Wouldn’t it be great if the auditor’s job was to determine how much money you save rather than how much money you owe? Taxes are all backwards in America. For example, in most countries income taxes are processed automatically and individuals don’t have to worry about filing unless they have complex financial situations. In America, tax preparation companies have lobbied lawmakers to successfully ensure that filing taxes is difficult and their services are necessary. When it comes to local property taxes, we also do everything backwards.
For most local jurisdictions—townships, villages, cities, schools districts, health districts, etc.—property taxes are the primary funding mechanism. Property taxes are indispensable. Without them, we would be forced to implement high sales taxes, value added taxes, income taxes, or develop some alternative form of local funding. We’ve already gone over what’s wrong with property taxes and how to make them more fair. We need to tax homes in a way that builds our social and physical capital. We believe that a rational tax valuation system based on the purchase price of primary homes, rentals based on rents, and commercial properties using a formula that rewards employment and investment. Now let’s look at some more specific initiatives where we can flip the script.
Reward people for community commitment
We want to build a strong community. Providing incentives for individuals to take root in the community can help achieve this goal. The longer a person lives in a home, the more of a tax break they should receive.
Reward people for living in older homes
The older homes in Dayton have been largely shunned for new McMansion developments outside the city. This urban sprawl requires major infrastructure projects to link them back to the city and then we have to pay to maintain those new roads and sewers. Meanwhile, quality homes in the city lie vacant and rot until we eventually have to pay to demolish them. The older your home is, the bigger your tax break should be. Currently, there are incentives for individuals who live in specific historic properties. We should incentivize the preservation of all homes. If you buy a piece of business equipment, you are allowed to charge depreciation on it and eventually its tax value becomes zero. We’re not suggesting this, but, in the interest of not filling up landfills and preserving resources, it makes sense to place value in maintaining older homes. Europeans often live in houses that are hundreds of years old. Sometimes, the government will even pay you to move there!
Reward people for improving their houses
Under our current system, if you improve your home you get taxed more. That’s a surefire way to make neighborhoods appealing to slumlords rather than good stewards. Let’s create a system of rewards for citizens who improve their houses. That wouldn’t just be major construction—minor improvements, such as new paint or gutters can make a big difference in the long run. If you want to build value in your community, it starts with the little things at home.
Let’s reward practices that help keep houses in good shape. Let’s also reward improvements that are environmentally friendly: insulation, solar panels, white roofs, etc. Sure, there are already federal incentives for doing these things, but we can do more.
Reward elderly homeowners
Ohio, like many states, has a homestead act that provides property tax relief to the elderly and the disabled. Unfortunately, individuals have to apply for this. Not only does that require awareness of the benefits, but it also requires being able to prepare the proper paperwork. Homestead relief should be automatic. And, if you need to downsize or move to a single story, accessible home, we shouldn’t penalize you on the sale of your old home.
Speaking of Automatic…
All of these rewards should be automatic. Instead of auditing houses to determine how much they have raised in value, it should be the auditor’s job to audit houses to determine how many tax breaks they should receive. The auditor could coordinate with the city to identify homes that are falling into disrepair and coordinate with localities to provide assistance to homeowners who are struggling to maintain their properties. If we want to build a strong community, we have to begin by acting like a community. Let’s make the auditor a person we all love instead of a person we all hate.