Overall Tax Burdens and the Good Thing About Missouri’s Personal Property Tax
Megan McArdle over at The Atlantic is one of my favorite economic bloggers. She has a very good post up today about the debate over the fact that quite a large number of Americans essentially pay no income taxes. The piece does a great job of considering all sides of the issue, and I fully agree with this key point she makes:
I think the real problem with the current setup is the political economy of it. A very large percentage of our electorate has nothing at stake when they vote for new spending. Since that spending imposes real costs on other people, and the economy at large, this is a problem. We don’t want to end up in a situation where 65% of the population is systematically voting to take the stuff possessed by the other 35%.
Which leads me to property taxation in Missouri. Exactly in line with what McArdle writes on income taxes, the Lincoln Institute of Land Policy wrote in a study about property tax circuit breakers (which are targeted relief laws) that circuit breakers should not eliminate the entire property tax burden:
Circuit breakers can lead to overspending by local governments, because some taxpayers will vote for additional public services knowing that higher property taxes will be entirely offset by circuit breaker benefits.
Missouri has a circuit breaker, as well as another property tax relief program called the Homestead Preservation Act. But, aside from real estate taxes, Missouri also taxes personal property — which brings me to my main point. Although there might be legitimate arguments against personal property taxes (such as the double-tax issue; buying a car also entails a substantial sales tax), the main thing I like about the personal property tax is that, for many people, it gives them the necessary “skin in the game.”
This might seem silly to like a tax just because more people pay it, and perhaps it is. However, if roughly half of Americans pay no income tax, than we can assume roughly half of Missourians pay no state income tax (although, as I said earlier, it probably totals a little less than half). Certainly some of that portion own homes, but for most people even those taxes are partially hidden in monthly mortgage payments — or hidden to an even greater extent in rent payments. We all know that sales taxes are paid in bits and pieces, except when you buy very large items. But the large majority of Missourians own cars or trucks, and — unlike with real estate — you owe a tax on your car even if the bank that loaned you the money still has the title.
I really think that there is a significant number of Missourians for whom the only time they make a tax payment of any substance at all (automobile property taxes likely average around $200) is when they pay their personal property tax. Hopefully, everyone who makes this payment — which is not due on April 15 but Dec. 31 every year — they take a moment to think about tax rates and government services, and contemplate whether they believe they get what they pay for. If this tax gets a large number of Missourians to realize that they are taxing themselves when they vote on tax increases, rather than just taxing other people, the structure of this particular tax may have a beneficial silver lining.