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As you may know, each week I have been writing about what I am calling the Taxpayer’s Bill of Rights. Last week I discussed what is wrong with taxing incomes. This week I will expose what is wrong with taxing property. Property taxes come in two forms, personal property taxes and real estate taxes. In Nebraska personal property taxes are imposed on all business equipment, whereas real estate taxes are imposed on commercial, residential, and agricultural real estate.
The third right contained in the Taxpayer’s Bill of Rights states: “The State of Nebraska shall never impose or collect a tax on the property already owned by its citizens, regardless of whether such property is real or personal, tangible or intangible.”
The primary problem with property taxes is that an owner never fully owns the property once purchased. If you don’t believe me, see what happens if you stop paying your property taxes. Whereas personal property taxes may expire after a period of time, real estate taxes never expire. Consequently, a person never truly owns the home or the land he or she buys.
The property tax on real estate is the tax that never ends. As Alexander Hamilton warned, it is a tax that “continually plunders the people.” Any tax that continually plunders the people is morally wrong because it undermines a person’s basic right to fully own property. The right to fully own real estate originated in the Law of Moses.
The real estate tax means that the State is a forever part-owner of your home or property. Because the State is a part-owner of your home or property, it effectively gives the State a property right in you. In other words, you as the landowner no longer may act as the sole decision-maker regarding the use of the land. What you do with your land now concerns the State.
Because the real estate tax prevents a person from ever fully owning their own home, those who purchase real estate become eternal slaves to the State. This makes retirement especially difficult. In order to retire, a person must have enough income to continue paying their real estate taxes for the rest of their life. This implies that homeowners effectively become slaves of the State until the day they die.
When real estate taxes are imposed on commercial properties, the prospect of starting a small business becomes a much more difficult and daunting task. Many a business has failed in Nebraska because the business owner could not pay the commercial real estate tax. Because Nebraska ranks as the seventh worst state in the Union for property taxes, the best thing we could do to attract new businesses to our state is to remove the tax on commercial properties altogether.
Repealing the property tax is the best thing we could ever do for our State. As Sen. Steve Halloran of Hastings once said, if we ever repealed the property tax, “We would have to build a wall around Nebraska to keep the people out…and Colorado would pay for it.”