Sadly, I have to be quick as my work-week starts this lovely Sunday.
There are many accurate and persuasive points in Josh Barro’s, “The Inevitable, Indispensable Property Tax.” Notably, the author discusses the stability of the property tax base as opposed to the income or sales tax bases, which diminish more rapidly in economic downturns. But there are a few points deserving criticism.
But economists like property taxes for the same reason taxpayers hate them: They’re hard to avoid.
I’ve never seen a survey of economists asking them which taxes they like and why. Technically, their opinions only matter due to the weight we’d give them as experts. It’s the arguments for or against them that are more important, but I’d wager they prefer income taxes because like everyone else their minds have been poisoned by income tax ideology. Additionally, I believe taxpayers hate taxes other people can evade rather than ones they can’t evade themselves.
Indeed, despite pointing out that property taxes fall in part on land, which doesn’t disappear when taxed, Barro writes:
Sales tax, which falls disproportionately on the poor, is what economists call regressive. Property tax is often perceived as regressive, but because wealthy people own much more property than poor people do, it is more progressive than sales tax, though not as progressive as income tax.
See what I mean? No reason is given.
Why should a tax on wealth be seen as more regressive than a tax on incomes? Most people’s “incomes” are their labor earnings, and taxes on those discourag work, as the author observes. Another portion of “income” is capital gains, but much of that is land values that are baked into financial assets. (Buildings almost never appreciate.) To the extent that’s progressive, it’s because it’s a circuitous property tax.
Meanwhile, as the earlier quote on which taxes economists like suggests, property taxes are often characterized as a tax only homeowners pay. Far from it: landowning businesses large and small (but not nonprofits) pay them too. The most valuable real estate is in urban centers, often large buildings. This explains why corporations so enthusiastically invert themselves to Ireland or other countries with low corporate income tax rates. Most homeowners can’t get away with that.
It’s dicta, but if you don’t believe me read the article’s comments: income taxism gone rabid.
Finally, in passing, Barro adds:
In rare cases, property taxes can get so high that they encourage people to abandon their property (see Detroit).
I’ve never seen evidence that property taxes destroyed Detroit, implying landowners deeded their properties to the city rather than pay the tax. I doubt this is true.