Benefits of Property Taxes

Published by Research Editor on August 12th, 2013 - in Taxes

Property taxes are high, especially in Texas, where we have the 14th highest property tax rate in America.

But when you factor in your entire tax burden, including sales, property, and income taxes, Texas ranks 6th lowest in the nation.

You already know that property taxes bring revenue to the government, which pays for all sorts of benefits. But what other benefits are there to property taxes? Charles Gilliland, David Adame, and Michael Oberrender answered our question in an excellent article entitled “In Defense of the Property Tax.”

Stable Revenue

In the article, the authors state, “Because property values change slowly, the property tax base is more stable than income and sales taxes.” A stable revenue means a stable government, which is beneficial all around.

To compare, a study found that sales taxes varied by more than 40% between 2000 and 2011. It would be hard for a government to function well on such wildly varying revenue.

Lower Taxes

Even though property taxes are high, our overall tax burden is nearly the lowest in America. How can this be? The article quotes a report that suggests that, if sales tax were to completely replace property tax, the sales tax would have to be 25% just to maintain current revenue.

A lower sales tax–of 11%–would be possible, but only if the tax base was expanded by taxing everything not currently taxed, including food, medicine, and real estate.

Either way, a skyrocketing sales tax would offset any savings from eliminating a property tax.

Economic Growth

Furthermore, the “In Defense of the Property Tax” article examines a study by the Organization for Economic Co-operation and Development on 21 countries, which suggests that higher sales taxes would not benefit the economy. “Property taxes, and particularly recurrent taxes on immovable property, seem to be the most growth friendly,” the study concludes.

Beneficial for All

Even though property taxes are high, they benefit Texas by providing a stable revenue, keeping taxes lower, and sparking economic growth.

© 2013 FYP, LLC.