Column 49: Tax Caps

In his column last week, Jim Clark appeals to knee-jerk reactions and a surface analysis to get us to favor tax caps. On the face of it, tax caps sound like a good idea. After all, here in Incline our property taxes keep going up, don’t they? Well, not exactly. Actually, our assessments keep going up, and property taxes are based on assessed value. For this reason, the Tax Revolt has wisely gone after unfair, irrational assessments. With a tax cap, assessments will keep going up, and the disparity between the property tax we pay and the assessed valuation will get greater and greater.

But what will happen to people who pay taxes on properties with lower assessed valuation? Their valuations will also also go up, though not as quickly, and so will the taxes they pay. In other words the effect of a property tax cap, when taxes are based on assessed valuation, is a tax that disproportionately favors those who own more expensive properties while providing no relief to those whose properties are worth less.

Also, what services are the proponents of tax caps planning to cut? The net effect of tax caps is that revenues to the state will decrease – taxes on high-end, fast-appreciating properties will level off, and the increase in revenues from taxes on low-end, slowly-appreciating properties will not be sufficient to cover the loss. As a result, some tax-funded services must suffer. Property taxes go to fund education and other services. Clark says “prophets of doom…are already predicting that children will die of starvation and the elderly will be thrown out in the cold if these Scrooge laws are imposed.” In my research I have not found anyone saying anything even close to that.

Here is what I have found: while no states have been bankrupted by tax caps (another non-argument the Right likes to “rebut”), in every case there have been significant service cuts. Proposition 13 in California directly resulted in cuts in mental health care that closed a number of hospitals and released thousands of patients - these released patients form the core of the homeless in cities such as San Francisco. In the 1970’s, California’s education system was number one or two in the nation. Prop 13 was passed in 1978 and California’s primacy in quality education was lost.

If there is a lesson from Hurricane Katrina it is that we must be responsible as a society for the least fortunate among us. The Republican administration dragged its heels, content to see those with the means to get out of New Orleans save themselves before doing anything about those too poor or infirm to help themselves. The danger in tax caps is that we will once again “save” those with means while ignoring those with less.

Jim wants to make the issue here the supposed “absolute authority” of the legislature to raise taxes, but this again is Republican sophistry. The Nevada Constitution, like the US Constitution, includes a system of checks and balances. The Governor has the power to veto legislation, whether to check profligate government spending or to block inappropriate tax measures, and the courts can overrule both the government and the legislature. In addition, both the Governor and the legislators are elected and subject to voter pressure. Jim and his cohorts want us to believe that the power of the electorate to overrule tax caps affords better protection than that provided in the Constitution, but this is again a canard – Prop 13 in California, for example, cannot be overruled, and even if a tax cap bill includes this possibility, the system of voter initiatives is cumbersome and meant to be used in extreme cases, not as an ersatz substitute for checks and balances.

In considering the question of tax caps it is critical that we think about this and not buy into the Right’s assumption that we are too dumb or too shallow to think about the real issues.