Earnings Tax

[bahua]

I see, but I think my point still stands. I like attempts to make taxes simpler, but anytime you simplify it to the point where only one activity is taxed and that is used to support our entire government, the revenues needed are so great that the taxes needed to be levied will be prohibitively onerous to the point of discouraging anyone from that activity. Here, I can't see anyone wanting to own land if taxes are over 50%.

No proponents of a land tax said anything about 50%. Even a modest rate, comparable in dollars to the amount that people are currently paying for property tax, would get the city all the money they could ever need. They'd be swimming in money. Crazy money. Corruption-style money. And we'd watch KC explode besides.

[KCMax]

So what is stopping this? I haven't seen too many city governments find a tax they didn't like. Why no implementation of the land tax?

[Joe KC]

Even a modest rate, comparable in dollars to the amount that people are currently paying for property tax, would get the city all the money they could ever need. They'd be swimming in money. Crazy money. Corruption-style money. And we'd watch KC explode besides.

Not to be a dick, but did you just pull this out of air?  Okay, maybe I did mean to be a dick.  Either way, how do you figure that a rate comparable to a property tax would yield more dollars? 

I smell a Reagonomics/Laffer-Curve-like argument coming.

[studentper]

"Again, maybe in theory, but I don't think a 1% earnings tax discourages anyone from drawing income.  The demand for income is almost perfectly inelastic."

The tax doesn't discourage people from earning income, it simply discourages them from earning income in KCMO.  In our office, almost everybody who lives outside KCMO keeps track of the days they work outside KCMO and files for a refund--it adds up quickly if you travel.  I believe the Royals players still do the same thing for away games (but i easily could be mistaken, there was quite an argument about it a few years back).

[bahua]

Either way, how do you figure that a rate comparable to a property tax would yield more dollars?

Because it creates a much bigger base to tax, and furthermore, by its nature, those who pay said taxes either can easily afford it because of the value of their property, or get out of the way for someone who can. Land is used efficiently, generating more wealth, more commerce, more land value, and hence more to tax.

Taxing 3000 people at 5% will generate a certain amount of revenue, but taxing 30,000 people at 5%(or 3% or 4%) will generate a hell of a lot more.

A land tax will increase the number of taxable people, because people will get back into owning property, and using land efficiently.

[lock+load]

I think you overestimate the capabilities of capitalism.

[bahua]

So what is stopping this? I haven't seen too many city governments find a tax they didn't like. Why no implementation of the land tax?

Harrisburg, PA is one example of land tax in action, though they don't rely solely on it, so its effects are somewhat abbreviated. Even so, they went from being cited as the most distressed city in America in 1979, to its current state: a city of only 55K, with a downtown to put ours to shame, and a business vacancy rate of next to nil.

I have heard, though have not confirmed, that Sydney, Australia uses a form of land taxation.

To allow it to be used anywhere in the US, however, it generally has to have special provisions made for it by state legislatures. A county in Virginia just recently was allowed by Richmond to enact a land tax, for example. The city council in Peoria, IL just passed a resolution to petition the boys in Springfield to allow it to happen. Such requests usually die in transit, though.

It's a brilliant system of taxation, but since it's relatively unconventional, it requires a lot of red tape to make it even possible.

[bahua]

I think you overestimate the capabilities of capitalism.

The capabilities of capitalism, unchecked by the greed of government, cannot be overestimated.

[lock+load]

The capabilities of capitalism, unchecked by the greed of government, cannot be overestimated.

Capitalism, unchecked by government, leads to anarchy.

[kard]

The question I thought I saw through the posts were was, in response to "the city will have all the money it could ever need", is:

How do you sell it to the people?  If the city will have more money after then before a land tax, then the taxes "the people" are paying as a whole will increase.  It's effectively a raise in taxes.  There are benefits as you're pointing out but saying this will raise taxes makes it hard to find support for it.

[bahua]

I never mentioned an increase in taxes. The only change I even alluded to was a decrease.

The increase I referred to was an increase in the number of people paying taxes, and more land value on which to base those taxes.

Capitalism, unchecked by government, leads to anarchy.

I disagree, but neither of us can definitively back up our opinions with fact, so we'll have to agree to disagree.

[10-7]

The original question asked what was provided by the "E-tax".  My understanding is that one of the main things that was supposed to be provided by it was our fabulious "free" trash service.  Years ago I remember when every few months, the city would come by and throw a huge roll of trash bags in your driveway.  You could put out as many trash bags as you wanted, and you could call the city any time you had a large item (old refridgerator or washing machine or something) that needed to be dumped. 

Of course now do we not only NOT get free trash bags, but we have to pay if we have more than two trash bags.  Large item pick-up is sporadic, and in my experience - you are lucky if they show up within two weeks of the scheduled date.

The E-tax is a real whammy for someone like me.  Since I work for the PD, I have a residency requirement that I have to live in KCMO city limits.  Up until recently, my wife worked in Lenexa, but because we had to live in KC - she has to pay the tax (she now works a job in downtown KCMO).  I would guess that there are a lot of households where only one resident (or neither) works in KCMO, so the spouse is stuck paying the tax because of where they live.  Sure, the tax isn't much.... but every little bit adds up.

[kard]

I never mentioned an increase in taxes. The only change I even alluded to was a decrease.

The increase I referred to was an increase in the number of people paying taxes, and more land value on which to base those taxes.

A person who is now paying taxes who wasn't before = an increase in taxes.  They went from 0 to more then 0.  This makes it harder to sell to those people.

[edit] I'm not saying this is a silly idea--I think it's rather interesting.  But one can't just say "The city will have all the money it ever needs" with out qualifying it.

[Boognish]

I think I must be an idiot, because out of curiosity I went to Wikipedia to read the definition of the workings of a land tax and understood very little of it. I'd like someone to give me a good one paragraph breakdown.

[bahua]

The value of the land is taxed. In effect, property owners are paying rent for the land they're using, to the community(the taxing authority), and the value of that land is what determines tax liability. The main effect of this policy is that open unused, or underused land becomes too expensive to be so. Surface lots, blighted empty lots, and big box stores can't naturally exist in this system. They use too much land without creating enough value to be able to afford it. In short, a land tax obviates density, which in turn raises land value, which in turn increases sustainable tax revenue, and encourages even greater density.

That's the USA Today version.

[bahua]

A person who is now paying taxes who wasn't before = an increase in taxes.  They went from 0 to more then 0.  This makes it harder to sell to those people.

No more than it is an "increase" now for someone to buy a property and start paying taxes on it.

[Boognish]

If the burden of the tax is decided by the value of the land (which is I assume determined by market value), minus the value of improvements (homes, businesses, whatever), how is this different from the current property tax system? Doesn't the system still lend itself to valuation corruption?

What happens to current owners who own say, empty lots in Old Northeast - how would they be able to even sell the lot?

[KCMax]

Bahua, it all sounds well and good, but I have a hard time believing that a tax that would decrease individual taxes, increase government revenues, and possibly simplify the system wouldn't be adopted everywhere. There must be some awfully big problems with it for this not to be adopted. I know politicians are stupid, but they're not so stupid as to overlook a tax that both decreases tax burden and increases revenues.

So whats the catch?

[Tosspot]

I know politicians are stupid, but they're not so stupid as to overlook a tax that both decreases tax burden and increases revenues.

So whats the catch?

[KCMax]

I work with lobbyists for H&R Block. Trust me, they ain't that powerful.