Property Taxes for Local Finance

Although property taxes continue to be one of the fundamental fiscal foundations for local government in the U.S., they also remain exceptionally controversial (even among taxes). The political or policy objections to property taxes generally amount to a charge that the tax is “unfair” to particular taxpayers or because of its operation. In contrast, economists and other tax analysts usually consider the economic efficiency aspects of the property tax and its alternatives. This report is intended to represent fairly the research evidence and current thinking of tax analysts about the property tax, focusing especially on the various concerns that the property tax is unfair. After clarifying understanding of the magnitude and importance of property taxes, three main property tax questions are addressed. To what extent are the political concerns about property taxes valid, and which are misimpressions? For the valid concerns, are there policy changes that might mitigate the problems? What are the advantages of property taxes generally, especially compared to the alternatives?