A Property Tax Alternative: The Home Consumption Tax

Jake pursues Daniel across the lawn for non-payment of property taxes.

Big Tax Increases

Last year my property taxes increased from $740.06 to $938.13, an increase of 26.76%. This year my taxes were raised to $1,062.94, an increase of 14.22%. So over the last two years the increase is an enormous 44.8%. As a software developer you might think my pay increases would counter this raid on my bank account. Really? 2006 saw a 3.8% raise and 2007 delivered a 5% pay cut. Additionally, in 2007 my wife switched from full-time to part-time work. Before kind hearted soul you rushes to send me a check I hasten to add my finances are in very good shape.

Property Tax Defects

If my property taxes seem low I must point out dear reader that compared to other states they are indeed low but in Utah we have a lot of other taxes to pay. My property taxes are in line with what my neighbors pay. So rather than write a post that only complains, I would like to propose a solution. But first let us look at the defects in the current system:

  • Assessments are hard to kept current.
  • Large increases in property values bring government tax windfalls.
  • Property improvements without a permit escape taxation.
  • The burden is on the homeowner to prove false an over valuation.
  • You can lose your home if property taxes are not paid.
  • A bureaucracy is needed to run the program.

I am sure you can think of some more problems with the way property tax is administered.

No More Property Tax

I sound like a campaigning politician with my No More Property Tax mantra. But consider that the quickest way to reduce cost is to cut out the overhead and/or simplify the process. The taxes must be collected so the key is to use an existing system of collection. Now it would seem fair to tax on something related to the property. In addition the tax should fall a little heavier on those able to pay.

Home Consumption Tax

Any heading that has Tax in it is not a very pretty sight. Nevertheless, as a separate line item on your utilities will appear a Home Consumption Tax or HCT. These are the utilities that will have the HCT:

  • Electricity
  • Water (excluding secondary water)
  • Garbage
  • Natural Gas

I was tempted to add phones to the list but they are heavily taxed already, and VOIP phones would avoid the tax. Besides, phones consume very little resources. Each of the items in the list can have a different tax rate if desired. Also the option to exempt from HCT the first $20 of say, electricity and natural gas could be implemented, thus helping the poor.

Summary

  1. We have scrapped an inefficient system.
  2. Utilized an existing collection process to fund county government.
  3. Based our new HCT on consumables that are billed monthly instead of yearly.
  4. Significantly reduced the chances of home loss through non-payment of taxes.
  5. Eliminated huge tax windfalls.
  6. HCT assessments are automatic and accurate down to the last drop, amp, and BTU.

Well, my friends, pick holes in my proposal but don’t tax me too much with your contrary insights. I do believe my HCT would work rather well.

Comments

  1. Well said

  2. here is my idea on the Consumption Tax and how the republicans can get there mojo back
    do you do the right thing – not smoke, eat right, go to school, not break the law, try to recycle
    if you do these things and are poor that a problem for me
    ask the average joe and the American people do the go to work and pay taxes to support people
    who smoke, don’t eat right (see the movie supersize me – think of the extra heath cost (soon under obama
    tax cost),dont go to school,etc
    its time for people and American people to pay based on results and stop living beyond there means and having the
    average hard working American pay for it
    my plan
    keep the income tax on people above 125,000 or so – that’s just a number i picked it can be debated and go up or down
    then get rid of all other taxes – people and corp
    then have a consumption tax on bad things
    no tax on non processed food and recycled items, other good things that society can decide on.
    tax fast food, smoking the most (i personally would legalize drugs (expect under 21, get caught selling or giving to kids life sentence) and taxes them the highest (call it the new death tax – to pay for there death and heath care cost) and require you to show you have 40 hr a week job to support the habit – because you never going to stop someone from using that wants to)
    tax the rest of products a normal rate
    instead of having a jail system like today for nonviolent offenders have weekend workcamps – if you steal or have a dui work weekends for a couple years (like 10 to 15) on a farm – that will have end illegals – if the farms and other low paying jobs are done by lawbreakers than the demand for illegals will dry up and stop both it and crime.
    industry that provide high paying jobs (like auto that make high mpg cars) that we want here in the USA – don’t tax what they sell or what the buy to make the product
    from the taxes from smoking, fast food, other consumption products give a reward for completing school or training for a new job
    you the average Joe that does not smoke, eats rights, recycles and goes to school will pay less and have a better life
    the coming baby boomers that are going to live the work force is going to mean either we start rewarding for recycle and doing the right things or lower are stardered of living

  3. James, thanks for your comment, I can see that you put a lot of thought into it. It is always a good idea to reduce or even eliminate income taxes and replace them with indirect taxation like the sales tax. When I lived in England it was hard for my employer to get us to work overtime because the extra money pushed us into a higher tax bracket. When my wife and I had to pay the Alternative Minimum Tax we responded by having her work two days less a week to reduce income. So in both cases the government lost income as a result of ill-conceived tax policy. There needs to be a tax system that encourages all of the workforce to earn and not just the rich or the poor. You have some good ideas that might be discussed in some future post, as soon as I can educate myself a little better. Thanks for stopping by.

  4. MarbellaPropertyGuy says:

    I agree with you 100%. There needs to be something put in place to help everyone struggling to make ends meet right now.

  5. There must be a good action to make it right.

  6. Congrats for nice post Rickety . As you mention about some taxes including Home consumption tax can you provide some more info on the same (only four parameters in it or more than that) would be great help for me , I am sales professional and looking for investment in Property .

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