MONEY: Empty Pockets on a Trillion Dollars a Year

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real estate than the poor. Actually, property tax rates tend to be higher on modest homes than on mansions. A 2% tax on a house assessed at $50,000 will yield $1,000. A 10% tax would be needed on a house assessed at $10,000 in order to raise that same $1,000—and a town filled with $10,000 homes may need more revenue for such services as sewers and fire protection than a suburb of stately homes. Favoritism in assessments, overly generous exemptions for business, and other abuses magnify both the inequity of the tax and its inefficiency as a revenue raiser.

Boston offers a striking example. Its revenue, comes mostly from property tax. Yet fully 54% of property in the city is exempt, the result of unwise concessions to colleges, airlines and businesses putting up new buildings. A surge of commercial construction has increased office space in Boston by 40% in the past ten years, but the city has received little revenue from it. Property taxes on those who do pay have been raised to a mind-bending $174.70 per $1,000 of assessed value, and are likely to go up again shortly to $190 or more; that is equal to $2,660 a year on a house assessed at $14,000 (which probably would be worth $40,000 on the market). The city is still so broke that it cannot replace some century-old wooden sewers, or even plow its streets properly after snowstorms; two days after a heavy snow last month, many streets still had only one lane cleared. Says Mayor Kevin White: "We are on a course of fiscal suicide."

The inequities of the property tax in financing education are so glaring that four state and federal courts in the past year have ruled these disparities unconstitutional. The reason: poor districts cannot raise as much money for schools as rich districts, and the quality of a child's education should not depend on the wealth of his neighborhood. The likely result of these court decisions is that Washington will have to greatly enlarge its subsidies for local schooling in order to eliminate or at least reduce the role of the property tax. The Nixon Administration estimates that the Federal Government will have to come up with $12 billion to $13 billion more a year to help states and cities equalize school financing. Unfortunately, it is thinking of doing so by proposing a value-added tax—a kind of national sales tax (TIME, Feb. 28) that, like all sales taxes, would be regressive.

How can the nation raise the revenue it needs to improve public services? One way to begin is by slashing, or preferably abolishing, some Government programs that continue to soak up tax dollars long after they have lost their justification—if they ever had one. The U.S. is in trouble not only because tax revenues are inadequate, but also because too much of them has been spent for the wrong purposes.

The Pentagon is usually singled out as an overbloated tax eater, but there are many others. The federal highway system, by the time it is finished in the late 1970s, will have consumed $76.3 billion. That is only direct cost; indirect costs include increased air pollution resulting from more driving, as well as the destruction of much housing for the urban poor in Baltimore, Detroit and other cities to make room for new freeways. Meanwhile, mass-transportation systems that could move people more efficiently have been starved for funds. In the Washington, D.C., area, the National