Final Reply to Justin About Reassessments

I shall keep this very brief.  I want to provide two clarifications to Justin’s latest response.

I never stated that property taxes should never go up on homes, which is sort of how it works in California. What is going to be passed by the Legislature is a change removing the increases brought about by reassessment — an idea I fully support. Local government bodies would still be fully empowered to pass increases of the property tax rates within their jurisdictions. The extremely important difference is that a tax increase passed by either the voters or an elected body is the proper and democratic way to increase taxes and raise government revenues (the two are not always linked) in the (rare) circumstances where tax increases are prudent. Increasing tax revenue through reassessment, on the other hand, is not how Missouri’s property tax system was set up to work, and is an underhanded and improper manner of increasing government revenues.

Finally, Justin wrote:

"So homeowners like David are grandfathered into a nice little tax haven with this legislation."

I am not a homeowner.  It was my wife’s house before we got married and we have never gotten around to changing the title, so it’s still all hers.  If you ever see me on an episode of "Cops" wearing the traditional garb being confronted by the local constabulary, I won’t have a very good argument for being the one spouse allowed to remain on the property, no matter how drunkenly I argue that she started it.   

Links to Radio Interview This Morning in Springfield

If you have time, you can listen to the full radio interview I did with Vincent David Jericho by scrolling down here to the link about tax increment financing (or using the direct MP3 link). You can also listen to the end-of-day summary Vince does about all his guests, which is the top link on that page. I enjoyed being in Springfield on the show, and I thank Vince for the opportunity to appear.

Letting Big Brother Watch Less

Periodically here at the Show-Me Institute, we like to look through the rolls of pending bills in the Missouri General Assembly and offer insightful, balanced commentary about select pieces of legislation. Granted, sometimes these insights turn into week-long rants about milk, ice cream cones, or beer, but more often than not they can lead to thoughts about issues such as this: Senate Bill 786.

SB 786, properly known as the RFID Right to Know Act of 2008, is a bill introduced by Sen. Maida Coleman that seeks to require that every item sold in Missouri containing a Radio Frequency Identification chip be conspicuously labeled as such. This bill has been introduced in various forms twice before, but its failure to pass is in no way indicative of its value as an article of legislation. If nothing else, the time that has passed since the bill’s first introduction in 2006 has made it more relevant.

RFID chips, for the technologically disinclined, are tiny devices that consist of a combination of electronic circuitry and a tiny antenna. RFID chips have long been used as security devices in bookstores and libraries, but the continual march of technology (as well as Moore’s Law) have made the chips smaller and the circuitry better to the point where RFID chips are now being used in tag form in supply chain management, as a replacement for UPC barcodes, and in implantable form in veterinary medicine, as a method to identify stray pets. Use of these implantable chips, in particular, seems to be growing the fastest, as a number of companies have begun to use them for security identification, and some high-end nightclubs are using them to allow VIPs to pay for drinks with a wave of the arm.

While such convenience may seem appealing, the privacy issues that come along with RFID chips are considerable. Most of today’s chips are passive, meaning that they will sit idle, hidden in a pair of jeans or a sweater, until a radio signal activates them and triggers a response. The problem is that their size makes them nearly impossible to find, and their passive nature (which is not destroyed by a bout with the washing machine or dryer) makes them susceptible to being activated again — possibly while you’re walking down the street.

This isn’t to say that RFID chips should be banned. Quite the contrary — they offer an enormous potential for consumers and advertisers alike. However, if they are to be used effectively, bills like SB 786 would provide a valuable service to consumers, letting them know that the devices are embedded in their purchases. Such identification allows customers to choose whether they would like to purchase the item, and gives them the knowledge they need to destroy the chips if they wish (as a corollary, passage of this bill may drastically increase the number of people who regularly microwave their clothing — as such an action is an effective method of disabling RFID tags).

Technology can open up some frightening doors (and, apparently, can be seen by some as the "mark of the beast"), but if we act now to account for it, we can assure that privacy and the other individual liberties of citizens can be assured.

Fun With Numbers

Dave Stokes pointed me to an interesting source of information on payday lending in Missouri. Because I’ve written before about this topic, I thought that I would share some key facts about the Missouri payday loan industry.

  • During 2006, Missouri payday lenders issued approximately 2.87 million loans (including renewals).
  • The average loan size was $274.72 and the average annual interest rate on loans was 422.26 percent.
  • Borrowers paid $39.05 on average in interest and fees on their loans.
  • The number of payday loan licenses (establishments) in Missouri versus neighboring states is as follows (ranked by my per-capita calculation):

State Licenses Population Per capita (in basis points)
Tennessee 1,459 5,689,283 2.56
Missouri 1,286 5,595,211 2.30
Kentucky 757 4,041,769 1.87
Kansas 396 2,688,418 1.47
Nebraska 200 1,711,263 1.17
Oklahoma 399 3,450,654 1.16
Arkansas 280 2,673,400 1.05
Illinois 1,140 12,419,293 0.92
Iowa 259 2,926,324 0.89

Before readers are outraged at the interest rates being charged on such loans, it’s worth considering the annual interest charged on other consumer products. The perfect example is late fees on video rentals. For example, despite the fact that Blockbuster advertises a “no late fee” policy, the company in fact charges a $1.50 restocking fee for rentals more than eight days past due. If you consider an average rental cost of $5, this restocking fee would translate into a simple interest rate of 1,369 percent if expressed as an annual rate (assuming no compounding). But nobody accuses Blockbuster of being usurious.

Just some food for thought.

