How many people who worked hard to buy a home wanted to live in it always, but after retirement could not keep up with rising tax assessments despite senior discounts?
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So they have to sell to downsize, but they get socked with paying taxes on the capital gains, which were not really a real rise in value, but just the relentless drop in their dollars’ purchasing power.
Tax attorneys, for good reason, advise that you can never make a sentence that includes the phrase “tax law” with the word “logic.”
Double-entry accounting, in use to this day, was invented way back at the beginning of the Renaissance and says buildings should be carried on the books at original cost less annual depreciation. If that is the recommended standard for all these centuries for accurate books, it ought to be the standard for property taxes.
Adam Smith in “An Inquiry into the Wealth of Nations” recommended four taxation fundamentals. Rather than the spin of modern paraphrasers, let us consult the unedited original.
Before I enter upon the examination of particular taxes, it is necessary to premise the four following maxims with regard to taxes in general.
1. The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state. The expense of government to the individuals of a great nation, is like the expense of management to the joint tenants of a great estate, who are all obliged to contribute in proportion to their respective interests in the estate. In the observation or neglect of this maxim, consists what is called the equality or inequality of taxation. Every tax, it must be observed once for all, which falls finally upon one only of the three sorts of revenue above mentioned, is necessarily unequal, in so far as it does not affect the other two. In the following examination of different taxes, I shall seldom take much farther notice of this sort of inequality; but shall, in most cases, confine my observations to that inequality which is occasioned by a particular tax falling unequally upon that particular sort of private revenue which is affected by it.
2. The tax which each individual is bound to pay, ought to be certain and not arbitrary. The time of payment, the manner of payment, the quantity to be paid, ought all to be clear and plain to the contributor, and to every other person. Where it is otherwise, every person subject to the tax is put more or less in the power of the tax-gatherer, who can either aggravate the tax upon any obnoxious contributor, or extort, by the terror of such aggravation, some present or perquisite to himself. The uncertainty of taxation encourages the insolence, and favours the corruption, of an order of men who are naturally unpopular, even where they are neither insolent nor corrupt. The certainty of what each individual ought to pay is, in taxation, a matter of so great importance, that a very considerable degree of inequality, it appears, I believe, from the experience of all nations, is not near so great an evil as a very small degree of uncertainty.
3. Every tax ought to be levied at the time, or in the manner, in which it is most likely to be convenient for the contributor to pay it. A tax upon the rent of land or of houses, payable at the same term at which such rents are usually paid, is levied at the time when it is most likely to be convenient for the contributor to pay; or when he is most likely to have wherewithall to pay. Taxes upon such consumable goods as are articles of luxury, are all finally paid by the consumer, and generally in a manner that is very convenient for him. He pays them by little and little, as he has occasion to buy the goods. As he is at liberty too, either to buy or not to buy, as he pleases, it must be his own fault if he ever suffers any considerable inconveniency from such taxes.
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4. Every tax ought to be so contrived, as both to take out and to keep out of the pockets of the people as little as possible, over and above what it brings into the public treasury of the state. A tax may either take out or keep out of the pockets of the people a great deal more than it brings into the public treasury, in the four following ways. First, the levying of it may require a great number of officers, whose salaries may eat up the greater part of the produce of the tax, and whose perquisites may impose another additional tax upon the people. Secondly, it may obstruct the industry of the people, and discourage them from applying to certain branches of business which might give maintenance and employment to great multitudes. While it obliges the people to pay, it may thus diminish, or perhaps destroy, some of the funds which might enable them more easily to do so. Thirdly, by the forfeitures and other penalties which those unfortunate individuals incur, who attempt unsuccessfully to evade the tax, it may frequently ruin them, and thereby put an end to the benefit which the community might have received from the employment of their capitals.
Here are additional considerations as to what would be a fairer and less destructive taxation method.
The John Locke Foundation and The Frontier Institute allege that local governments use mass reassessments as a “strategic financial tool” to claim more revenue than is justified by economic reality. Americans for Tax Reform argues that rising home values (due to inflation) provide local governments a bounty of new tax revenue to expand budgets without having to get votes on politically unpopular tax rate hikes.
The 1970s California Tax Revolt, led by Howard Jarvis, highlighted the position that “inflation should not be a reward for government,” and California’s Proposition 13 was passed by the voters in1978.
In McCulloch v. Maryland (1819), Chief Justice John Marshall wrote, “the power to tax involves the power to destroy; that the power to destroy may defeat and render useless the power to create.”
The only certainties, says the proverb, are death and taxes, and upon death there is an estate tax, adding more misfortune to the survivors’ grief.
As George Harrison wrote in “Taxman” performed by the Beatles:
Now my advice for those who die,
Declare the pennies on your eyes,
’Cause I’m the taxman,
Yeah, I’m the taxman,
And you’re working for no one but me.
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