one of which are possible rather than actual, an appropriate way to look at the tax to establish its essence?
Posted by Tony | September 26, 2013 6:57 PM
And I can add another point to that, Tony: Because ownership changes, it is entirely plausible that no one person will own the property during the entire period of "consumption of the value." So with which person do we start? Do we start when the home is built and add all of the tax paid by all of the owners together from then on in perpetuity? But why do that? Is anyone being "dispossessed" of the property if no one owns it for that long period of time? The entire concept of dispossession here, to my mind, makes no sense.
Posted by Lydia | September 26, 2013 9:02 PM
Matt,
No. It has nothing to do with the nature of the penalty. The very existence of a penalty means it cannot be a user fee. By definition, a user fee has several essential differences from a tax:
1. It lacks compulsion/coercion/duress.
2. It has consideration.
3. It has an exchange of value between parties.
4. It meets the necessary legal requirements to execute an exchange of value, including authority to convey title where property is involved.
A tax by definition is an explicit violation of the first three of those as is based on coercion, lacks consideration and there is no direct exchange of value in the transaction. You cannot weasel out of this by saying that a tax is an exchange of money for government services because the courts have ruled that no one has a constitutional right to government service and the legal definition of an exchange of value between parties pursuant to consideration requires something resembling a quid pro quo.
When the government makes you pay a DMV registration, it is because the roads are legally the property of the state, not the citizenry. The state is engaging in a free transaction with a private citizen in which there is an exchange of value, with proper contractual form, to acquire access to its roads. That you may pay taxes to fund the building and maintenance of said roads is immaterial to the government's inherent property rights in those "public roads." So a cop arresting you for not having a registration is a valid police power analogous to a citizen's arrest for trespassing on private property.
Land is a different sort of thing than other goods, but land is not sufficiently different that it has any impact on the nature of a user fee. Proposing that the government can hold your property hostage during a user fee transaction is not even a valid tax power so much as it is a form of racketeering by the state because the two powers are not inherent in the same organ of the state.
Another obvious example of how user fees and taxes coexist while being completely different is the Postal Service. Your income tax does (or at least did) support their base operation while all fees you pay at the counter are user fees.
Posted by Mike T | September 27, 2013 6:31 AM
If they did it one time, they should just do it as a sales tax. A 5-10% sales tax on a house would raise a lot of revenue.
Last night I realized there is another example of this, only private: mineral rights. Mineral rights supercede your property rights, which has been a serious problem for a lot of people in Pennsylvania and Ohio who thought they'd make a quick buck by selling their mineral rights for really cheap and then found themselves at the (perfectly legal) mercy of fracking companies. They now stand to see the value of their property destroyed if anything goes wrong with the use of those mineral rights and their recourse against the owners of the mineral rights are minimal at best since mineral rights have superior standing to normal property rights.
I assert that the state's claim to being able to tax your title is an impairment on your title and use of the property in the same vein, with the key difference being that it lacks a voluntary transfer. Though even with mineral rights it is possible to sell the property rights to a piece of land while not being able to convey the mineral rights because you don't have them. In both cases, someone is making money off your property.
Posted by Mike T | September 27, 2013 6:48 AM
But lands unequally on just those who decide to sell. And if it is just for one year, almost everyone will hold off their sales for said year.
That's got to be an absolute irrelevancy: mineral rights just ARE part of property rights. If you make a bad deal selling off part of your property rights because you don't think through the bits and pieces of what is sold off, well then yes, you are going to regret the deal. But if you structure a mineral rights lease or sale that properly protects the rest of your property interest, it's fine. I can guarantee you that mineral rights don't "supercede" the rest of your property rights under a contract correctly drawn up to respect the laws that govern interrelated aspects of property rights.
Mike, we already established above that the aspect of a property tax that presents the "dispossessing" problem is NOT that the tax is measured by your property, a one-year tax measured that way is not a problem. Nor is the problem that it might eventually be enforced by a taking of your property, because some places don't enforce that way and thus it is not essential to such a tax that it be enforced that way. The problem is that the tax erodes your ownership. But (as we also showed) it does so in the manner of an abstraction: the tax does not literally take away an actual slice of your property, it takes away an amount of VALUE equal to the value of a slice of your property, so that over time it will take away a total amount equal to ALL of the property. The dispossession happens bit by bit but can ONLY be called dispossession because of the aggregate effect - under a tax permanently enacted, assuming conditions remain stable, it is inevitable that the tax will eventually take an amount equal to the whole value of the property.
