Consumption and Property Taxes

* Joel Fox’s “We Should Tax Consumption, Not Property” (Commentary, April 5) needs an update. New Hampshire isn’t going to make Michigan’s mistake.

Fox lists us among states considering ways to abandon the property tax in favor of taxes on consumption. He may have had House Bill 1260 in mind, it being the only proposal within memory to suggest such a thing. It would have set a termination date on the property tax, and thrown school funding into the hands of a “high-level study committee.”

The House dealt with it March 17, killing the “death knell” provision 219 to 111. There will be a study, and all the usual consumption taxes Fox mentions are on the list of possibilities to be reviewed, along with a state property tax.

But the four-term legislator who filed the bill has since declared he will not run for reelection and, in saying so, sees a slim chance of such consumption taxes in New Hampshire’s foreseeable future.

New Hampshire, it is relevant to add, is the property tax state by a considerable margin, depending more heavily on that source for state/local funds than any other state. It has neither a sales nor an income tax, is comfortably in the black without them, has cut its tax on business profits by a full percent, and is leading New England out of the recession, which hit all of us here in 1990 almost as hard as it hit California.

The property tax is not one tax, but two taxes that sometimes look alike but are actually quite different. The tax on homes, stores, factories--all products of labor (so it is, in fact, a tax on labor)--is the bad one we are working to eliminate gradually. The tax on land values, which government creates by its investment in services and infrastructure, is the good one. It collects only money to which government is entitled, by virtue of having made land valuable.

STATE REP. RICHARD NOYES

Salem, N.H.

* Fox’s article ignores the fact that consumption taxes are extremely regressive, hit all renters and small homeowners, particularly those with children, very hard, and benefit mostly large property owners. The greatest beneficiaries of shifts from property taxes are the downtown property owners, a large percentage of whom are foreign corporations.

Just a few weeks ago The Times ran a lengthy article on home buyers being desperate to buy homes in areas with good schools, and paying a bonus for such houses.

Before conservatives support increases in our sales tax they should keep in mind the statement made by Adam Smith in “The Wealth of Nations”: “Every increase in the real wealth of society, every increase in the quantity of useful labor employed within it, tends indirectly to raise the real rent of land.”

STANLEY M. SAPIRO

Malibu