Most people are troubled by our crumbling infrastructure, widening inequality, and massive underemployment. What if we could make a dent in all three?
What we should have done, of course, way back in 2011 when the President called a joint session of Congress to make the case for it, was put people back to work rebuilding America. Especially because long-term interest rates then were so incredibly low — the perfect time to finance public works that should last a century. We still should do that.
But our Republican friends blocked it, so I have this different idea. What if we:
- Launched a massive 15-year infrastructure program funded by . . .
- A 1% property tax — but only to the extent the value of your home exceeds $1 million. So right off the bat, 98% of Americans would be untouched. (The average home these days: about $180,000.)
Those with $1 million homes would be taxed nothing.
Those at $1.2 million would be chipping $2,000 a year into the Infrastructure Fund — 1% of the $200,000 above $1 million.
Those with $3 million condos would be chipping in $20,000.
If you bought this lovely 5-bedroom condo on East 22nd Street, you’d be chipping in $710,000.
But do you know what? When you compare the hardships such homeowners would endure with the hardships many of their ancestors did — the ones who built the infrastructure we’ve neglected — a 1% “mansion tax” on values above $1 million doesn’t seem all that onerous. (Even so, they should get thank you notes with each annual payment. Seriously! We should look for every opportunity to thank people for the contribution they make to our well-being, whether it is by cleaning our motel-room toilets or by chipping in $710,000 to rebuild our infrastructure.)
Maybe it’s a $1 million exemption on your first home, but just $500,000 on second, third, and fourth homes.
And maybe the same tax applies to your first, second, third, and fourth boats.
And definitely the thresholds should rise with inflation, so the tax doesn’t begin to bite more and more people.
But here’s the refinement I love: to avoid bureaucracy and appeals and all the rest, homeowners would self-appraise. And the reason it would work is that once you appraised your home for tax purposes each tax year, investors would be allowed to buy it from you at 20% above your appraisal.
Most homeowners — 98% of them — would opt out of the appraisal altogether: they’d just check a box: “$1 million or less, no tax due.” If anyone wanted to buy their home for $1.2 million (20% above the minimum threshold), they’d presumably feel as though they won the lottery — though they could turn it down, as explained below.
But if you valued your $2 million home at $1 million, to avoid the tax, someone could grab it from you for $1.2 million. So you wouldn’t.
If you valued it at $2 million, they’d have to pay $400,000 over market to buy it — so they wouldn’t.
If you valued it anywhere near fairly, you’d never have to worry about being bought out. (Why would an investor want to overpay by 20%?)
And there could be two “escape” clauses, just in case: You could “get out of” a forced sale by providing a licensed, arm’s-length appraisal showing that your valuation was fair; or by paying (say) triple the tax due on that appraised value.
There are roughly vaguely 3 million American homes worth more than $1 million . . . most of which, presumably, hover not far above the million-dollar mark, but enough of which are in the $3 million – $6 million range, let alone a lot higher, that a back-of-the-envelope guess puts the revenue from such a tax at (even roughlier, vaguelier) $50 billion a year (when you count the second homes and boats). That’s just a small down-payment on what we need to invest in infrastructure — but every $500 billion per decade helps.
Investment in infrastructure would provide a lot of jobs that can’t be outsourced, dealing with our underemployment problem . . .
. . . thereby tightening the labor market a bit, giving a little boost to wages (thus addressing our inequality problem) . . .
. . . and making our economic infrastructure more productive and competitive (helping us all).
And it’s just nice when your sewage doesn’t back up, your kids attend modern schools, and your bridges don’t collapse.
The overall notion is that as a nation, the balance between public and private consumption has for the last 30 years skewed a little too much toward private consumption. Not a lot too much, necessarily, but even 2% a year (say) really mounts up over 30 years — 2% that we should have been spending publicly (via taxes) on infrastructure but instead spent privately (via MasterCard) on things we don’t need quite so many of or quite so large.
Which is why we’re where we are today.
Ronald Reagan and the Republicans have demonized taxes and spending on anything but war — and they didn’t even tax us to pay for war, as throughout history used to be the custom. Instead, they slashed tax rates on the rich and borrowed to make up the difference, ballooning our National Debt, even as they let our infrastructure slowly decay. Now they want to eliminate the estate tax on billionheirs, decreasing the funds available to invest in infrastructure while increasing inequality.
But I digress.
A 1% mansion-and-yacht tax to finance infrastructure revitalization. Good plan? Bad plan? Refinements to my refinements? Thoughts?