For the second time in three years, Wisconsin Governor Jim Doyle has vetoed legislation that would have imposed caps on the growth of local property taxes. GOP lawmakers are threatening to keep on passing tax cap legislation until Doyle stops vetoing it.
Doyle is right. Property taxes are certainly high in Wisconsin, but given the state's dire financial straits it's important to come up with a solution that will provide tax relief to those who need it without breaking the bank.
Tax caps are not that solution. Artificial caps on growth in tax revenues is problematic for two main reasons.
First, these caps give tax breaks with no consideration to a homeowner's ability to pay-- basically asserting that no one, at any income level, can afford to have their property taxes grow beyond a certain rate. This is baloney. We know that property taxes are a lot more burdensome for low-income homeowners, taking a much bigger share of their income on average. This free-handed approach to tax cuts obviously costs a lot more than targeted tax relief alternatives such as a circuit-breaker or a homestead exemption.
Second, tax caps restrict the growth of revenues with no consideration for needed growth in spending. Lawmakers ought to be able to decide how much services they wish to provide, and then figure out a sensible way to raise enough revenue to pay for those services. With tax caps, it's a lot harder to lawmakers to come up with the money to fund education and other services. Of course, that's what the anti-tax advocates who support tax caps are counting on. But if Wisconsin lawmakers are going to scale back government (and I'm not saying they should), they ought to do it in an honest way that lets them evaluate the spending side and the tax side with as few arbitrary constraints as possible.
There's a lot of debate about the long-term impact of California's Proposition 13 tax cap. But the two most frequently cited effects are (1) less property tax revenue means public schools got a lot worse and (2) to some extent, impoverished local governments went and found other non-tax revenue sources to help provide services. Neither of these are really defensible as policy goals.