Opinion | The case against cutting property taxes

Cutting property taxes makes our state and local institutions weaker.

Shahab Khan, Opinions Columnist

Iowa Republicans’ plan to slash property taxes is economically unsound.

While there is no official piece of legislation that would cut property taxes, several Iowa Republicans have expressed interest in adopting a plan proposed by Iowans for Tax Relief that calls on supporting a two-year freeze on property tax rate increases until they could overhaul the system and reduce rates.

The rationalization for cutting property taxes is derived from the broader libertarian critique of taxation. The idea can be summarized as taxes like the property tax, which local governments use to fund public schools and the construction of roads, are immoral for it allows the government to “steal” from hard-working taxpayers thus trampling on their rights of freedom.

The argument wrongly assumes that successful taxpayers made their money from their hard work alone. In reality, these individuals would not have gotten to their position without the help of government services such as public education, police and fire departments, and roads.

In other words, cutting a property tax would seriously jeopardize funding for localities, making the Iowa tax system regressive. This would end up hurting middle and lower-class Iowans by making the quality of government services significantly worse.

A property tax is levied by state and local governments on the value of people’s real estate, or the land and buildings that people own.

Traditionally speaking, economic theory argues that taxation distorts markets and makes them inefficient because it prevents decision-makers in those markets to maximize their utility or the satisfaction they gain from a good or service. In short, taxation makes it so that consumers are not able to gain full satisfaction from purchasing a good because they must pay a higher price and reduce the quantity they buy.

It also discourages firms from producing the necessary amount of goods that would be beneficial to society and allow consumers to be fully satisfied.

Some economists argue that this inefficiency, or deadweight loss, is necessary because taxes allow the government to redistribute wealth to the poorest members of the society so that they are able to live better and more economically secure lives.

Regardless of where economists stand on taxation in most markets, there is widespread support for property taxes by economists because property taxes tax the land that is owned, and landowners are encouraged to develop their real estate and lower their property tax.

In addition, property taxes are progressive taxes. A progressive tax is characterized by the fact that they force wealthier people to pay higher taxes compared to those making less money.

As a result of wealthier people owning more property, they must pay more taxes on their properties in contrast to middle-class Iowans who would only have to pay a property tax on his house.

Property taxes are the primary way in which cities fund their budgets and pay for upgrading facilities such as schools. In addition, when it comes to state funding, property taxes are also important for helping keep the government running and allowing Iowa to pay for important programs to help those in need.

It would be foolish for Iowa Republicans to cut property taxes as it would force local municipalities to cut budgets and lower the number of programs and services they provide to all Iowans.

Columns reflect the opinions of the authors and are not necessarily those of the Editorial Board, The Daily Iowan, or other organizations in which the author may be involved.