South Bend Tribune Editorial Page Needs Econ. 101

An editorial in today’s South Bend Tribune makes the case for property tax reform in Indiana. Unfortunately, the paper’s questioning of property assessments shows a lack of understanding of basic economics. A trip to the local university for enrollment in ECON 101 may be necessary. From the editorial:

Not all the examples are in Clay Township. Consider the three Meijer stores in St. Joseph County. One (on Grape Road) is assessed at $20.8 million, one (on Bremen Highway) at $10.6 million and one (on Portage Road) at $9.9 million. Their assessments rose, respectively, from $12.2 million, $9.2 million and $9.3 million.

Why is the Meijer on Grape worth more than twice as much as the larger, newer store on Portage? The chain’s owners probably would like the answer to that question, too.

While assessments aren’t perfect and the author of this blog post doesn’t claim to understand the real estate market of the Michiana region (beyond what he has seen for occassional football trips), this editorial makes the fallacy that a property’s value has nothing to do with location.

Let’s see. I want a 2,000 square foot house. But I want to live in Malibu? I wonder why the price of such a house is a hundred times greater when the house is down the street from the beach than when it sits down the street from the local Steak ‘N Steak Restaurant in Goshen, Indiana. It’s the same house, isn’t it?

And I wonder why the price of a South Bend hotel room is only $70 on July 15th, but $500 on a Michigan-Notre Dame weekend. It’s the same hotel room, isn’t it?

The same principle even applies to differing property values in what seem to be similar areas. There is more to a piece of property than merely its physical characteristics.

For more on Indiana taxes, check out our other recent blog posts on Hoosier State tax policy.