But this means that INCOME TAX ALSO constitutes a claim against your property title and is dispossessive: under an income tax permanently enacted, assuming conditions remain stable, it is inevitable that the aggregate amount of income tax you will pay will equal or exceed the value of your property today - or ANY finite property value. Remember, the problem is not because it is measured by your property, so it is irrelevant for these purposes that the income tax is not measured by your property. It is solely that over time in the aggregate the amount of tax will eventually exceed the value of this property. And that holds true of income tax. Indeed, it holds true of EVERY permanently enacted tax. You can't get away from this fact: when the problem is apprehended by way of the abstraction "total value" instead of the actual property itself, the problem expands to all taxes. When you try to avoid the abstraction, you cannot get around the fact that not all property taxes are enforced upon the actual title to the property and by the fact that if you pay your tax you keep the property itself. The only remaining (very limited) sense in which the tax constitutes an "impairment" of your property rights is a sense that is readily borne and justified by the overall meaning of property ownership.
Posted by Tony | September 27, 2013 7:52 AM
MikeT, I said above that the property tax can be understood as a user fee for access to services in a particular area. I agree that a user fee is not the same as a tax, but the property tax is a tax for two reasons. One is that land is not like a car. You say that a person can avoid registration by just not using their car on public roads, but this works with cars because they are mobile. Land isn't, and there is no realistic distinction between public use and private use of land similar to that of vehicles. So how would a strict user fee be structured in this case? At the least, the penalty for nonpayment would be that you would be forbidden to live in it, and more likely forced to sell.
You might say that the user fees could just be put on the services in question, but then the rich can develop alternate services and avoid paying into the system. This is a problem because it is intended that the rich subsidize these services, paying more than their share. You may not like this, but it is probably not going to change. The fixed nature of land makes it ideal for this purpose, as there are no tricks for evading the tax as there might be with regards to an income tax.
In any case, the way to avoid the property tax is just to not own property in the specific jurisdiction, which isn't too unreasonable. If you aren't going to contribute to the community then go elsewhere. Also, I think the property tax works off of land being communally owned in a minor sense. It shouldn't go as far as the government being able to repossess your land, as though their name were on the deed, but the concept seems sound to me. I can see how a more libertarian person might not like it so much.
Posted by Matt | September 27, 2013 10:06 AM
And as I said above, you are categorically wrong as the essential differences between the two are in fact quite severe and not subject to private interpretation. They are no more the same thing than buying from a store and robbing a store can be understood to have anything in common except that the store hands over something of value to someone.
Posted by Mike T | September 27, 2013 3:56 PM
OK, but there are reasons the property tax is a tax and that user fees wouldn't work for the intended purpose. If you believe property taxes are evil regardless, I'm not sure where else to go with this.
Posted by Matt | September 27, 2013 5:04 PM
Show me an income tax where this is actually true. This is certainly not true of Virginia income tax and federal income tax as there is a cap on what percentage of your income you must pay so it is not true that it'll aggregate more than the value of your income.
Posted by Mike T | September 30, 2013 7:26 AM
I didn't say more than your income, I said more than your property. And yes, it will, over the years, aggregate more than any finite value of property.
Mike, if your property is worth a million, and your income is only 1,000 per year, and your income is taxed at a rate of 1% per year, then eventually, assuming all of these conditions remain stable, the income tax will have taken an aggregate amount out of you of more than a million, more than the value of your property. It just takes a while. It's just using the exact same reality Zippy pointed out: adding any finite amount over and over, eventually, must exceed any given specific finite value.
Posted by Tony | September 30, 2013 8:04 PM
Well, no it isn't because you've tried to pull a bait and switch between income and property ownership.
Posted by Mike T | October 14, 2013 8:00 AM