Taxing Strategies

DC Politics Economics
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            New Orleans      It’s hard to believe that any of us want to talk about taxes, but it’s hard to avoid the discussion since next to the act of declaring war, they are one of the most powerful forces that governments exert over their citizens.   You may think I’m going there because of all of the discussion about how to fund the various infrastructure bills in Congress right now, and, yes, that’s part of it, but not all of it.

What particularly caught me short was reckoning with the Chinese government and its leadership wrestling with controversy over imposing a property tax. Reportedly, Xi, the Chinese leader, has been pushing a property tax there and is getting rare pushback from other members of the government body of the country and party.  In their recent congress, he won support for a five-year trial in ten cities, after originally proposing twenty cities.  Taxes are even an issue under communism it seems, but more likely they are an issue in China because of communism.  The party has made property ownership by individuals one of the great reforms under their leadership so that more than 90% of urban Chinese families now own their homes, according to official data, and about 10% of the households own at least three properties. Meanwhile, property and related industries account for nearly one third of the country’s output.

Supposedly, the Chinese were moving on property taxes in this way because they are trying to both curtail real estate speculation and also use the tax to narrow their own inequality gap and distribute income more evenly.   I’m scratching my head though because property taxes are a regressive tax, not a progressive one, so I’m having trouble understanding how imposing such a tax would redistribute wealth, unless it is waived for special categories and income.

Regressive taxes are those that hit people squarely, regardless of income and ability to pay.  Sales taxes are another example, since they are required on every purchase, and those with more money can shoulder them more easily.  The regressive nature of property taxes helps fuel gentrification particularly as fixed income individuals and lower income individuals have to pay based on comparable rates from sales in their community that drive up assessments and therefore taxes regardless of income.  Our social enterprise coffee house is a case study in the fast-gentrifying area of Faubourg St. John along the Gentilly Ridge in New Orleans.  When we bought it eleven years ago, taxes were $2000 per year, steep, but something we could handle so that we could move 5% of the gross to support community organizing.  Within a couple of years, the taxes had gone up to $10,000, diverting the money from organizing.  You can only charge so much for a cup of coffee when you’re competing with the big and little chains.

Income taxes are the most progressive, although wealth taxes are now competing for that title.  Of course, that assumes the rich actually pay income taxes, which we’re finding out is not the case in the USA.  Even West Virginia Democratic Senator Joe Manchin seems now to support a tax on billionaires to help pay for the stimulus.  Secretary of the Treasury Janet Yeltsin has made great progress in getting countries around the world to agree to a minimum 5% corporate income tax, which would be huge in blocking some of the tax havens and filling some loopholes.

Governments use taxes for myriad reasons, but as taxpayers the one thing we want and have a right to expect is that everyone will share the same burdens for our common good and public benefits.  Progressive taxation policies do that, while regressive ones do not.  China is confusing me, as is some of the wrangling from Democratic Senators trying to save money for corporate and wealth donors.  We ought to at least agree on making taxes progressive, if we can’t agree on anything else.