Thursday, August 5th, 2010
We see in a lot of places – Indiana, Illinois, elsewhere – various tax revolts centered on property taxes. Property tax caps are a frequently proposed policy these days. Gov. Christie in New Jersey has just proposed them, for example.
A friend of mine had an interesting take on this related to demographics. He observed that there has been an increase in anti-property tax sentiment as the population has aged. Think about the various major categories of things that are taxed to raise funds at the state and local level – income, consumption, property. People who are coming up on retirement are going to see drops in income and consumption, but they own lots of taxable property. In fact, they probably have more wealth, much of it in the form of taxable property, than the younger families who are out buying clothes for their kids, furniture for their growing families, etc. Younger people are also those who are more likely to see their incomes go up, not down over time. Older households are also less likely to consume services, such as schools, typically funded by property taxes.
This person suggested that property tax caps are basically tax shelters for older people, and act to shift the tax burden towards the young. I’d be very interested to see some actual research around this topic, as the matter of demographic impacts on public policy, apart from some national level concern over entitlements, hasn’t gotten much airplay. It strikes me that the personal preferences and spending/saving behavior of people changes quite a bit over the course of a lifetime, and appropriately so. If that’s true, why wouldn’t there be policy preference changes as well? And what might that mean for an aging society? It’s an interesting matter to think about.