It’s time to recognize historic buildings for what they are: a premium feature or amenity whose extra cost should be born solely by those who chose to own them or rent them.
Supporters of historic buildings tell us that renovating them is more expensive than building new. Likewise, building a home with granite kitchen counter tops and marble floors in the bathrooms is more expensive than a plainer home. These premium features are chosen voluntarily by the homeowner, and it is right and just that they alone should pay for them.
There’s no difference between these premium features and choosing to live in a historic building. Those who desire them choose them voluntarily, and should pay their full cost. Forcing everyone to subsidize this choice is wrong. It’s an example of a special interest gone wild.
Supporters of historic building preservation subsidy tell us that these historic buildings define the character of a city. They have succumbed to the design fallacy, “the notion that architectural design is a major determinant in shaping human behavior.” It may be so for some people. Let each person decide for themselves, and then pay — or not pay — for its perceived benefit.
It’s often true that historic preservation tax credits go to subsidize the choices of well-off people. For example, at a meeting of government officials with Wichita-area legislators in January, Wichita Downtown Development Corporation president Jeff Fluhr presented examples of several buildings in Wichita that have been rehabilitated, including the Wichita High Apartments, which he said will rent for $1,000 to $2,000. He mentioned condos in the Grant Telegraph building, which he said range in price from $300,000 to $950,000. Do the taxpayers of the state of Kansas need to subsidize people who can afford rents and prices like these?
Wichita developer Dave Burk stood to pocket over $1 million in taxpayer money on this project.The use of tax credits, however, leads many to believe that what the state is doing is not a direct subsidy or payment. In order to clear things up, maybe we should require that the state write checks instead of issuing credits.
Indeed, if the state issued checks to real estate developers, citizens would look at things differently. They’d wonder why they’re subsidizing the construction of apartments that rent for up to $2,000 monthly, or condos worth nearly a million dollars. They’d be angry. Using a semi-mysterious mechanism like tax credits shrouds the true economic transaction taking place.
These expenditures of tax money — being issued as credits rather than appropriations — go through a different process than most expenditures of state money. Recently some have started to use the word “tax appropriations” to describe tax credits. These expenditures don’t go through the normal legislative process as do most appropriations.
It’s time to recognize these historic preservation tax credits as payments to a special interest group. Unfortunately, as with most special interest groups, the group receiving the payment — tax credits in this case — has an extreme interest in the matter. They benefit greatly. But to the rest of the populace — well, does it really matter to them? John Stossel explains the problem like this:
The Public Choice school of economics calls this the problem of concentrated benefits and dispersed costs. Individual members of relatively small interest groups stand to gain huge rewards when they lobby for government favors, but each taxpayer will pay only a tiny portion of the cost of any particular program, making opposition pointless.
That’s the situation we face with the historic preservation tax credits. A few real estate developers will enrich themselves at state expense. Well-to-do renters and condo buyers will get a better deal. To everyone else, it’s just another way that government nickels and dimes us to death.
It should be noted that one of the most vocal proponents of the tax credits is Christy Davis, a historical preservation consultant who operates a company that assists property owners and governments in obtaining funding for historic preservation projects. She’s the very definition of a special interest group.
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