Homestead Exemptions:
The Equivalent of Getting Milk From Half-Starved Cows
Harry Gunnison Brown
[Reprinted from The Freeman, October, 1938]
Once more -- alas when will it end! -- we are treated to a proposal
for the alleged aid of the politically much-cultivated homeowner, a
proposal which would make the acquisition of unencumbered homes
definitely harder than now. An Associated press dispatch states that
Senator Sheppard (Dem.), Texas, urged a Senate subcommittee to
recommend his constitutional amendment exempting homesteads from
taxation up to $5,000 in valuation. The amendment, if enacted, would
prohibit political subdivisions to tax homes up to $5,000 except to
pay outstanding bonded indebtedness.
Of course we are treated to the usual misleading ballyhoo. Senator
Sheppard stated -- what is probably true -- that more than two-thirds
of Texas families are landless and homeless. And then he further
stated that ''to correct this situation" exemption laws have been
passed not only in Texas (but in eleven other states. The Senator is
quoted as saying that removal of taxation from small homesteads would
"halt and reverse the deadly nation-wide drift of our people into
migratory tenancy." Senator Neely (Dem.), West Virginia, chairman
of the Senate subcommittee, is reported as remarking that the Sheppard
amendment is "very appealing." And in the same news item a
Mr. Frank Putnam of Houston, Texas, is referred to as "leader of
a national movement for homestead exemption."
Without at all questioning the sincerity of Senator Sheppard, or of
others in public life who may support his view, we can nevertheless
truly say that the senator has hit upon a proposal which, if adopted
in the only way it is likely to be adopted under present conditions of
pressure politics, would make home ownership for the poor harder to
achieve than it has ever been before in our entire history. True, the
scheme might relieve of taxes those who are already prosperous enough
to own their homes. But these, in Texas at least, are, by Senator
Sheppard's own statement, not more than a third of the families. And
unless the expenses of our states and local governments are to be
drastically cut, the money now raised by taxing homesteads MUST BE
RAISED IN SOME OTHER WAY. Then HOW shall it be raised? If present
trends are followed, it will be raised by increased sales taxes and
other taxes falling heavily on the poor. Those, therefore, whom
Senator Sheppard would, presumably, rescue from the unhappy condition
of tenancy will be more hopelessly in that condition than previously.
Down in Senator Sheppard's state there was an old farmer who had more
cows than he was able to provide with good pasture. One herd he put
into a field where the grass and clover were pretty good. But another
herd he put Into a field where the pickings were indeed very poor. The
cows of the first herd gave a good supply of milk; those of the second
were somewhat disappointing. But the farmer, Sam Barsambus, had an
inspiration. He wanted to "encourage" the giving of more
milk by the cows of his second herd. So he rewarded the cows of the
first herd, which were giving plentiful supplies of milk, by running
his mowing machine over the field occupied by the second herd, cutting
off what few clumps of high grass and clover he could find there and
giving this as extra feed to the cows in the first herd. This policy,
Sam thought, would make the cows in the second herd realize that
virtue was duly rewarded and would cause them to give more milk.
Senator Sheppard may not know Sam, but "he sure is like him!"
But suppose the taxes now levied on homesteads are made up for -- as
they are hardly likely to lie in these days of cigarette, gasoline and
sales taxes -- toy higher taxes on other kinds of property, such as
stores and factories and apartment houses! We must have stores and
factories, of course, and city people of small incomes, who cannot
afford homesteads, must often live in apartment houses as tenants.
What if the resulting added burden on these types of capital
discourages the building of them and makes store and tenement rentals
higher than they now are? Would such higher rentals for rooms and
tenements and apartments help those who must live in them, to save and
buy themselves tax-exempt homesteads? And if rentals for store apace
are higher, who, in Senator Sheppard's thought, will finally pay these
rentals? Will it be only a few rich business men, and never either the
small and struggling merchant or the general mass of consumers?
Such a proposal as this of Senator Sheppard certainly does not go to
the roots of the evil which he is ostensibly seeking to cure. At best
it could be only a surface remedy, even if it did not make the evil
distinctly worse.
That the senator's scheme might tend in some degree to increase the
number of persons holding formal title to the homes they occupy, we
need not deny. Suppose Smith owns three houses and, since only one is
his "homestead," has to pay taxes on the other two, in which
Jones and Wilkina are tenants; but these two will also become
tax-exempt if they are purchased by Jones and Wilkins respectively.
Jones and Wilkins, however, are too poor to buy homes and really pay
for them, and the added sales taxes and other taxes likely to be
levied under Senator Sheppard's plan, to make up for the abolition of
the tax on homesteads, certainly won't help these tenants to save the
money to pay for Smith's houses. But Jones and Wilkins may become
titular owners nevertheless.
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