"There are 10^11 stars in the galaxy. That used to be a huge number. But it's only a hundred billion. It's less than the national deficit! We used to call them astronomical numbers. Now we should call them economical numbers." ~ Richard Feynman
Property Is Fiction
March 19, 2007
Pierre-Joseph Proudhon in his treatise What is Property? erroneously concluded that 'property (its exclusive ownership) is theft.' Frederic Bastiat, in his book The Law, stated "Government is the great fiction through which everybody endeavors to live at the expense of everybody else.' Unfortunately, government is not a figment of one's imagination, but a very real and consuming entity. A closer look at Florida's recent troubles with real property shows that, though there may be some fiction and lots of theft, they aren't necessarily in the same context described by both of these 19th Century philosopher/economists.
The headlines in newspapers across Florida are filled with stories about the troubles in the real estate market. The Florida legislature, in its current session, has been consumed with what to do about rising property insurance cost and taxes. Has real property itself really gone bad or are some external factors to blame?
In 1992, Florida voters approved the addition of the "Save Our Homes" Amendment to the Florida Constitution in order to protect homesteaded property from whimsical politicians and their free spending ways by limiting to three percent the amount by which a property tax assessment could be raised annually. But 'Save Our Homes' did not protect all properties in Florida; it left commercial, rental and investment properties at the mercy of politicians and tax assessors.
The 'Save Our Homes' Amendments did nothing to curb governments' insatiable appetite for taxpayer money. Politicians simply shifted the tax burden onto properties that weren't eligible for Florida's Homestead Exemption. County budgets ballooned keeping pace with the real estate bubble. In Miami-Dade County, the 2006/2007 budget increased 14% ($700 million) over the previous year amid scandals of fraud and incompetence that cost taxpayers tens and perhaps hundreds of millions of dollars. The commercial and rental property owners who shouldered the burden of such exorbitant increases saw their tax bills double and, in some cases, triple in just two years.
Property taxes aren't the only way governments extract monies from real properties. Impact fees, which are paid by developers and builders, have also increased dramatically throughout the state. In 2006, Polk County, Florida raised its school impact fees from $1,607 to $8,596 and its road impact fees from $2,705 to $5,844. By the time all is said and done, a builder pays approximately $20,000 in impact and connection fees for the right to build a home. County governments claim that impact fees pay for capital improvements such as roads, libraries and schools, but once upon a time property taxes alone covered those costs. Impact fees are nothing more than county governments' stealthy way of raising taxes since the builder and homebuyer will ultimately bear the burden.
Unfortunately, there's more. As if taxes and impact fees weren't enough, you still have to deal with permits. Want to have a new kitchen, replace a window, install hurricane shutters or maybe just paint the house? In most places, you'll need a permit (which will set you back a few bucks and even more valuable time). If you have the audacity not to obtain one, you'll face hefty fines and frustration from dealing with a Kafkaesque bureaucracy. There are also zero tolerance laws and nuisance abatement ordinances that ultimately give the government the power to take your property, not too mention the Kelo decision and the eminent domain nightmares that it created.
Where does all the money go? Miami-Dade County is looking into refurbishing the Orange Bowl for the MLB franchise Florida Marlins for a mere $490 million, and just recently, construction was completed on the new Carnival Performing Arts Center. The Arts Center was four years behind schedule and close to $300 million over budget.
All of these boondoggles and rip-offs pale in comparison to unfunded government pensions. For example, during the 'economic boom' of the '90s, California's governor Gray Davis, introduced legislation that basically allowed state workers to retire at ages 50 or 55 with 90% of their salary for life. It was passed without any debate (I think it's called The Old Mistress Hush Money Act). That generous gesture by the former governor will cost California taxpayers more than $10 billion over the next 20 years. Unfortunately, the Golden State is not the only place state employees can retire early and enjoy the government's largess. In the city of Miami, former Mayor Joe Carollo enjoys an over $80,000 a year lifelong pension (after failing to be re-elected) for five arduous years of 'service.'
Taxes, fees, permits and fines aren't the only things home and property owners must contend with. Feel good legislation, like laws against 'predatory lending,' limit property owners' financial choices. These laws plant clueless busybody bureaucrats between the folks who have collateral and need money and the folks who are willing to take certain risks to lend it to them. The Home Ownership and Equity Protection Act (HOEPA) is a perfect example of the knee jerk, oxymoronic legislation infecting the US today. How do you protect homeownership by limiting the homeowner's options only to what the politicians and bureaucrats find acceptable? Politicians will surely point to the recent meltdown in the sub-prime mortgage market as an indication that further regulation is needed, but the only harm done is to foolish investors and irresponsible borrowers (a fool and his money . . . .).
So, is property theft? As Proudhon alleged, far from it. If anything, property has become a conduit for theft. Is government a great fiction? As Bastiat stated, today the government is very real and absconds real money. Bastiat was at least right in that most folks endeavor to live at the expense of everyone else (perhaps another 2 million years of human evolution will correct this trait, perhaps not). As I write this, the Florida Legislature is 'hard at work' finding ways to save taxpayers from exorbitant property taxes. It is safe to say that nothing significantly positive will come out of it. As Mark Twain once said, "No man's life, liberty, or property is safe while the legislature is in session." He was right on all counts.