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Thoughts About Arlington's Homeowner’s Grants

Steven Malanga has some excellent comments to make in today’s RealClearMarkets about those tax rebates that recently arrived in some mailboxes. He begins:

“The tax rebates contained in the Economic Stimulus Act of 2008 were controversial because most economists doubted they would fire up the national economy enough to justify their cost.

“Less controversial, however, was the fact that once Congress and the President decided to go ahead with the program they made it means-tested, that is, they excluded high-earners based on a complex formula.”

According to Malanga, “federal politicians are learning from their state and local brethren.” For example, he writes:

“Politicians seem to love such programs so much they are even willing, paradoxically, to raise taxes to support them. New Jersey began a rebate program in the late 1990s when the state was running huge budget surpluses, using state funds to offset high local property taxes. But as Jersey’s spending rose and the 2002 recession cut tax revenues, the state raised dozens of taxes, including those on businesses and high-income earners. But it kept paying out the rebates, as politicians argued that in hard times the refund checks were even more important. Of course, the state eliminated those refund checks for high income earners, the very same people whose taxes it had raised to keep the state’s budget afloat in the first place.”

He later explains:

“Despite claims by their proponents, most property tax rebate programs don’t really subsidize working families anyway. Most are heavily oriented toward retired senior citizen homeowners, who are reliable voters, on the spurious notion that those on a fixed income are hurt most by such a ‘regressive’ tax. But income is a poor measure of household wealth. Although the typical over-65 household earns only half the annual income of a household headed by someone aged 35-44, senior households also have an average of three-times the assets of these younger families, and far fewer family members to support. Still, virtually all property tax rebate programs take tax money paid by our most productive workers and use it to relieve the burden of those who are no longer working, but who may have spent a lifetime accumulating wealth.”

In Arlington County, the Manager wrote in his letter introducing the FY 2006 Adopted Budget, that the Arlington County Board:

“Established a new homeowner’s grant program to provide $500 grants to households meeting certain income and asset requirements.”

All politicians may not be the sharpest tacks, but most seem to quickly learn how to redistribute taxpayers money. And in the case of the homeowner’s grants, Arlington’s panjandrums may have furthered the education of their federal brothers and sisters on the other side of the Potomac River.

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