No Taxation Without Realization
By Martin Harris

A long time ago, in a far-away galaxy  --oops, that wasn't a different galaxy, it was Massachusetts before it became known as Taxachusetts—some of the locals objected to a new tax imposed by their royal government. It wasn't much as such things go – a few pennies on the pound, or well under one percent of Fair Market Value—but the locals responded ungraciously by dumping the tea in the harbor. In this violation of the Clean Waters Act they were incited to feats of carton-tossing by one Sam Adams, who went on to an illustrious career recognized, long after his death, by the marketing of an adult beverage bearing his name. He was something of a sloganeer, as well, suggesting to the uppity tax-protestors (their conduct was lamented by their betters in government, who worried that perhaps they had failed to educate the ungrateful rabble into understanding all the wonderful things they, the natural leadership, were trying to do for their children) that they explain their underlying principle as "No Taxation Without Representation."

That turned out to be a catchy phrase, even if one of the words has five syllables, something carefully avoided in modern political/philosophical debate, where monosyllabics like "Bush Lied", "Stop the Hate", and "Tax You, Fund Me" push the outer limits of proficiency-in-comprehension.

NTWR, it turned out, has its own Achilles Heel (a little Greek-mythology lingo, there) as described by Plato, who warned that democracies would last only until the majority figured out how to vote themselves benefits at the expense of the majority. Part of the  lesson (the ain't-it-fun-to-sell-tax-breaks-for-votes part) was gleefully embraced two millennia later under Vermont's legislative Golden Dome, where politicians created  Act 60 and then son-of-60, Act 68, whereby a majority of property-tax-payers/voters would be immunized from their own education-spending-increase decisions by shucking off  "extra" costs onto such attractive political-minority targets as  non-voting business- and non-resident property owners, and, of course, deservedly-attackable resident rich people, whose votes are too few to matter anyway.

The tea-tossers went on to perpetrate actual physical violence against their taxing betters, and even though we're told that wars never solve anything, it all ended up with Taxation With Representation, which actually worked (in terms of levies against property like tea or real estate) fairly well as long as 1. the taxers showed restraint in taxing because 2. the spenders showed restraint in spending and 3. the majority voters didn't stoop to shoving off their own spending wishes on a minority of others to pay for and, of course 4. that property values correlated predictably with income and ability-to-pay. Now, all of those once-accepted rules-of-the-game have been discarded.

There was, once, a fifth rule: that property-appraisals were revenue (tax) -neutral in that, with spending held level, a higher appraisal would merely convert, arithmetically, to a lower tax rate. That, too, is history in Vermont but not the other 49 states. Here, thanks to 60 and 68, a higher appraisal converts to a higher tax unless a few pennies are shaved off the official rate by a magnanimous legislature when they get around to it.  Because the voting majority benefits, no remedy short of tea-tossing and its follow-up seems likely.

Which leaves a fairly pathetic substitute argument: No Taxation Without Realization. This modern-day NTWR would require that unrealized (paper gains) in property value not be taxable, and that property Fair Market Value be determined not by a questionable appraisal process but by an actual sale, at which time a new FMV is set by the marketplace.. California has been on this form of NTWR since the mid-70's, and it works. The State has (like Vermont but not as severe) a middle-class flight problem, but the underlying cause is different. People flee California not because of property taxes but because of earthquake fears and other considerations not mentionable in a family newspaper. More next week.

Martin Harris is the former President of Vermont Citizens for Property Rights.