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  • Print publication year: 1995
  • Online publication date: March 2010

2 - The diversity of property tax systems



As early as the 1930s critics were predicting the demise of the property tax based on the Depression-era tax revolt discussed in the previous chapter. In the 1970s taxpayers again began rebelling against the property tax, and many thought it was finally headed for oblivion. But it has survived, and recently it has even begun to stage a comeback. The long-term pattern of decreased reliance on the property tax was arrested in the 1980s, and the property tax share actually increased at the end of the decade. Perhaps the myriad of reforms over the past two decades have actually helped to ensure preservation of the property tax.

The property tax is still the largest source of local-government tax revenue throughout much of the world. It is essential that local governments have their own source of revenue if they are to preserve local autonomy, and the property tax is better suited to local use than other major taxes. It doesn't compete with tax bases preferred by higher levels of government, it can be integrated with local planning and zoning systems, and it generates a predictable and stable revenue stream.

Theoretically, the property tax is consistent with both the ability-to-pay principle and the benefit principle of taxation. Property values constitute the tax base, and to the extent that property ownership increases with income, those with greater ability to pay will pay higher taxes. The property tax also provides a method for indirectly taxing certain types of income, such as the imputed rental income of owner-occupants, that escape income taxation. The property tax also serves as a benefit tax.