Tuesday, January 2, 2007

The trouble with rebates for renters

Left in the West makes a good point about the plan that Rep. Mike Lange (R-Billings) has proposed, namely to extend in some way the proposed one-time property tax rebate (that both Democrats and Republicans agree on) to renters. A similar proposal has been made by Rep. Kendall van Dyk (D-Billings), but there isn't as much cognitive dissonance in such a proposal coming from a Democrat, as will be noted below.

LITW correctly points out that in a Republican plan where all property owners would get property tax cuts, this would mean that a landlord would get a tax cut and his renters would get a "rebate," amounting to a double "rebate" on the same property.

It is diappointing to see a proposal for a double rebate coming from a member of the GOP, a party that opposes double taxation (such as the death tax and taxes on stock dividends) as a matter of principle. One hopes that Rep. Lange, in his desire to please his constituents, simply didn't think this one through. He may just be engaging in the art of the possible, but if so, this should be stated forthrightly.

One could make the argument that the budget surplus reflects excessive property taxes paid, part of which came from renters via higher rents. By this argument, since the rebate part of this plan is intended to put a floor on the amount of the budget surplus return that someone gets, the renter is getting back what he overpaid.

That, however, is stretching it. More realistically, renters will get the benefit of lower property taxes in the same way that they suffered from higher rates -- indirectly. Rents should rise more slowly than would otherwise be the case (has anyone ever seen their rents actually drop?)

At the end of the day, for a Republican to want to hand out direct property tax "rebates" to people who don't directly pay property taxes looks suspiciously like pandering for votes by mailing out government checks -- something that Republicans should, at least in theory, be in the business of avoiding.

A thanks to LITW for picking up on this flaw in Rep. Lange's idea, and also for supporting the Governor's plan over that of Rep. van Dyk -- since of the two, the former is certainly superior, both conceptually and practically.