.
Don't Exchange Income Tax for
Property Taxes |
| [Reprinted from the
Chicago Sun-Times, 1 April, 1993. The writer was at the time
a Professor of Economics, University of Illinois at
Urbana-Champaign] |
I am aware that the Sun-Times has taken a firm position that Illinois
would do well to shift away from reliance on the property tax to the
income tax. This issue will be hot in the next few years as it derives
from the question of who should fund education in Illinois and who
should fund local government generally. But:
Is this really tie time in American history to increase taxes on effort
and saving (the income tax) to reduce taxes on consumption (the property
tax)? Surely America's notoriously low saving rate would argue against
that.
While property tax inequity is often cited by the Sun-Times, how can it
be "equitable" to increase taxes on people who work hard and
invest in plants and equipment while reducing taxes on people who spend
their money on mansions?
It turns out that even across income groups that property tax is widely
regarded by economists to be roughly proportional. Thus, its burden is
little different from Illinois' income tax.
The property tax is a local tax devoted to local purposes. Raising a
statewide tax to reduce property taxes tends to break the important
political nexus between the pain of taxation and the pleasure of
spending.
I am disinclined to let mayors and council members take credit for
public spending while shifting the onus of taxation to the governor and
Legislature, though local politicians clearly love to do that.
Surely these reasons argue strongly against proposals to fund property
tax relief at the local level with hikes in the state income tax. I urge
your editorial board to reconsider its position.
|