26 Jul 2016

The political economy of property taxes

I advocate property tax as a source of revenue due to its simple measurement and implementation. It's also progressive, in that property owners (and indirectly, renters, shoppers, et al. using the property) will pay more for properties that are worth more.

So why do we see such a small share of local and national tax revenues from property taxes compared to income, expense and -- worst of all -- corporate taxes?*

In my opinion, it's because rich people want to avoid taxes on their wealth, so they "help" politicians design and implement those other taxes in ways that sound "fair" on paper, but actually take very little from the rich (as opposed to a lot from the middle classes).**

Bottom line: Follow the money (or lack thereof) if you want to know who the system is really designed for!

* Corporate taxes make no sense in theory (we want to tax people) and they are MUCH easier for corporations with lawyers to avoid/dodge compared to the individual taxpayer.

** I asked several leading scholars of inequality for their opinions on property taxes. They just shook their heads as they agreed with me. Property taxes are totally off the radar of most people -- perhaps because they see themselves as potential "victims" of higher property taxes without considering how much more the wealthy would pay with, say, a 4-5% annual property tax that had no exemptions. (It's no accident that the Vatican is the greatest real estate owner in the world.)