Each Generation’s Duty to the Next
One odd feature of property taxes is that homeowners pay based on the assessed value of their home – not on how much of that value they own.
Consider two neighboring, identical houses. One is owned by a retired couple who paid off their mortgage a few years ago. The other is owned by a young family that just moved in. Because it makes the math easy, we’ll say both houses have a market value of $1 million. At a 1% annual property tax rate, both households would be paying $10,000 a year in taxes.
But consider how odd that result ends up being. For the retired couple with a paid-off house, that $10,000 truly does represent 1% of the total wealth captured in that home. But for the young family, which just put 20% down and is paying off the rest on a 30-year mortgage, that [ $10,000 / $200,000 ] = 5% of what they actually have as their own!
The bank owns four-fifths of the property, but the home “owners” get the joy of paying the bank’s share of the property taxes too. (And now consider the math for renters.)
It used to be that the mortgage deduction on federal income taxes helped correct some of this distortion. But with the huge expansion of the standard deduction, many families are no longer hitting the threshold where itemizing helps.
So why does this matter? Well, as you may have noticed, Washington has a bit of a taxation issue right now. One of President Reagan’s most famous lines is not a completely unfair way to describe the way the legislature has gone about imposing new taxes the last few sessions.
One of the clearest distinctions in this race is that I support the new Washington state income tax. My opponent does not. People should know that about both of us.
But this new tax can’t just be additive. If that law passes constitutional muster, the state legislature must use this new, consistent source of revenue to reform the current system and build a better tax code. One that truly eliminates regressivity, encourages investment, helps grow the economy, and doesn’t unfairly burden the young families or small businesses that otherwise can’t afford to start here.
Which brings us back to where we began. One proposal that polls really well is property tax exemptions (or reductions) for seniors. No one wants to see older individuals forced out of their homes because their tax burden is too high. And frankly, older folks vote at much higher rates than young people do.
But is it really generationally fair – as in the example above – to pass an exemption that reduces the effective property tax rate to 0.5% for the retired couple, while keeping the effective rate of 5% for the younger one? And doesn’t incentivizing higher property values for people who fully own their homes lead to even more opposition to building the kind of housing supply we need to make housing more affordable and help working families get ahead?
One of the wonderful things about the community I live in is how much our older residents want to lift up our younger ones. Our Walla Walla school system is blessed by all the support we receive. That same sense of generational support has to infuse our broader policymaking.
Eleven years ago, I ran for the school board because I had young kids and wanted to help build the best school system possible for them and their peers. As my kids now head toward adulthood, I’m running for this new role because I see all the ways the world their generation is graduating into isn’t set up for them to thrive.
It will take hard work and hard choices, but each generation inherits the responsibility to renew and pass on the promise of the American Dream. It’s our turn.
Photo by Vitaly Mazur