Property taxes have got to go
The idea of taxing property based on it's market value no doubt once seemed like a "fair" solution, at least fair to those who believe that those who can afford it should pay more in taxes. Property taxes are a form of progressive taxation. Of course, progressive taxation is really an implementation of the Marxist tenet "From each according to his ability, to each according to his need". Although such redistribution of wealth has never been successful, and has dragged down numerous societies, the "economic equality" myth persists and is perpetrated in our tax systems.
The primary reason forced redistribution doesn't work is that it benefits the incapable or lazy at the expense of the capable or hard-working. It rewards sloth and handicaps ambition. Those looking for benefit without earning it love the system and learn to "work it" to the max, and those who believed in working for what they get eventually become discouraged and reduce their effort. Enough harshly-enforced redistribution may indeed result in economic equalization, but at a much lower level, and, if it continues unchanged, it will eventually stagnate the whole economy.
Wherever progressive taxation is used, government has to simply waste a lot of the extracted monies in deciding how much should be taken from each taxpayer, and then in collecting and enforcing their decisions. Property taxation is no exception. In order to levy property taxes based on market values, the government uses an assessment process, triggered by building permits, to make sure that any improvements that are made to property are included to raise the valuation and assessment, and to establish a starting value on new constructions. Since assessment is a judgment call, they usually have to provide a means for property-owners to challenge their assessed value, and then presumably re-assess their assessment.
In addition to the normal challenge process, Minneapolis, for example, faces about 300 court cases/year based on challenges to the assessment. Most challenges want the assessment lowered, but, in this government-induced madness of a housing market, some actually want their assessment raised, in case they want to sell or increase the size of their mortgage. The shift away from rental property to condominiums has complicated the assessment process too, as each individual condo unit must be assessed individually, during construction and after they're finished. All told, the Minneapolis Assessor's annual budget is $3.8 million for a staff of 3 dozen. Since the housing bubble finally busted, and foreclosures and boarded houses are becoming common, the value of other properties around such failures is being depressed and triggering a new wave of assessments.
Unintended Consequence - Eminent Domain
Because government takes in more money if property values are higher, some perverse incentives are created. The monstrous abuse of eminent domain proceedings stems directly from property taxation based on value. Cities discovered that they could raise their revenue by declaring areas as "blighted", forcing the owners to sell, then do some "economic development" by arranging for higher-valued structures on the vacant properties. Single family homes have been destroyed and then replaced by large condos, big-box stores, malls, or mixed-use developments, which produce higher property tax revenue. Of course, doing economic development has resulted in much larger, more expensive government too.
Unintended Consequence - Loss of affordable housing
With governments pushing to increase the value of the properties within their jurisdiction, they have come to think of those properties not as properties owned by individual citizens, but as part of the city's "housing stock"... the inventory of houses the city has 'at their disposal'. As a result, there has been a continual effort to increase the cost of such housing, through zoning, and building regulations. Building regulations force the cost of a new home up 25-30%, beyond that which most buyers would choose. Even under pressure to allow in some formally affordable housing, most suburbs have fought it hard, because they want higher revenue, and because they do not want poorer citizens. City governments, especially suburbs, have twisted the idea of value-based property taxes into the support of monolithic, luxurious and virtually "gated" communities.
Unintended Consequence - Loss of liberty
Property tax has been described as 'paying rent to the government on property you own", and it feels like that. The city would point out all the services the city provides with revenue from property taxes. Education, police services, fire services, street maintenance, parks, programs, etc. In a modern city, the number of "services" on that list can seem endless. Are those services worth what you pay in property taxes? Ah, there's the rub... nobody asked you if you wanted those services or not.
Liberty is the right to say NO... I don't want to do that... I don't want to buy that... but cities don't give us those choices. They do what they choose and the charge us for it, through property taxation. They add programs or services, which require more city employees, facilities, and resources, and simply raise taxes to support it. With such contunial "upgrading", they need new government quarters. City halls were once modest little buildings; no longer... some suburban city halls now resemble office complexes, and may include a theatre, or even a health club, paid for by all residents, whether they want them or use them.
The overall effect of market-value-based property taxes is the widening of the gap between "haves" and "have-nots". It's a divisive effect that drives a wedge between those of differing income levels. It causes enormous waste. Houses are torn down before they need be, sometimes by eminent domain force, sometimes by driving the old owners out when they can't make property tax payments. When those old owners leave, those with money are likely to grab the property and build a new structure. Naturally, city governments love that result, since it "upgrades" their citizenry a bit and produces more tax revenue. Property tax creates strong incentives for cities to ignore and even harrass those with older property... to simply drive them out.
The other side of property tax evils are the building codes that, in the name of safety, drive up the cost of new construction and of improvements and repairs. The dirty downside of building codes is that it forces poorer citizens to forego repairs and improvements, or to try to make the changes themselves. Either "solution" reduces safety. People naturally find ways to get around the artificially high costs of housing, but when minimum standards are as locked in as city governments make them, low-income residents have to resort to breaking the law. A common way is by overcrowding a residence. Most governments have limits on the number of residents, especially in rental properties. Sometimes it is done behind the landlord's back, but some landlords will give in and allow overcrowding, but everyone does so at their own risk; not just increased safety risk, but risk of being caught. Overcrowding is the ONLY way some people can afford to live, short of living on the street. On occasion, it backfires dramatically, and the wrong people get blamed.


