Assessing a failure

Real estate taxes are all out of kilter.
Food from the grocery, eating meals out, tires, gas, vehicles, staying in a hotel room, paper goods, income, savings — all are taxed at a much higher rate than real estate — and reform is needed.
Though I get a queasy feeling each time my real estate tax ticket comes, it's easy to see that taxes on land are the best deal out there when it comes to government tithing.
They take the value of the land and the value of any improvements there upon, divide it by $100 and base the taxes on the remainder.
So if a house is $100,000, they calculate the taxes on $1,000, whether that land is on a mountain peak, a drained wetlands, a riverbank, a former cabbage field, a cut down forest, in the county or in the town.
And that's the crux of the problem.
Every budget season, I hear concerned citizens tell local officials that their governments should be run like a business, and I agree with them fully.
However, our real estate tax system with its generally flat tax on property, with the exception of large tracts of farms and forests enrolled in land use, ignores the economic laws of supply and demand.
Having just been through a county-wide assessment, I am aware that the system used to come up with values does consider variables of scarcity — such as putting a higher price on mountain land or tracts on the river.
But it's when comes to the actual set tax rate, applying it equally across the board, that's the part that makes the real estate taxes (as compared to income taxes, for example) regressive.
This reflects an oversight in our whole economic system — the failure to account for resource depletion.
Farmland, wetlands, forests, they all have intrinsic value. Just to belabor the obvious, farms produce beef, chicken, wheat, corn, etc. to supply food; forests supply timber for building; and wetlands contribute in a more abstract way to world health and biodiversity.
But real estate taxation in the current system will always value wetlands being filled in and farms being split up into umpteen housing tracts in a subdivision higher than it was as productive land.
That is the rule in the economic system that counts on resource-intensive development, i.e. "growth," as progress.
That's okay as long as there are natural resources to feed that growth. But the last time I checked the cliche about land that goes "they're not making any more" still holds true.
Real estate taxes at present rewards the consumption of open land by encouraging people to look for the tax impact will be the lowest on them.
That is not within a town's limits, as people who build there will be subject to both town and county taxes.
(Virginia differs from many states in the application of real estate taxes from towns, counties and cities. In states like Indiana, Illinois and Ohio, schools, fire departments, libraries, townships and more all have independent taxing authority in addition to the localities. The way Virginia allows cities to collect taxes without also the county being able to get a share is also an exception to the rule.)
The "double taxation" for people who live in municipalities is exactly backwards, allowable because the assessments do not take into account the intangible values of open space.
The vast majority of people should be encouraged to live in the world's urban centers, not driven out, I say.
To fix it, government officials, academics and economists would have to add to the equation the true value of open land and the negative impact of its loss.
The result, I expect, would be the inverse of today's flat real estate taxes.
People in town would see a low tax rate, as would owners of huge tracts of preserved open land, perhaps comparable to the way property is assessed today — at less than 1 percent.
Single-family dwellings out in the boonies would pay considerably more for the privilege of changing productive land out in the county to unproductive land.
The more scarce land is, the more the owners should have to pay taxes on it, applying the rules of economics to the taxing paradigm. Therefore, taxes would be the highest for land at a mountain's summit and at the river's edge.
And if owners are willing to pay extremely high taxes to build their 4,000-square-foot mansions across a couple acres, then wonderful, let them do it.
I understand that there's something for everybody to hate about this idea.
People who want luxurious homes in the middle of nowhere with a lot of elbow room will say that's their right and government doing anything to discourage that would be nothing short of communistic.
And people in urban areas would get a lot more development around them and a lot more neighbors, which normally leads to violence and the necessity for police and other emergency response.
This is not something that local governments could pull off alone — the tax system would have to be revised on a national and state level in order for true values of development to be considered and to implement something that would encourage conservation of natural resources.
To try and make an apt analogy, let's consider an independent trucker who runs his own business. Say that he runs his truck hard to make a living, but fails to account for depreciation and the need to eventually replace the truck.
Failing to sock money away will prove fatal to his business and his livelihood once his sole truck wears out and he has no capital to reinvest. That's exactly what we're doing with our land and the minerals in it, as well as water and air.
Unchecked development and overconsumption of natural resources will end one day, no matter what we do.
The tough choices that humankind are propelling ourselves toward amounts to whether we just want to continue the unrealistic attitude that we can burn through all our resources or adopt a model that actually accepts the essential value of controlling development.
People need to correctly assess the failures here.
What worries me most is that the system doesn't even look broken yet, and it won't look broken until a crisis emerges involving something that's hard or impossible to replace.

• First published in The Gazette , Galax, Va., November 2008.