Many of us are inconsistent in our economic desires. I would like the price of my home to rise, because it increases my wealth, but I would also like the prices of all other homes to fall, so that I could sell my house and buy an even nicer house. Also, I would like to have the value of my house rise, but also pay lower property taxes. David Schleicher digs into the second issue in “The Great American Property Tax Freak Out” (posted online at SSRN on September 1, 2026). He writes:
In the last three years, a number of states have substantially reformed their property tax systems, providing huge tax benefits to owner-occupied homes and shifting the burden of paying for services like schools and police to commercial property owners (including rental apartment buildings), to other local taxes, and to state funding, which itself largely comes from sources like sales taxes and income taxes. A few, including Florida, Ohio, North Dakota, and Texas, have considered going further, either completely abandoning property taxation for owner-occupied housing or even abandoning property taxation entirely. … One might think that homeowners would be happy that their largest asset has appreciated substantially in value, as homes did, particularly in suburbs, in the post-COVID period. But because property taxes are wealth taxes, property owners have responded to their increasing wealth with political anger, pushing shifts in property tax policy, often leading to increasing rates on commercial property owners who have seen declining values during the same period. …
[T]hese reforms shift the property tax from a tool homeowners use collectively to provide for locally-wanted services towards a more standard form of redistributive taxation, charging commercial property owners to pay for services for homeowners. Further, they will lead to greater state authority over local governments, less stable funding for local governments (but also less tax foreclosure in recessions), and stricter zoning controls (but more building of homes where it is legal). Perhaps most notably, these property tax reforms will lead to higher housing costs, and thus constitute a substantial transfer of wealth towards people who already own homes and have already seen their net worth increase substantially in the post COVID housing market.
A few other facts and insights seem worth appending here.
1) there’s a lot of local variation across public finance in the United States. But as a broad statement, property taxes are the major own-source of revenue for local US governments, and in turn the main source of financing for local schools. Many local governments have traditionally relied on property taxes to pay for police as well. The political dynamic of reducing property taxes often involves state-level actions that limit or block property taxes at the local level. It is not clear that voters for lower property taxes have drawn a connection in their mind to the likelihood of reduced local public services.
2) the property tax is a form of wealth tax, and it has the standard problems of a wealth tax: specifically, you can have more wealth–say, the value of your home, your business, or your retirement account went up–without having immediate income to pay a higher level of taxes. Thus, older voters who tend to have higher accumulated wealth, partly in the form of home equity, but also lower current income, are a politically powerful and sympathetic group in the push to reduce or eliminate property taxes.
3) If property taxes are reduced or abolished, the cost of owning a home falls. (For example, imagine that you could guarantee that the roof, exterior, driveway, plumbing and HVAC systems in your house would never need repair or replacement, which would also lead to a fall in the cost of owning a home.) With lower costs of owning a home, the market value of the home rises. Thus, the ironic outcome is that higher housing prices cause voters to want to limit or repeal property taxes, which would then lead to even higher housing prices. Moreover, the current homeowners who have already benefited from higher home values will benefit further, while homeownership will look even costlier for potential future homebuyers.
