Economists have long stressed that the legal incidence of a tax is not the same as the economic incidence. In other words, the person or corporation that mails a check to the tax authorities may not actually be bearing the true economic burden of the tax. Corporations, for example, could in principle pass increased corporate taxes into higher prices for their goods or into reduced wages for their workers. In another important example, employers and employees each pay half of Social Security taxes, but most economists believe that employees pay the full burden of the tax and that the part that the employer pays actually leads to reduced wages. The same economic forces operate with respect to property taxes.
Economists have traditionally studied the incidence of an ad valorem property tax based on market value. The standard analysis (dubbed the “new view”) has been discussed extensively. Henry Aaron (1975) provides a classic treatment of the issue, and Wassmer (1993) provides a more recent view. According to the new view of property taxation, a uniform property tax levied on all land and capital would be borne only by the owners of land and capital. Since they would all be taxed at the same rate, they could not pass the tax on to consumers or other parties. This analysis applies to the average rate of property taxes levied in the country. It also suggests that uniform property taxation is a progressive tax because the ownership of land and capital is concentrated among upper-income individuals and families.