Property vs. Sales Taxes

MLewyn's picture

The first CNU 21 speech I went to was by attorney Craig Galli, who briefly outlined the history of Salt Lake City.  He pointed out that one of the region's problems was the dependence of local cities on sales taxes; to attract tax revenue, local governments need to attract sales-generating retailers.  As a result, the region became oversupplied with big box stores, some of which are now vacant due to competition from other big box stores.

I am certainly not going to endorse vacant stores.  On the other hand, property taxes (the dominant source of local government revenue in much of the U.S.) may be even worse.  The more expensive homes are, the higher a city's property tax revenue.  Thus, a city in search of revenue has a strong incentive to use zoning to keep housing supplies scarce in order to keep home prices high- hardly a beneficial development. 

In addition, property taxes seem especially burdensome to homeowners, because they receive one (often constantly-growing) bill every year, rather than paying a bit at a time with each purpose.   The sheer noxiousness of property taxes leads to periodic tax revolts, which in turn cause state-level politicians to enact limits on municipal property taxes.  These limits choke off local public services, and in addition choke off local autonomy over taxes and spending- also undesirable results.


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