Taxes and Services

This morning I read G.D.Gearino's blog, "Words Assembled Well".  Today's post concerns the recent election in which North Carolina voters decisively defeated a transfer tax.  A transfer tax is one on every sale, i.e. transfer, of land and homes.  In North Carolina it is a very unpopular tax, and has been defeated every time it is on the ballot.

Gearino takes the elected representatives to task for continuing try to get  voters to approve it.  According to him, the tax haqs been on the ballot 20 times across different jurisdictions in the state, and defeated every time.  Orange County, the site of UNC and a very well educated, mostly affluent populace, spent $100,000 to educate its voters about the tax in hopes of getting it passed.  It lost, 2 - 1.  The County Commissioner Chair blamed strong lobbying for the failure. 

As I see it, there are two ways to view this.  One, the politicians are correct, and if the voters understood, they would approve.  Two, the politicians are wrong, the people understand, and think this tax is wrong.  I fall closer to number 2.  It's a bad way to tax.

But the issue brings other concerns for me.  Governments provide services.  In an area in which the school population grows 20-30 percent every year, money is needed for schools and other services.  I'm sure that there is some waste that can be eliminated, but not much.  The public has been calling for cuts for so long that there is not much left to cut.  It seems to me the cut waste method has done about all it can.  Something needs to change, either less services or more revenue.

Less services is a non-starter, or it seems so to me.  I'm not an economist, but I can only see three sources for the additional monies needed.

Growth - The increase in population will increase the tax base while not increasing txes on the current base.

Higher tax rates - Property, sales, and income taxes could be increased.

Additional taxes - Current tax rates could increase, or fees charged for service.  Taxes could be levied on items, services, and products that are not presently taxed.

Actually, all three can be used in different combinations. Raising taxes has become the death knell for politicians.  Sooner or later though, someone is going to have to step up and tell the public that the services they demand are require money.  In my opinion, taxes are not too high on most people.  Some people are definitely under taxed.  I'm retired, and I think that there is some justification for higher taxes on my retirement income.  I wont like it, but I realize that I receive a lot from my state and local, and to a lesser extent, federal governments.  The Iraq war is unjustified use of the nation's money, and is not only immoral, but is keeping us from adequately funding programs that are needed.

I think G.D.Gearino is correct.  The transfer tax is not a good way to raise money.  More education of the voter isn't likely to ever be effective.  No matter how that pig is dressed, it is still a pig.  The transfer tax has been an attempt of local government to fund schools and services that people need, and the people rejected that method. But somehow, people have to realize that their government cannot function without finding money sources from somewhere.

Politicians, it seems to me, are basically cowards, and in instances such as this, not too bright.  They thought a transfer tax would be a hidden tax, paid only when homes or property change hands, and the buyer would pay.  They cannot bring themselves to face the public and tell us that if we want the service, we are going to have to pay.

I believe the property tax is not the best tax, and that some way for local governments to get the money needed to operate needs to be found to, if not replace, at least give an additional source.  Though not an economist, I can see there is a problem but don't have enough knowledge to offer suggestions.  I wish I did.