It is often said, and correctly so, that the hallmark of the American dream is homeownership. This was intentional at our country’s Founding. James Otis famously said, “A man’s house is his castle,” pointing to the essential link between homeownership and liberty (See “Against Writs of Assistance”, 1761). And James Madison ensured that this link would be preserved, by including protections of property rights in the Bill of Rights, under the Fifth Amendment.
One of the greatest barometers of the success of the American Experiment through our history has been the ever expanding portion of Americans that own their home, proving true that this indeed is the land of opportunity. Overall, since 2004 and according to government figures, the rate of U.S. homeownership is just over 69 percent — an all time high. Minority homeownership has eclipsed 50 percent for the first time. For many (most?) Americans, homeownership is the principle vehicle for building wealth.
So, most of us own our homes.
Or do we?
A story in yesterday’s USA Today shows that, fundamentally speaking, homeownership is an illusion — and that we are, in fact, serfs.
In the article, “Property Taxes Up as House Prices Fall,” the implication is clear: failure to pay ever increasing taxes to the feudal lord may result in your home being returned to the real owner.
The fundamental nature of property taxes means that “homeowners” are forever in debt to the government or governments that demand that tax. You may pay off 100 percent of your mortgage to the bank and thus “own” your home outright, but you can never pay off the tax collector.
This fact is why I have long held that property taxes are the most sinister of all taxes, philosophically speaking. Almost every other tax you can substantially avoid. Income taxes you can lessen or even eliminate through a variety of means, including charitable deductions. Sales taxes and tariffs you can avoid by avoiding consumption. And in both cases you are not repeatedly taxed on the same dollar earned or spent. You are only taxed more as you earn or spend more.
Not so for property taxes. You buy a house (or a car, here in Virginia) and you have all sorts of taxes that come out of the initial purchase. And then you will be taxed again on that same purchase in perpetuity, for every year after based on its assessed value. And if through either investment to improve your property or through the good fortune of the area market the value of your home increases, the tax man will demand even more money from you.
Why, your house itself will be taken, of course! Not right away, perhaps. The government will probably demand you pay through legal sanction. Failing immediate compliance it may place a lien on your wages. But ultimately, if taken down the road far enough, the government can and will take what is fundamentally its own, by logic of the matter: your house. For instance, in the state of Pennsylvania an estimated 20 to 30,000 homes are taken from individuals and families every year as a result of property taxes. (Source: S.T.O.P)
Rather, its their house. Meaning that in reality, the property taxes you and I pay are really rental payments.
What right does any government have to do this?
Compounding the issue is the regressive nature of property taxes, placing a disproportionate burden on those with less disposable income. They are so, for the simple reason that property taxes often consume a higher percentage of a lower income budget than they do of a higher income budget.
As the USA Today article explains, when the assessed value of homes — i.e. paper wealth — goes up, as it has with the housing boom these past few years, but liquid incomes do not go up nearly so much, suddenly lots of lower and middle income homeowners are in serious jeopardy of losing their homes. The current situation is even worse, because the market price of homes has gone down in recent years, but the tax assessment in most cases lags behind, assessing homes at a higher value than the market says they are worth.
Even the liberal American Association of Retired Persons has come out against property taxes for this reason, including in their national policy the following statement:
“Property tax is the single most burdensome tax for many low-income and older persons. States should broaden their method of financing public education, thereby taking some of the burden off the regressive property tax.”
Through the proliferation of property taxes we have undermined our property rights, turning on its head the understanding America’s Founders had of the concept and its importance. Consider the words of James Madison, from his magnificent letter, “On Property”:
“Government is instituted to protect property of every sort; as well that which lies in the various rights of individuals, as that which the term particularly expresses. This being the end of government, that alone is a just government, which impartially secures to every man, whatever is his own.”
The emphases are Madison’s. Note how he stresses the word “own.” Can we still say we truly own our homes? Your answer will depend on where you live.
The retort to be anticipated is this: taxes on property are the cost of living in a local community, providing for upkeep of roads, sewage systems, water and electrical lines, and police and fire services, among others. It is a social compact, if you will.
But this doesn’t make it better. Rather, this is an almost exact definition of medieval feudalism. Under this system, serfs were offered protection (the social services of the day) by the lord of the land in exchange for their labor on land leased from the lord. The feudal contract was a reciprocal agreement: in return for protection, the serf would reside upon and work a parcel of land held by his lord. The structure of the house was considered part of this land, and thus was not owned by the serf.
But the serf was fundamentally not free, nor did he own any property to which the lord did not have power over. And ultimately, the math for the exchange doesn’t add up.
Serfdom is not freedom. Nowhere is this seen more starkly than in the many thousands who lose their homes to the government through no fault of their own.
Given the link established by the Founders between homeownership and liberty, then, property taxes represent a fundamental abrogation of the American dream.