‘Soak the rich’ takes wrong approach

In presenting a case for property tax reform, columnist John Buell (“Question 1 and the politics of property taxes,” BDN, June 1) made his usual lucid and thoughtful presentation. However, in his mention of “fairness” he also demonstrated the time-honored “soak the rich” approach to taxation and reform.

Twenty percent of Maine property tax is paid by out-of-state landowners. That means, excluding possible fire or vandalism protection, 20 percent of all landowners put no economic burden on community or state services. There are no children to educate, no MaineCare benefits to pay, just money paid to the town in the form of taxes, and to local contractors for maintenance services and improvements.

Out-of-state landowners are a net benefit to the state economy. The fact that they might be well-to-do and so benefited from the president’s “generous tax cuts” only means they have more money to spend when they visit. Their economic success should not be utilized to rationalize treating their real property any differently from that of full-time residents of Maine.

Because the founding fathers had enshrined a government run by uniformly proportionate and equal taxation, in 1913 the Constitution was amended to allow the disproportionate taxation we now call the federal income tax. At the time, the idea was to “soak the rich” – that is, burden the richest 5 percent of the population by demanding they pay their “fair share” toward the maintenance of government services. The term “fair share” was the semantic terminology used by “democratic” societies to achieve the same redistribution of wealth that, at the time, was being promoted in Russia – eventually known as communism, or socialist economics.

All of which, including Social Security, was based on an economic theory proposed more than 100 years ago. In the case of Social Security it was a tax to be paid now, with the promise of a retirement pension to be paid later. Of course, when it was imposed by the kaiser’s German government, it was recognized that the average person paying the tax would be dead by 42 and the majority dead by 60; hence the retirement age was set at 65.

With the 100th anniversary of the income tax, the post-World War II baby-boom generation will have reached Social Security age – and the men will do so with a reasonable expectation of collecting their retirement, on average, for 15 years; their wives will collect benefits for 10 years more. Looking to the income tax – the tax that would soak the upper 5 percent with no burden on at least 90 percent – finds a situation where the upper 10 percent of the population pays a smaller percentage of their income to taxes than the remaining 90 percent.

Both instances of “income redistribution” have, with the passage of time, been wrongheaded and ill-conceived. The founders of this great nation have been vindicated. Only taxation equally applied as a fixed percentage will, over the long term, provide the funds necessary for all services that a government might deem to undertake or benefits it might wish to bestow.

In the case of property taxes, all property should be taxed at the same uniform mill rate based on the overall market value of that property. The market value should be the value a willing buyer actually pays, and a willing seller will actually accept. If people from another state wish to forgo the benefits of living “life the way it should be” and would, for their own reasons, decide to only enjoy it sporadically – so be it. If an individual wishes to live in Washington County rather than Cumberland – so be it.

The mill rate should still be the same. Regardless of where the property is within the state, or where the owner selects to reside most of the year, the mill rate should be the same fixed rate. A town where property is more in demand, and therefore which must provide services to a greater number of people, will have higher property values and collect proportionately more money because of those higher valuations.

Basic services should be under one authority with the related taxes paid to that authority – in concept, it is a time-honored if feudal model. Redistribution of property tax funds would be affected by the state being given the excess property taxes on a per capita basis.

Property tax reform, as enacted in several states and proposed in Maine, will effectively cap the mill rate at a percentage of property value. In accordance with the proposed limitations, the Legislature could easily fix the mill rate so it is uniform across the state. This uniformity will be painful in the first year – or for the first few years – but, as history has demonstrated, the long-term benefits will be significant and far outweigh any doctrine based on the failed notion that disproportionate taxation is “fair” taxation.

When it comes to voting on the questions, we must vote to force the state to pay 55 percent of educational funding costs, and affirmatively support any question that makes property taxation more uniform – the latter being achieved by capping property taxes.

W. Lawrence Lipton, a retired businessman and former director of real estate for a major New York law firm, Wohl, Lipton and Lowe, is a 30-year resident of Washington County and former professor of business studies with the University of Maine.