Opt-Out Compromise: Luxury Property Tax?

Let us suppose that the Madison Central school board lacks the political will to advocate at the state level for an income tax. This summer Superintendent Frank Palleria said as much to me, expressing the oft-cited line that the income tax is a good idea but that South Dakotans will never vote for one. (Again, if everyone says that, who's left to voteagainst it?) Comments from board member Mark Hawkes in the Tuesday Madison Daily Leader indicate that attitude persists: he says that the board does not think the legislature will do anything to change the funding formula to help schools in the coming session, and he expresses no initiative to go to Pierre and push for change. The board is stuck in the same old rut.

If we must have a property tax increase, perhaps the board could still be a bit creative about it. Perhaps the board could still find a way to increase the district's revenue without hitting the lower-income people of this community. There are obviously people in the community who can afford higher taxes: just take a look at the huge houses going up around Lake Madison. Perhaps the board could vote for a property tax increase that would target just those big builders.

Specifically, let's impose a "luxury property tax." We could pick an arbitrary value, say $250,000. Every property valued below that amount would see its property tax levy remain the same. However, we would impose a higher levy for every thousand dollars above that rate. Right now, the residential property tax levy is $14.77 per $1000 value. We could tax the first $250,000 of a house's value at that rate. Above that value, we could levy $24.77 per $1000.

So take a $400,000 house. On the first $250,000 of that value, the owner would pay $14.77x250 = $3692.50. On the remaining $150,000 of the house's value, the owner would pay $24.77x150 = $3715.50. The total assessment: $7408.

My numbers are not set in stone. We can certainly debate just what value constitutes a reasonable starting point for "luxury property" and just how much to increase the levy for those higher values. Perhaps instead of a dollar figure, we could use residence status: perhaps we apply the tax only to second homes and vacation homes and exempt primary residences. Perhaps we could apply the tax strictly to new construction, thus encouraging people to renovate and preventing urban sprawl.

Whatever scheme we would choose, a "luxury property tax" would buffer people with older, smaller homes, like retirees who don't have the energy or time to clean a giant house or lower-income workers who simply can't afford new, sprawling digs, from the increased tax burden the school district wants to impose. The people who can spring for an extra 1000 square feet of living space can likely spring for increased property tax as well. Such a luxury property tax rate still isn't the ideal -- ultimately, we should move toward an income tax that most directly addresses the issue of taxing people according to their ability to pay. But a luxury property tax would provide at least a little breathing room for lower-income property holders until we develop the political will to completely reform the state tax system.

Education Yes, Property Tax No

The Madison Central school board is tooting the opt-out horn again. Three years ago, after losing two opt-out efforts at the public ballot box, the school district engaged in some serious budget cutting. However, with enrollment dropping due to unavoidable demographic factors -- we've passed the baby boomlet, and Madison's population, while stable, is skewing older -- the school will continue to receive less money under the state aid formula. Therefore, just to maintain salaries and programs at current levels, board president Kelly Johnson says the board may need to opt out of the state property tax freeze.

Opt-outs are a tricky issue for me. As a teacher, my livelihood depends on sufficient public funding for education, and determining what is "sufficient" is difficult enough in itself. But whatever constitutes "sufficient" funding, we can't get that funding fairly under South Dakota's current system of taxation. South Dakota, with no personal or corporate income tax, relies primarily on sales and property tax (along with lots of federal welfare) to fund its government functions. Neither tax is based on an individual's ability to pay. The property tax hinders the ability of lower-income workers, retirees, and farmers to obtain and hold onto their property. Property tax also penalizes people for having richer neighbors: if I am content with my small house and limited income, but a wealthy businessman builds a sprawling mansion next door, his construction drives up my property value and tax bill, which forces me to work more hours just to hold on to what I have. I may be able to enjoy increased property balue by selling or borrowing against my property, but if I am interested simply in holding onto and enjoying my land and living within my current means, I'm out of luck.

Three years ago, I voted against both of Madison Central's opt-outs. I participated actively in the campaign against the first one, circulating petitions to put the opt-out to a public vote. I will oppose and will urge my fellow citizens to oppose any future opt-out as well. I love education. I want to see our school sufficiently funded to provide the kids as many educational opportunities as we can manage. I want to see Madison's debate team provided with enough funding for proper coaching and travel to all the tournaments during the debate season. But I will not accept the argument that I have to support these valuable programs by approving an increase in an unjust tax system. It's like saying I have to approve the repair of a major highway by using indentured servants, or that I should support winning debate rounds by cheating. We cannot do the right thing by doing the wrong thing. If Madison voters and others across the state want more funding for their schools, they need to find the political will to fight for a more just tax system.

Conservation, not Production: Letter to SD Congressional Delegation

In the news this week: the "Gasoline for America's Security" Act, passed by the House Republicans 212-210. Evidently, a majority of Republicans believe that giving oil companies money to build oil refineries will ease our energy crunch. They ignore the fact that oil refinery profits have doubled in the past year and that the oil companies could thus afford new construction on their own, if they really wanted to increase supply.

Fortunately, South Dakota's lone representative in the House, Democratic Congresswoman Stephanie Herseth, voted with the rest of the Democrats on this one. Perhaps now she will pursue the proposal outlined below, which I e-mailed to her (as well as to our esteemed Senators Johnson and Thune) this morning:

Dear Representative Herseth:

Outraged by the Republicans' "Gasoline for America's Security" Act, I've decided to propose to you a plan for real energy independence. If energy independence is really vital for America's security, then we should approach the problem in the same way we approach wars. When we fought World War II, we ordered the big auto companies to retool and start cranking out tanks and airplanes. Why don't we declare war on energy dependence and order Ford and GM to build hybrids for the federal government?

I'm not suggesting nationalizing the auto industry or passing a bunch of regulations. I'm suggesting a very simple business deal: the federal government offers Ford, GM, and any other willing automaker a giant contract: build enough hybrid, E-85, and/or biodiesel vehicles to replace the entire federal fleet of vehicles by January 1, 2007. The Postal Service alone has 200,000 vehicles*, many of which could easily be replaced with hybrid vehicles, which are perfect for the sort of urban stop-and-go driving that most postal vehicles do. The federal government could lead the way with its revamped alternative-fuel fleet in reducing energy consumption, and the big automakers, having retooled to meet government demand, would seek to maximize their profit by cranking out more such vehicles for the private consumer market.

*I consulted Stacy C. Davis and Susan W. Diegel, US Department of Energy, /Transportation Energy Data Book, /Edition 24,/ /Chapter 7, "Fleet Vehicles and Characteristics," http://cta.ornl.gov/data/tedb24/Edition24_Chapter07.pdf for my numbers on the size of the federal vehicle fleet.