There is, as you have heard, a petition going around calling itself “AxMITax,” purporting to have an easy way to eliminate all property taxes by fiat. While I’m all for the concept of lower taxes, this is based on a wildly faulty understanding of taxes, doesn’t work mathematically, and diverts resources away from doing what we need to do to win elections.
Bumper sticker slogans don’t often make good policy. People in New York are about to find this out, good and hard. They elected a bumper-sticker communist as their Democratic nominee for Mayor, and Dems always win in New York. Everyone with an ounce of common sense knows that closing jails, defunding the police and operating state-run grocery stores don’t solve their problems with crime, police brutality and high prices. They will, in fact, make things worse. Their slogans might show well on a bumper sticker, but they don’t work practically.
Same with AxMITax. I have asked repeatedly where the replacement source of revenue can be found. Many states have shifted tax burdens from one type to another, like between property, sales and income. The majority of the growing states in the US, blue and red, have worked to lower their state’s income tax, as that leads to economic growth. (We should, too; another story for another day.)
But this bumper sticker has no replacement revenue. Their “plan,” as best as I can figure it out, is that they hope that the State will find cost savings in their budget, and then send the results of those cost savings to localities to replace property taxes.
As the great Herm Edwards once said, “a hope without a plan is a wish.” There is no identification anywhere what the State can cut, or how much. They point to an $80 billion budget, and claim, “there must be cuts somewhere.”
That fails to understand how our State’s budget is created. First, about half of that $80 billion is Medicaid funds, directly from the Federal Government. If the State finds cost savings in that area, those savings go directly to Uncle Sam. There’s no there there.
Next, about a third of the remainder is other State Restricted Funds. Those are funds from taxes and fees from a particular user for a particular purpose. A great example is gas taxes, which must be used for roads. Is there a person in the State of Michigan who thinks we should find cost savings on roads and use that for something other than fixing more roads? I don’t know one.
A third of the remainder is the School Aid Fund. Those funds are collected statewide and spent locally. Lansing doesn’t have much control over how that money is spent, and the wise Republican budget presses that even further in their latest effort, providing even more autonomy to local schools. As a result, there is no amount of cost savings in schools that will flow to other parts of the budget.
The remaining portion is the State’s General Fund. Surely, there are cost savings there, right? Probably. But there are two small problems. The State’s General Fund includes revenue sharing for (you guessed it) municipalities. So the plan is that the State is going to cut funding to municipalities to fund more to municipalities. Does that make any sense?
The larger second issue is the size of the General Fund. It’s about $14B. The amount of property tax collected in the State of Michigan last year was around $17B. That means you could shut down every part of State Government—state police, state parks, other state services—and you’d still be way short. The proposal can’t get its basic math right.
In addition to the obvious calculator issues it has, the proposal relies on the wasteful State Government to somehow find religion and cut, as the key feature of the proposal. Is there any reason to believe that the legislators in Lansing will do that? They’ve never done it before, and they won’t do it now.
A few more thoughts. Let’s say we did away with property taxes and replaced them with sales taxes. To generate the necessary additional $17B in sales taxes, we’d have to increase our sales tax from 6% to 17%. That needs no further comment.
I’ve heard it said that if you don’t pay your property taxes, the state can take your home. True, but now that’s only to the extent of the taxes you owe; someone failed to update the AxMITax team on the recent US and State Supreme Court rulings. Regardless, if you don’t pay your income tax, what do you think the State and Feds can do? They can take your home, your car, your bank accounts, and everything else. The property tax is the only one that is “in rem;” the State can’t go beyond the property to seek repayment.
Finally, the vast majority of property taxes are collected locally and spent locally. All property taxes must, by law, be put up for a vote of citizens in the first instance and then periodically. If you don’t like how your local government taxes or spends, by all means, exercise your right to organize and vote. Many local groups have, including the wide rejection of a massive new school tax in Saginaw. Great work, by them. But if you can’t win that debate locally, how are you going to win it statewide?
Go to your localities. Demand information. Review the materials. If your property taxes are being misspent, go get ‘em. But this petition drive isn’t that. It is misguided, mathematically erroneous, and a waste of our volunteer time.