RALEIGH – This is not exactly a new or original observation, but in the minds of many local politicians there is no problem for which a tax increase is not the obvious solution.
Remember a couple of years ago when the big fiscal challenge facing North Carolina’s largest metropolitan areas was rapid growth? As the population swelled, the need for new schools, roads, and other public services seemed to grow at least as rapidly.
Many politicians argued that the growth would be unsustainable unless taxpayers were willing to pay a little more to build the necessary infrastructure to stay head or at least even with demand. These politicians also argued that because the property tax system didn’t adjust quickly to growth, in part because of the lag time in revaluations, North Carolina communities need other revenue sources such as impact fees and real-estate transfer taxes to keep up with the demands of growth.
Today the situation looks markedly different. The Great Recession was triggered by the collapse of a housing bubble created and sustained by government policies such as lending mandates, tax deductions, and easy money at the Federal Reserve. As the bubble burst, property values plunged – and, correspondingly, so have projected property tax revenues.
Consider Mecklenburg County. As The Charlotte Observer reported Monday, the site of IBM’s former hub at University City has just sold for $42 million, only a third of its tax value. Other commercial real estate deals have posted similar declines. Officials have yet to assess the overall effect on Mecklenburg’s property tax collections, it’s not too early to predict the policy response some will recommend. In the Observer’s phrasing, for example, if real values fall far below tax values, “elected officials would be forced to raise taxes or find more cuts.”
I’d find the argument for raising tax rates after property-value declines somewhat less risible if I hadn’t heard many of the same people argue for tax increases during periods of property-value increases. If growth causes tax hikes and recession causes tax hikes, then it’s kind of difficult to see what wouldn’t cause tax hikes.
The truth is that many of the politicians and activists who resort to such arguments are ideologically predisposed to believe that North Carolinians keep too much of the own money, which they squander foolishly on goods and services of questionable value. Instead, say these ideologues, the government should have a claim to a higher percentage of private incomes, which it will invest wisely in the education, infrastructure, and services that the citizenry really need – and will come to appreciate over time, even if they dislike the prospect of tax increases today.
If that sounds an awful lot like the argument the Obama administration and Democrats in Congress are making for their health care plan, that Americans will come to like a nationalized health insurance system in the future despite their skepticism of the idea today, you shouldn’t be surprised. It’s the same mentality.
By definition, expanding the scope of government action means taking away resources from those who earned them through voluntary market exchange, and giving those resources to government officials to deploy as they see fit. The only way to square such an action with the concept of popular government is to assume that the people will eventually “catch up” with their more-enlightened leaders.
The specifics change. The arguments change. The proposed remedy does not. Tax increases are the hammer, and everything else starts to look like a nail.
Hood is president of the John Locke Foundation