I’m Sorry I Ruined Dave’s Vacation :)

I will quickly respond to David’s post.

Like David, I’ve stated my support for protecting homeowners from spurious appraisal increases. I definitely believe that this is a problem. But I cannot defend Dave’s protectionist sentiment. Property tax rates should be set at a flat rate, dependent upon the fair value of the home, and not a flat nominal amount that is independent of home value. David is basically advocating that new homeowners should subsidize existing homeowners, whose property taxes are fixed at the rate at which they originally purchased their home. So homeowners like David are grandfathered into a nice little tax haven with this legislation.

Here are some hypothetical tax issues David might also support, based on his logic.

A 20-year-old pays $1,000 in income taxes on his $20,000 salary in 2008. Therefore, he should pay $1,000 in income taxes in 2030, even though he is then making more than $500,000 per year.

A woman bought a personal computer in 1985 for $5,000, paying $500 in sales taxes. So she should pay $500 in sales taxes on the computer that she bought this year for $800.

You can see how this makes little sense for other forms of taxation. I have no problem with indexing property values to inflation or another metric so that only real appraisal gains are taxed. But in my opinion, David’s idea is not a fair solution in general. Regardless of whether property assessments were intended to lead to tax increases, it doesn’t mean that they shouldn’t.

“Nothing in the World Is More Dangerous Than Sincere Ignorance and Conscientious Stupidity.”

Supporters of Ward Connerly’s Civil Rights Initiative — which would end race-based affirmative action programs in Missouri — are increasing their efforts to solicit the 140,000 signatures necessary for a November ballot position.

The Kansas City Star blogs on the topic here. It’s amazing how much liberty they take in editorializing their coverage, by the way.

My favorite sentence: “Programs that could disappear include race-specific scholarships at public universities such as the University of Missouri-Kansas City […]”

Reread that sentence again. Was a society that judged people based on the color of their skin one of the goals of Dr. Martin Luther King and the civil rights movement? Imagine if the University of Missouri offered scholarships to white students only. Or, if the University offers race-specific scholarships, then why not create race-specific bathrooms as well? How far we’ve fallen from the original ideals of civil rights.

And, of course, the thing that is most ironic about affirmative action to me is that its strongest supporters are often upper-middle-class families with “white guilt” — the same class of people that affirmative action programs are supposed to, in theory, protect minorities from in the first place.

Personally, I think that this comment on the Star’s blog says it best.

Justin’s Post About Property Assessments and the Three L’s

Justin blogged last week about the property assessment and tax changes coming from the general assembly. Reading it was the the only three minutes of vacation that made me wish I was back at work in order to respond more quickly. Justin’s post is rife with an error that is, not surprisingly, fairly common at a think tank such as this: too much theory and not enough practicality. To his credit, he does wonder that he may be missing the point, to which I will respond (in all caps, to emphasize the seriousness of it, but without any anger) that PROPERTY ASSESSMENTS HAVE NEVER BEEN INTENDED TO LEAD TO TAX INCREASES. The system is supposed to use assessments as a method to allow local governments to set the proper and necessary rate — not to set a rate and then let the tax money roll in through assessment increases, which is what has happened.

It might be reasonable in theory to say that because people don’t complain when their assessments and taxes go down, they shouldn’t complain when they go up — but because the former happens so rarely in Missouri, it is not a practical argument. Furthermore, taxing districts are protected from a decrease in assessments in those rare cases (which we may actually see in the 2009 reassessment, because of the terrible real estate market we are in) so that’s just further proof that it does not happen both ways.

As to less prosperous neighborhoods subsidizing booming neighborhoods with an average system as I have proposed, all I can say is I only wish the system was so consistent as to make that a legitimate concern. The problem people have is with the herky-jerky nature of the comparable sales system, where there is absolutely no consistency between homes in an area. The St. Louis County assessor’s office does a good job of getting the numbers right, for the most part, in the countywide aggregate, but everyone involved with the process knows there is a tremendous amount of variance at the smaller levels of blocks and neighborhoods. Outstate, where they have elected assessors and don’t have certificate-of-value filings, the same thing works in reverse and leads to inconsistently lower property values. My average-based proposal addresses the inconsistency within the entire process, which is one of the primary problems people have with the entire system. And I would keep the appeal process, precisely to avoid homes that have not increased in value from subsidizing those that have.

The reforms coming out of the general assemply are long overdue, and I commend the assembly for taking on this issue.

How Free Are We? Part Three

Third in a series, after a long break. Having just returned from vacation, I have a lot to blog about, so I am going to keep this post short. I ask you to read this article in the Post-Dispatch about proposed restaurant outdoor seating legislation in St. Charles County, and think to yourself just how nuts it is that something as simple as a restaurant serving food and drinks outside requires this much work and effort from government. Maybe I’m crazy here, but the never-ending expansion of planning and zoning requirements strikes me as lunacy. Yet we all accept it in the name of standardizing services and regulating all aspects of life.

I just want to highlight the comments of one control-freak busybody in the article (emphasis added):

Last week, Veit modified his bill to impose a closing time for sidewalk
tables of 11 p.m. or 30 minutes after the end of food service,
whichever is earlier.

Dan Satterfield, who lives on South Main, said that wasn’t early enough. He suggested 10 p.m.

He said his concerns were about people who were exclusively drinking, and not having dinner.

"Drinks that can be served outside during dinner — there’s no opposition to that," he said.

God forbid you just want to have a drink outside at night right along the wall of a restaurant. We certainly can’t have that, now …

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