Rights, Land Use, Taking and Taxes

My recent post on Kelo warranted a comment and then an extended response from Mr. Heidelberger of Madville Times which concluded as follows:

Mr. Woodring is right to lament the Kelo decision. I lament it with him. But remember: a rejection of Kelo is a rejection of the capitalist imperative. Some things, like having your home on your terms, are more important than money.

“a rejection of the capitalist imperative.” What is this imperative? Does it mean that all other needs, desires, or rights are subsumed into allowing whoever will make the most of any given resources to do so? Therefore, we would permit the taking under Kelo because the new owners were going to be better capitalists than the old ones? If this is the meaning of the imperative, then I must say that I and (I would believe) nearly all of my fellow capitalists reject such an idea as being incompatible with the private ownership of property.

Kelo was not a question of capitalism run amok so much as it was a question of rights: the city’s perceived rights against the homeowner’s rights. In the penultimate paragraph of his piece, Mr. Heidelberger says the following:

Forcing a property owner to sell that property to another private party who can make more money on that property is akin to forcing construction workers and custodians to move out of town because we want our community to be populated by doctors and lawyers and other wealthy folks who can buy more stuff and generate more sales tax (Vail is like that). Rights should not depend on your economic output. Kelo and the slim liberal majority got that point dead wrong.

I do not know how these “construction workers and custodians” were forced “out of town” but I think it unlikely that they were made to turn over their property to someone else. They may well have been “forced” out of town by the cost of real estate (or more properly by the cost of paying the property taxes on that real estate), but that is another issue entirely, as I note below in the section on taxes. While “rights should not depend on . . . economic output” one does not have the right to affordable housing or a well-paying job.

One does have the right to strive for these things and one has the right to hang on to the things which one has–regardless of anyone else being able to do more with it. Kelo went awry when the court found that the taking was warranted because the city’s desire for more revenue trumped the homeowner’s right to keep their property and live in it. One of these parties had rights, the other one had wants: the court ignored the rights and elevated the wants.

As is noted in the following quote, land use rights (including the right to do nothing with the land) have a long history in the United States:

Under the feudalistic system that governed Europe for most of the second millennium and prevailed in Hawaii until the mid-19th century, land use was a privilege granted only by the king. For most of American history, land owners had a right to use their lands as they saw fit, provided they did not create a nuisance for other people.

We have building codes and more (association covenants, etc) which restrict and constrict property owner’s rights with regard to land and its use. While I find many of the building code specifics to be onerous and even petty, I can see a case for having them. If one doesn’t want to deal with such, then one has the option of moving elsewhere (that is, of avoiding the contract). If one does not wish to come under the rules of some association’s covenant, then one should choose a different neighborhood. However, if Kelo is permitted to stand, we can’t get away from unfair takings without leaving the country.

Let me address the issue of property taxes:

In the colonial age, the property tax was far more fair and progressive than it has become.Back then, most property produced income. Now, as Gordon noted, “property is a terrible measure of a family’s ability to pay taxes. Almost all privately owned property today is income-absorbing.”

In other words, property used to be the best measure of economic activity. But now, most families don’t make money from property — at least not until they sell a house.

[…]

Property taxes flunk every test of fairness. They bear no relation to the taxpayer’s ability to pay. They are arbitrary, varying with the ups and downs of the housing market and the ability and fairness of individual assessors.

Property taxes (whether $1700 for a modest lakefront home or $360 for a small-town dwelling) are a horrible way to reward people for their success, such as it may be. My own home is assessed at a certain value, based on the incomplete status of a massive renovation project. When I get done with the project, I will be assessed at a substantially higher amount. Why? Because the house is now worth more. Of course, the services which the town provides to me are not worth more, but that is immaterial in the calculation. One of the saddest things to me is to hear is that someone’s property was sold for failure to pay property taxes.

I understand the need for taxes–since I am a supporter of limited government rather than no government at all. And, speaking of government, let’s talk about New London for a moment. If you believe as I do that any government entity should exist to protect its citizens and provide a safe context for “life, liberty and the pursuit of happiness,” then the behavior of the city is troubling. The city wanted greater tax revenues (property, income, etc) to the end that it could do more, be more, create jobs, whatever. The problem is that what New London was interested in was perpetuating itself. As a result, the city became an entity in competition with the homeowners.

If we were able to replace property taxation with another form of taxation which was equitable (and perhaps based on consumption) we would no doubt see the number of Kelo-type situations shrink to a very few, or perhaps even go away altogether. However, the possibility of the property tax system being changed is probably smaller than the the chance of the US Supreme Court reversing itself on Kelo–and that seems unlikely in the near future.

3 thoughts on “Rights, Land Use, Taking and Taxes

  1. I mention the income discrimination as a hypothetical illustration, not with a specific instance in mind. However, your mention of building codes connects with an article my wife read to me from Dwell this morning: a Colorado development requires houses be no smaller than 2500 square feet. My house is 1228 square feet. I would effectively be excluded from building in that neighborhood, for no greater reason than that the neighbors want big houses to boost their own property value. They thus impose unnecessary consumption on any who wishes to enter the community, effectively limiting those entering the community to those with the extra income to waste on such unnecessarily large houses.

    Now I will agree, such building codes don’t represent true capitalism or any sort of reasonable Smithian government check on capitalism. They represent the same value failure as Kelo: the view that a home is nothing more than a financial asset and that government has a right to force people to engage in exploitative financial activity or step aside in favor of those who will.

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