Real Tax Reform

It appears the Trump administration is aiming high on tax reform initiatives. Making the Trump tax plan of 2017 permanent seems an easy lift with Republicans controlling both houses of congress. More comprehensive tax reforms might take a bit longer and may be harder to get through congress.

Most of the large state caucuses are seeking increases in tax relief related to state and local taxes (SALT). Other ideas include no taxes on social security, tips or overtime. I am all for reducing my tax burden, but there needs to be corresponding cuts in spending if one is to control deficits and increasing debt in the short term. With the country facing a possible contraction in Gross Domestic Product for the first quarter of this fiscal year, convincing Americans that all these changes are good might be tough.

Tax reform at the national level may get most of the media attention, but actions at the state level can really make a difference when people consider their well-being when they are sitting around the dinner table. One would hope that state and local governments would be fiscally responsible when considering changes to the tax code.

At the heart of things at the state and local level is property tax. All our property is assessed, and we pay taxes based on those valuations. Local governments depend heavily on property taxes to fund law enforcement, schools, road maintenance and a host of other function of local government. When state legislatures put caps on property tax increases, they really put the squeeze on those local government enterprises.

So, how do we address these tensions between state and local governments. Do we not look to the state to be reasonable in helping one county look like another? Would we not want the state to step in to ensure that each school district had exactly the same funding available for each student? Would we not want our state government involved in finding novel approaches to rural economic development? Would we not want state government to be a partner in preserving the rural lifestyle? Of course we would.

It is time for revolutionary ideas related to tax reform at the state and local level. In subsequent newsletters I will advance ideas for readers to consider.

So as to whet your appetite for thinking outside the box, as they say, how would one feel about building circumstances where one would be relieved of paying any property tax? How would the state and local governments operate if all income tax was eliminated and a consumption tax was put in its place? Imagine what might be the potential economic boom if more states would join the “no income tax” revolution.

The demand for preserving the rural lifestyle is compelling, so let us find ways to keep people on the farm.