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Book Club Review: A Good Tax, Chapter 2

June 14, 2017

This post is a part of our Local Government book club seriesJoin us in reading A Good Tax: Legal and Policy Issues for the Property Tax in the United States by Joan Youngman.  This week’s post focuses on the second chapter of the book.

When discussing tax policy, regressivity and progressivity are often used in conjunction with fairness, when that’s really not fair at all.  Fairness denotes a value judgement of who should bear the burden of a tax whereas progressivity and regressivity are technical terms used when evaluating the ultimate incidence of a tax.

Joan Youngman defines these terms in this excerpt from Chapter 2 of The Good Tax:

“A regressive tax falls more heavily on low-income taxpayers, taking a larger percentage of their income than it takes from those with higher earnings… A progressive tax, by contrast, constitutes a higher percentage of income as income rises”.

Regressivity and progressivity are much easier to define than to determine with regards to the property tax.  There are all sorts of questions to answer:

I don’t want to give it all away!  Read Chapter 2 for Youngman’s outline of three different views of the economic burden of the property tax.

One more consideration to ponder this week is how Indiana’s property tax relief tools affect the incidence of the property tax.  While traditional circuit breakers are tied to the taxpayer’s income, our property tax caps are tied to gross assessed value of the property.  How do the property tax caps affect how the tax burden is distributed?  What about the homestead deduction and supplemental deduction?

Youngman writes in the final section of this chapter that this technical analysis of the incidence of the property tax doesn’t answer the underlying concern of fairness.  Fairness by itself is an important debate for policymakers addressing social and cultural values.  The measure of regressivity helps us understand the incidence of tax; it doesn’t tell us what it should be.


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