The history of mankind is filled with stories of people rising up against taxes. Even the most ignorant person several centuries ago could understand the two main ingredients of successful tax policy: Something of value must be received in exchange for the tax and the burden of taxation must be distributed “fairly” amongst the people. It is this question of “fairness,” which we find hard to answer because it is almost impossible to measure and just as difficult to agree on.
But one cannot escape the conclusion that a fair tax policy must accurately reflect the ability of people to pay. It is a guiding principle for every tax plan in the civilized world. And in the case of property tax we have gauged fairness for many years using a measuring stick that is no longer accurate or appropriate. Let us look at the origins.
Property tax is a contribution to local needs. In earlier times people in towns recognized that banding together financially was necessary for survival and growth. A sense of obligation to contribute needed to be balanced against each person’s ability to pay.
People concluded that the quality of one’s home and the amount of land they owned was a pretty fair measure of how much money they were making. In this way the value of one’s property became accepted as a reasonable way to get a fair distribution of the tax burden. The situation was helped by some powerful influences.
By and large people in earlier times were not nearly as mobile as they are today. They tended to stay put, and to stay invested and connected in the community. They were motivated more by commonality of interests than individual expression. It created a climate of stability in a town which made property tax understandable even if not pleasant.
This started to change as rapid transportation made people extremely mobile and the ownership of a home didn’t necessarily mean you lived in that community. This is especially pertinent today as the affluent classes of people move themselves and their financial resources around the world with a plane ticket and a phone call. They come to beautiful places of modest means such as Homer, Alaska, and the impact is not all good.
When people from vastly superior economies such as Silicon Valley start buying land here because it is cheap according to their standards and station in life, the increase in land value does not reflect how we are doing in life; it reflects how the people from Silicon Value are doing. It destroys our historical ability to use property values as a fair way to measure what our financial contribution should be to the community.
The price a willing buyer and seller agree on might be a fine basis to determine the value of my home, but my property tax obligations to the city of Homer or the Kenai Peninsula Borough are not rightfully increased because Bill Gates likes the view from my front porch and will pay me an obscene amount for my home. I propose that property tax move away from the philosophy of determining assessment by what a willing buyer would pay a willing seller. Instead, I suggest it is time to assess property tax by what a willing buyer “actually pays” the willing seller. If you can afford to buy it then you can afford the taxes. A fair property tax policy must accurately reflect your ability to pay under normal circumstances.
Hopefully, the state will allow us to implement a roll back of the property tax on one’s primary home to something like it was in 2004 before the last big assessment spike. Home’s purchased after that date would be taxed on the appraisal value at time of sale, and any future property tax increases could be no greater than the rate of inflation.
We are not serfs and we do not live to support the king.
Mike Heimbuch is a lifelong Alaskan, a Homer resident, commercial fisherman and a Homer City Councilman.
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