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Taxation by Density

Last week the town of Buford, Wyoming was sold for $900,000. For that price they got an exit from the highway, a small business, some land, and a zip code. With the towns sole resident moving to Colorado… it’s safe to say Buford wasn’t purchased for it’s strong tax base.

The idea that you could buy a whole zip code or even an entire island in this country for the right price got me thinking about our income tax code. There’s a lot of talk about a flat tax or even a minimum tax for the super rich. We all want something that’s fair, and truth be told, we all want to pay as little as possible while reaping massive benefits when we want them.

In reality, we have a system that is exactly like the airline industries baggage fees. We are rewarding people for bad behavior. Airlines charge for bags which forces everyone to cram as much into their carry-on as possible. Then the airlines and passengers complain about overhead baggage space? If they wanted less overhead baggage space they’d make it free to check bags and charge $10 per item for carry-on. Duh.

It’s the same thing with our income tax system. We reward people with deductions for doing things they wouldn’t naturally do just to lower their tax rate.

But what if your tax rate was based solely on where you lived? What if we rewarded people who chose to live in less desirable places with paying the lowest federal income taxes while people who lived places highly desirable or overpopulated paid higher taxes? I mean, if you’re a bagillionaire and you want to pay 10% income taxes… maybe you should live in Yuma, Arizona? But if you want to live on 5th Avenue in a mega-penthouse, that’ll cost you at least 35%.

That way the rich can keep getting richer. They just have to make the holes of America a bit more fabulous.

8 Responses to Taxation by Density

  1. Stephen April 11, 2012 at 8:13 am #

    It’s an interesting concept, but I can imagine it would be easy for rich people to find loopholes. e.g. buy property in Yuma for tax purposes, but in reality live somewhere else. Unless they were to wear some kind of monitoring device, there’d be no way of proving what state they were resident in.

    This could then lead to many empty properties in places like Yuma, making it like a ghost town rather than improving the quality of life for those around them. It would also probably raise the house prices in these towns, pricing out those that could previously afford properties there due to it being an undesirable area.

    • Adam McLane April 11, 2012 at 8:48 am #

      New role for auditors. 

      You realize this is just fantasy, right? I’d never run for office!

      • Stephen April 11, 2012 at 8:59 am #

        Yep – realize it’s fantasy!

        Like you said though, sorting out the tax deduction system might be another way to make the richer pay more, as the way it is now doesn’t make sense to me. My wife and I earn about $70k combined, don’t have children and rent and pay a reasonable amount in tax. We know someone on $80k who doesn’t pay any tax due to deductions for having a few kids and owning a property.

        It’s weird that someone earning 14% more than two people combined pays zero tax, whereas the couple have to pay tax simply because we they have kids or own a house.

  2. Chad Schuchmann April 11, 2012 at 8:27 am #

    It’s not a terrible idea, however, it does pose some struggles for those who currently live in those areas.  IF, as a middle class person, I, and other, choose to move to a lower taxed area, and then we cleaned up the houses we bought, improved on the homes and property, by default, it actually begins to raise the value of all the other homes in the neighborhood, thus raising the property taxes people pay (even if their income tax stays lower).  This is actually a problem many urban mission groups face.  

    As they improve their homes, painting, fixing bad plumbing, replacing roofs and floors, they are actually adding a financial burden to the neighborhood. Nicer homes means the neighborhood actually becomes more desirable and thus the property values increase.  This increase in property values results in higher property taxes and can have adverse effects. In some cases, those in homes which they could previously afford, unable to pay their property taxes and forcing them to move away or leaving them and ending up homeless.

    This process is known as gentrification.

    I am by no means arguing that our tax system doesn’t need overhauling.  I am not sure I agree that this would be the best solution.

    • Adam McLane April 11, 2012 at 8:47 am #

      And I’m just having fun to try to think about taxation in a completely different way. We base the whole thing on how much people make. What if we made it based purely on our primary residence? 

  3. angierines April 11, 2012 at 9:02 am #

    re: bag checking
    I’d easily pay $10 a bag not to have my luggage handled by the bag handles and stored underneath.
    I hate waiting for my luggage or worrying about it being lost if I have connections.
    Either way, I’m still bring on my backpack as a purse and a rolling suitcase! Sorry, I’m that person!

    But I love the idea of a bigger tax for living in the swankier places. Course I live in NJ, and this place is tax central!

  4. danielparkins.wordpress.com April 11, 2012 at 9:04 am #

    Haha, brilliant.  

  5. Jared Dilley April 11, 2012 at 6:45 pm #

    I prefer a system with no deductions. Why should people pay less taxes for giving tk charity or buying a fuel efficent car? A flat rate is also cheaper brcause no irs. Btw i believe in a progressive set of rates.

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