[Mpls] Property Tax: Progressive or Regressive?

[Anderson & Turpin]

> Carol Becker wrote (in earlier posting):
> <snip>  The property tax in practice is strongly regressive; there little 
> to no link between taxation
> and wealth, the incentives in the system are not what you want to create a
> healthy community, etc.  Not a good way to go.

Mark Anderson replies (in previous posting):
> That is an interesting supposition.  It certainly is counter to everything
> I've seen.  Do you have any evidence of the tiny link between (property)
> taxation and wealth?  I've always thought real property values to be a
> pretty good proxy for wealth (or better than anything else we have, at
> least).  That's why I think property taxes make more sense than income
> taxes, which are a disincentive to work.

Carol Becker replies:
Ah, the joys of being misquoted.  This quote comes from a discussion of the 
Pittsburgh tax system, which is strongly oriented towards taxing land much 
more heavily than property.  This has resulted in a strongly regressive tax 
system in Pittsburgh.

Mark Anderson replies again:
Misquoted?  I took it right off your e-mail.  I presume you mean I took it
out of context?  But I don't think that is true either.  If your QUOTE above
was related only to Pittsburgh, why were you discussing it on this List?


Carol Becker continues:
Are Minnesota property taxes progressive or regressive? In Minnesota, the 
true tax geeks turn to the "Minnesota Tax Incidence Study" (see link below) 
to get answers on this question.   

Mark Anderson answers this comment:
No, the QUOTE above discusses the relationship of property taxes to WEALTH,
not to INCOME.  The tax incidence report only discusses income.  That is one
of the problems with the constant focus on income; it doesn't take wealth
into account at all.  I think that a major benefit of a progressive tax is
it reduces the wealth gap between people.  In our highly governed society,
wealth often equates to political power, so narrowing the gap makes us more
democratic.  So I think there should be more emphasis on linking taxes to
wealth instead of just income.  I suspect that property taxes are much
closer to being proportional to wealth than they are to income.


Carol Becker wrote:
To give you a sense of the regressiveness of the property tax in Minnesota, 
for 2002, the amount of their total income that people paid in property tax 
(when you group people by income into 10 equal sized groups)
- 2.2 percent for the second decile (the 10% to 20% poorest Minnesotans)
- 1.8 percent for the fourth decile and 1.9 percent in the sixth decile (the

people right in the middle for income - between 40% and 70% in income)
- 1.0 percent in the tenth decile (the richest 10% of Minnesotans).
In short, the poor pay more.  The rich pay less.

Mark Anderson writes again:
The tax incidence report also shows that the most regressive taxes are
business taxes (or at least far more regressive than property taxes).  And
business taxes are even worse because they are also hidden taxes, paid for
by individuals in higher prices and lower wages.  Last time I mentioned this
you blew me off and waxed on about how the tax incidence report shows the
imbalance between taxes paid by the poor and the rich.  Of course that same
report shows that if we eliminated business taxes, then rich people would
pay a higher percentage of their income than the poor in this state.  A much
better solution for decreasing regressivity than higher income taxes and
LGA, which would result in a much more complex system and even less
accountability.

Mark V Anderson
Bancroft