August 8, 2006
Regarding Property Taxes II Posted by Fredric Smoler at 10:45 AM EST Blog in haste, repent at leisure. Yesterday I wrote in agreement with John Steele Gordon’s attack on property taxes, and succumbed to the Jacobin instinct to privilege abstract theories of justice over experience. In hindsight, financing local government via taxing property has worked well enough for hundreds of years, and for that same period of time most (possibly all) Anglophone societies have thought it sensible to tap stored wealth in addition to income. If the inequity of giving renters a free ride is too offensive to natural justice, we can probably figure out a way to tax people who use local services without owning real estate.
But my main reason for repenting is John Steele Gordon’s last post, where he declares one of his purposes for proposing this change: He wants to freeze public expenditure at the local level by making it as hard as possible to increase taxes. He proposes state laws prohibiting local governments from raising taxes other than in proportion to rising populations and inflation, unless such increases are approved by referenda. This would allegedly stop politicians from behaving irresponsibly. It seems to me that we already have a way of controlling irresponsible politicians: voting them out of office. John Steele Gordon’s mechanism would not so much provide a method of controlling irresponsible politicians as substitute referenda for a function hitherto, i.e., normally, performed by elected representatives.
In this country, the use of referenda was once a populist measure favored by the left but has recently become a measure favored by the right, because it has been successfully used to inhibit tax increases, most famously in California. In Europe, where Napoleon III and Mussolini are associated with politics by referendum, the method has long aroused hostility on the left. That does not mean that referenda have any intrinsic advantage for either left or right, and there is certainly a case for subjecting changes in fundamental law to referenda: the new European Union constitution, drafted at the behest of unelected officials, was defeated by referenda, and I cheered at the time. There are good and interesting arguments on both sides of the broader question of direct vs. representative democracy, and I shall not rehearse them here. Instead, I want to think about John Steele’s Gordon’s broader question.
Should governments always be on a short spending lease? That was what the British Treasury thought, in the 1930s, when it was arguing against increased military expenditure. The French took a comparable view in the 1930s, when it came to consider funding the fortification of the Belgian border and the purchase of a modern air force. Louis Napoleon’s legislature thought something similar late in the Second Empire, just about the time Bismarck was planning his next war. I would be astonished if someone didn’t take a similar view when Americans began taxing themselves to pay for universal secondary education, one of the better investments this country has ever made. Politicians sometimes waste money, sometimes embezzle it, sometimes spend money very wisely, sometimes shamefully fail to raise and spend money when it is necessary. Corporate managers exhibit all of these tendencies themselves. As far as I know, no one has ever done a systematic comparison of the wisdom of all public and all private expenditure. We think we “know” that public expenditure has to be more reckless, because of the structure of incentives, but it is worth remembering that Ford bought the Edsel and the American government bought the F-16. Someone decided to market New Coke, and someone decided to build the interstate highway system. There are strong theoretical arguments on both sides, so for now I am going to go with a minute amount of personal experience—oddly enough, that is what conservatives are supposed to do, but no matter.
My mother was an elected, unpaid official in local government and wound up her career as head of the school board. The schools in our town were then thought to be the best in the nation, and I have no reason to doubt that description. I was too lazy to profit fully from them, but most were not. School taxes were high, but people who didn’t want to pay them had the option of moving a few miles to any adjacent town, where taxes were lower and schools worse. People also had the recourse of voting down the annual budget, which they almost never did, so John Steele Gordon could argue that they had the power of referendum, and he might have a case. But what if they didn’t have that power? They could always have voted my mother and her colleagues out of office. So why did they not do that, and only rarely—maybe once in 40 years—vote down a school budget? Maybe because their property was valuable because of the excellence of their school system, and they knew it. They had good and honest police, and excellent roads. One road was a border with an adjacent city, one with lower taxes, and you could see the difference in the paving on either side of that street. They paid high wages to teachers, and still do. If I taught in that town, rather than at my college, I would probably double my salary. But in the aggregate, those teachers clearly did a splendid job, and few greatly begrudged them their salaries. If you did, again, you could vote in a new school board, one pledged to renegotiate labor contracts (teachers in our state do not have the right to strike).
Representative rather than direct democracy means, among other things, trusting elected officials who (ideally) have the time and responsibility to develop a kind of expertise on questions, and (again ideally) have demonstrated exemplary character. It is in local government, the kind Mr. Gordon wants to keep on so short a leash, that this latter part of the business can probably work best. Why did the citizens trust my mother’s judgment? Well, it was a smallish town, and she was known for her industry and her integrity. I only recently realized that she spent many hours each day keeping up on the questions she had been elected to decide, because my brother is now helping her clean out her basement, and he has found cartons and cartons of elaborate notes, many reams of legal pads and many scores of notebooks, all filled, which he has been looking through and is astonished by. It occurs to me that she devoted significantly more time to thinking over the merits of possible increases to the school budget than would people deciding such questions by referendum.
Is John Steele Gordon’s suspicion of politicians’ ways with tax money the true American genius (“If America has a native criminal class, it is Congress,” etc.), and my veneration for my mother’s public life blinding me to some great truth? Maybe, but there is another American tradition, in which skepticism about expertise, elites, and politicians is counterbalanced by trust in our ability to wisely delegate power to elected officials, then correct their mistakes at the ballot box. We have a lot of American traditions, and they do not all point in the same direction. We do not always keep governments on a short spending lease. The majorities who elected and reelected FDR and LBJ didn’t, just as the ones who voted in recent Republican majorities went the other way. Polling data suggests that emerging majorities are trending back the other way yet again. A lot of people are apparently happy to pay more taxes for better schools. I am not eager to develop an innovative method of political economy largely designed to stop them.
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