What will eliminating property taxes do to the economy?

Answer 1

That will depend in some part with what it is replaced with. Property taxes are typically the major funding vehicle for schools and essential services such as fire and police protection. If the property tax is abolished, it will have to be replaced with some other form of tax to keep schools operational and cops and firefighters on the streets. The repercussons of dropping essential services is unthinkable so an immediate replacement would have to be put in to place.

IMHO, property taxes are the worst possible form of tax. They to not take into consideration the ability of the owner to pay the tax and are the most regressive form of tax in existence.

If you are a young professional with a rapidly growing income, they are an annoyance at worst. If you are an elderly couple on a fixed income living in a home that has been in the family for generations and has increased in value substantially you may be forced to sell your home simply to survive. Some wags like to point to estate taxes as taking away family homes and businesses, but simple property taxes do that far more often than estate taxes with their relatively high exemption amounts.

Like it or not, a graduated income tax is the fairest of all possible taxes. They are based SOLELY upon the ability of the taxpayer to pay the tax.

Some misguided folks like to point to sales taxes -- often euphamized as "consumption taxes"' -- as being fairer but they are not. Like property taxes they do not take into account the ability of the taxpayer to pay the tax and disproportionally affect the poor who have little choice in how much money that they must spend simply to survive.

In the long run, eliminating property taxes won't have a major impact on the economy since it would be replaced with another form of tax. Replacing property taxes with a graduated income tax would, however, be the equitable thing to do as it would transfer the tax burden to those with the greatest ability to pay.

Answer 2

Well, since property taxes go to fund what is usually considered "essential" services in a local community, such as fire, police, and education. Eliminating them would need to be shifted to another form of tax.

As just about everyone pays property tax. (even if you rent, your landlord pays it, but you better be sure they pass that along to you in your rent.) it's a "somewhat" fair way to pass the tax around. In theory, the richer you are, the greater the value of your property will be, and thus you pay more tax. Naturally a billionare could live in a shack to avoid the property tax, but for the most part this will not be the case. The problem comes from the fact that the property tax in most areas does not get reassesed often, so people that have lived in a community for longest are usually paying less tax than the person that just moved in, but then again, this is an incentive for property owners to stay around, and not up and leave if the economy sours. So in that way, they may well help an econony.

The question is to consider what effect a replacement tax would have. A high local sales tax would discourage travel or purchases made by those from other areas, and encourage locals to buy items from somewhere else. A higher income tax would lose the incentive to property owners to put down roots. Naturally having property taxes too high would discourage any new people from moving into an area, and would be bad if the local economy is producing a lot of new jobs.

All these factors must be weighed back and forth to try to do what is best for the economy. Most simply put, eliminating property taxs would both help and hurt the economy in different ways. The state of the local economy determines if there would be more hurt than help.

Some people feel that property tax is unfair because it based on the value of the property, not on how much money a taxpayer has or makes. In all the sad stories of lil' old ladies losing the family home because they have no income and can not pay property tax are only the result of a lack of financial planing. Putting the home in a trust fund would easily protect it, or if the home is paid for, the equity value can be used to generate income that would pay the property taxes. In nearly all areas a little old lady living in a home for the last 50 plus years is paying a fraction of the property tax of a newly arrived neighbor. My grandma pays about 5% property tax compared do her new neighbors because her house value has not been reassesed since she bought it. She pays this amount easily with savings she put away for her retirement. It does not take much to pay a property tax on a house valued in 1950's dollars.

If you however live in an area where they reaccess the property value every few years or so, I would say the tax would cause more harm than good, and would be a very unfair and regressive tax.

Answer 3

Property taxes are used for different purposes in different areas. Most places, they support police and fire protection, schools, and public health. Eliminating them would leave you with the question of how those services would be funded. By a sales tax?

How it would affect the economy would depend on which services were lost. Without professional firefighters, homeowner will find it hard to get fire insurance and have to pay a huge amount if they can get it at all. Would businesses want to be located in an area without police protection, decent schools, etc.? Cutting way back on those services has hurt some communities, making them less attractive to businesses and professional people like doctors. Would people want to go out to eat in an area that can't afford to have health inspectors from the health dept. check the restaurants? That would hurt the food industry.

I'd say that eliminating property taxes would have a lot of negative effects on the economy unless the services paid for by the property taxes were made up in some other way.

Answer 4

Property taxes are the source for most fire protection, police, libraries, schools, and most other things provided below the state level. If those taxes were eliminated, the services provided would be either dropped or forced to seek alternative sources. In the short term the unemployment rate would significantly increase along with rampant fires and crime. Over time the uneducated unread masses would drag the economy down to a third world level. Further down the road, the entire national infrastructure would collapse into a quagmire of illiterates fearful of going outside to their outhouses or to relieve themselves in the street.

Answer 5

Nothing. All plans that I know of to eliminate property tax replace it with other taxes like sales or income, or else with revenues from gambling, which is regressive but in theory still replaces the lost funding.

Answer 6

All taxes are dead weight to an economy. Taxes do not directly generate new wealth.

Property taxes punish people who have worked hard and invested; especially retired people on a fixed income who have paid off their mortgage but now must cough up tax money.

Since government is just another service, why can't it dump taxes altogether and send us an itemized invoice for services rendered? Huh?