With a baseline of public sector services and benefits available to all, afforded by progressive taxation, we knit together diverse citizens of uneven means and needs to create community. The animating ethos of the public sector is empathetic collectivism. It empowers us to build a civil society despite our inequality and diversity.
Our national motto proclaims: E Pluribus Unum. Out of many, one.
If you are among the fortunate, realizing extraordinary personal gains from our economic system, be sure to convey your outsized contributions to the collective with a spirit of gratitude for your prosperity, not with grudging contempt for your greater burden.
To whom much is given, much is expected.
California’s local government agencies, including city and county administration, police, fire, libraries and public schools, are funded with property taxes assessed and collected by counties. And while the benefits of public agencies are evenly available to all, taxes to pay for them are unevenly imposed: only on residential and commercial property owners.
Even among property owners, property taxes are unevenly imposed. The burden of funding local government falls heaviest on wealthier people, since taxes are a function of the value of the property: the higher a property’s value, the more property tax they pay, and so the more they fund local government. We consider such unequal property taxes equitable because the tax burden scales with property value and wealth. Strict equality in property taxation is not a guiding principle, nor is equality of apportionment of benefits of the services funded by property taxes.
Equality is not our goal. Equity is our goal.
House renters and commercial property lessees are not directly assessed property taxes, so they don’t directly pay for local government. Investment and vacation properties are a third of California real estate, so a significant portion of local government funding comes from property owners who don’t live in the communities to which they pay these taxes.
Wealthy absentee owners pay taxes that fund community services, but they may receive a wee fraction of the benefits, since they don’t actually live in that community. Unfair, you say? Hey, nobody forced you to buy a vacation home. Property taxes are just part of the deal—for all owners, wherever they happen to live.
So public sector benefits are available to all residents and businesses in a community, and wealthier people pay more of the costs but they don’t receive any more benefit than others. In fact, wealthier people may receive less benefit than others, such as when a family chooses private schools for their kids over public schools. Conversely, older citizens may use public services more than younger citizens, such as the public library or community center, even though they tend to pay less of the costs. Proposition 13 intentionally suppresses property taxes for longtime, typically older, property owners, transferring the cost of public services to typically younger, more recent home buyers.
Whether you were born into prosperity or became prosperous through circumstances and effort, you’re an economic winner.
My accountant once said, and I think it’s apropos here, “We pay taxes when we do well. Taxes are a consequence of good fortune.” The more you prosper in our economic system, the higher your earnings and the more real estate you buy, the more taxes you’ll pay. ‘Most everyone wants to be an economic winner.
It’s not considered fair and equitable to expect people of modest means to pay the same taxes as the wealthy, either in rate or amount. Our federal and state income tax systems minimize or eliminate income taxes on low earners and ratchet up tax rates for high earners. The California property tax system is similarly progressive; the wealthy pay more.
It’s no exaggeration to say local governments and services are funded by progressive property taxes on the more fortunate, and the benefits of public services flow disproportionately to the less fortunate. In this way, our public sector is strongly redistributive—by design.
Allow me to recap: Local government agencies and services are funded unevenly, with more of the cost borne by wealthier people who own more, and more expensive, real estate. The people who can pay more do pay more, and the people who need more benefits receive more benefits. We consider this system fair and equitable.
Some people may need to be reminded of the public sector ethos from time to time. Wealthy taxpayers, unhappy about their greater tax burden, may be heard complaining they’re being taken advantage of, or claim they deserve more rights, benefits or concessions because they pay more taxes.
The public sector wasn’t designed to be ‘fee-for-service’ or ‘pay-to-play’ like the private sector. When the wealthy cry unfair, we should remind them to check their privilege. They’re already economic winners. Equitable is fair, equal is not fair.
If the guiding principle for the public sector was strict equality, the wealthy could have a legitimate gripe, but the guiding principle is equity, so their complaints fall on deaf ears. Who among us feels bad that the guy who just bought the giant new, beautiful home pays a larger property tax bill? Nobody pities the super wealthy guy complaining about his taxes, except maybe his equally wealthy neighbor. Certainly, the moderately wealthy, the average earner and the low earner are unlikely to protest high taxes on the most fortunate.
I’m not necessarily arguing that public sector redistribution is good or bad, I’m simply pointing out that it’s our system—and not by accident. We put more of the tax burden for local government on citizens best able to afford the assessments long term. This levels the playing field among members of a community, transferring value down from the top economic strata, creating greater opportunity for those who otherwise would have less.
Some economic inequality is normal, inevitable, even desirable, but communities or nations marked by high income inequality suffer socially, so a modicum of redistribution from the wealthy to those of modest means is prudent and practical.
Even in a community deemed wildly prosperous the principle of equity and the justification for redistribution apply. Community members of all means and needs are meant to enjoy equal access to benefits of public services, but a greater share of the costs falls to wealthier members and a greater share of benefits flows to less wealthy members. We consider such redistribution of value fair and just in the public sphere.