Several years ago, even prior to being a homeowner in Montgomery County, Maryland, I came across this article by the fantastic personal finance blogger ‘Financial Samurai’. I majored in economics from the University of Maryland, so I always had an interest in this kind of thing. But even more so then basic economics, personal finance, and political science or ideology, one basic principle I’ve always believed in is: government transparency.
Specifically tax transparency and showing residents the immediate true and full cost of their votes and preferred spending.
It is the only way to get a mass of regular, “normie” people to care about local politics and perhaps throw out the incumbents. Get a “clean slate” if you will.
“Sam” at Financial Samurai wrote back then: “I’m a big believer in equality, and therefore I believe renters should pay a “Renter Tax.” To calculate an equitable way to tax renters, what we do is capitalize the annual rent by a normal risk free rate of say 4%.
Say for example you pay $24,000 a year in rent. Divide $24,000 by 4% and you get $600,000. The $600,000 is the basis where you as a renter will pay 1.2% ($7,200) every year to the city, to also pitch in and support the schools and roads.
The Renter Tax proposition is a brilliant way to shore up any budget deficit the city or state may have, while creating a fair scenario for all people. Let’s create an environment where everybody proudly pitches in to ensure a harmoniously great nation for all our children!”
He is being a bit tongue-in-cheek, of course, but the overall message is spot-on. Renters need to understand, immediately, the full effects of their voting for big-spending Montgomery County politicians who use the people’s private property as a piggy-bank while simultaneously claiming that they can “cap” the rents people are paying to live or run a business through.
Understanding this very real relationship between higher taxes, more spending (especially at a higher rate) and higher costs of living for the working class, middle class and all classes in-between cannot happen under the current set-up because there is no tax transparency. We should demand it. All of us, “good government” renters included. Renters are seeing higher rents over time, yes. Property taxes are a real reason why! Many don’t seem to care or ask why – but if we had a true Renter’s tax or Council tax (as it is called in England) – many certainly would and in the year the tax was raised! All of a sudden, real questions might pop up as to why MoCo politicians grant millions to their friends or former employers in the MoCo “non-profit” world.
Once again, in closing we can go to Sam at Financial Samurai for the simple truth when it comes to ‘equality’ and basic cost accounting for more government spending:
The mindset of always raising other people’s taxes is embedded in America. However, in the long run, raising rents ends up hurting renters. Rents will simply increase to reflect increased expenditure by way of property taxes.
If you want more spending, please also agree to pay more taxes as well. It is wrong to raise taxes on one group of people without having to pay more yourself.
