Property Tax Good Tax, Bad Tax? MPA 622: Government Finance

Advantages Base is immobile Stable in the face of recession Variable tax rate gives many options for small geographical areas. Services typically supported by local property taxes provide direct protection to real property. Property taxes base associated with industrial development provides a way of compensating those living around the property for the inconvenience associated with such activity. Visibility and transparency encourages involvement in the fiscal process Many decisions made by local government have a direct impact on the value of real property. Tax applied to extremely valuable property, including properties owned by people who have managed to avoid being taxed as their income was received.

Disadvantages Property taxes are seen as regressive Not horizontally equitable Local property taxes create a pattern of fiscal affluence and fiscal poverty. Burdens can become shocking high for people living in areas with increasing property values and can become difficult for p[eople with low incomes Can reduce the prospects for economic development by reducing the after-tax rate of return that can be earned from building productive facilities or refurbishing deteriorated properties.