Letter Re: Property Taxes and Hyperinflation

Dear Mr. Rawles,
It’s been on my mind off-and-on since I read your novel “Patriots”, when the Grays sent in a property tax payment to avoid losing their retreat to tax delinquency. It’s always annoyed me that a landowner has to pay the government to keep land he has bought and paid for. That said, what would keep a local government, starved for cash in just such a situation as “The Crunch”, to raise the taxes on local properties until no-one could pay them? If a landowner pre-paid his taxes for, say, two years in advance, what would stop the powers that be from just saying that you didn’t pay enough because we’ve just doubled the taxes, and then taking your well-stocked and cared-for home? I suppose there’s nothing that could, and that most towns would not accept a two-year payment on property taxes anyway, but I wanted to put the idea out there. Thanks again for all you do! – R. in New Hampshire

JWR Replies: I had mentioned pre-paying taxes in the novel only because I had foreseen (and still foresee) a hyperinflationary situation where both the repudiation of the paper currency and collapse of government seemed imminent. If the currency would soon become worthless, it would be worth the effort, and it could certainly do no harm–assuming that the same amount of currency would only buy one of two meals worth of food. In the aftermath of a collapse, being able to show a receipt for pre-payment of taxes would at least demonstrate the good faith intention to pay the property tax.

In less severe circumstances where local governments can continue to operate in a hyperinflationary economy, it is impossible to rule out inflation indexing of property taxes. Depending on circumstances that cold result in delinquency judgments and property seizures. If this starts to happen too frequently, this might inspire local uprisings by a discontented citizenry. The recent absurdities in Zimbabwe illustrates one potential outcome. (In Zimbabwe, Mugabe’s government just started issuing a $10 Million Dollar bill, which as of this month might buy you a hamburger and an Africola. But if you wait a couple of weeks the same purchase might require $20 Million Zimbabwean dollars.)

During a hyperinflation the crucial factor will be whether or not you have cash income–preferably inflation indexed–with which you can pay your taxes. If you lose your job or on a fixed income (such as a pension), there may very well come a day when you cannot afford to buy food, much less pay your taxes.