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Lightning Rod

It’s not A-Rod’s fault he got a tax break on his condo

Mar 14, 2011, Vol. 16, No. 25 • By JIM PREVOR
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Keeping these expenditures off budget has the effect of dramatically understating the percentage of the economy being spent by government. Whether those affordable apartments in the outer boroughs are subsidized via government check or a tax abatement on a different property, the whole enterprise is a governmental drain on the economy.

The Tea Party will be more effective in its push for fiscal sanity if all governmental expenditures are moved onto the budget and are recognized as such.

Make taxes explicit so that people don’t incorrectly believe that the corporations and the rich are getting off easy. One big problem with the A-Rod scenario is that it invites the facile charge of tax breaks for millionaires. A-Rod’s taxes are lower because the developer of his building is also supporting subsidized housing elsewhere in the city​—​though this won’t show up in any statistics.

To the extent the 421a program really is a tax bargain, it almost surely is not going to benefit Alex Rodriguez. After all, A-Rod or any buyer would gladly pay more for a condo with a tax abatement than for an identical unit next door without a tax abatement. So perhaps the benefit of the tax abatement went to the developer. In all probability, however, the developer paid more for the land than he would have had the abatement program not existed. So it may have been some previous land owner who got the benefit of the abatement program.

It is all very complicated, and a big price is paid in public respect for institutions when the statistics on taxes get warped. The public will find it hard to discern the truth about who is paying what in taxes and will easily be induced to think the system unfair.

The long and short of it is that if the government wants to build subsidized housing, it is much better for the country if the government explicitly taxes people, including Alex Rodriguez, for that purpose. Then, instead of the statistics’ suggesting that multi-millionaires pay no tax, the numbers will reflect reality​—​and dealing with reality is to no small extent what the Tea Party is all about.

Jim Prevor is the founder and CEO of Phoenix Media Network, Inc.

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