Discuss about property taxes
Introduction
Property taxes are the taxes payable on properties at a rate which has been collectively decided
by the legislature while property assessment refers to the assignment of fiscal value to the real
properties.
Do you have a recommendation as to how the government could more equitably assess
property taxes?
Property taxes represent a very large source of income to some countries. The US government
through its county governments raises a lot of income from property taxes. The basic steps to
assess or value properties in view of taxation are the discovery of an appropriate tax base and
the recognition of applicable exemptions and tax rates to the valuation standards and eventually
the collection of the taxes. While collection of property taxes presents a challenge to most
county governments in the US, property assessment is the major issue that draws a lot of
attention in the US due to its subjectivity. (Almy, 2006) To increase the collection of taxes,
property circuit breakers that connect the tax rates to the landlords or owners income can be
applied. The tax rate is capped at a certain percentage of the landlord’s income. Also the
introduction of specific thresholds on tax increases to counter or mitigate property value
increment due to increases in market prices.
Consider the best way your recommendation could be implemented, keeping in mind the
government’s need to plan for budgeting, and the best way to maintain the revenue streams.
Property taxes 2
To increase the collection of property taxes, a clear policy on property assessment should be
adopted that will regulate the assessment and valuation of real properties as its basic cause of
uncertainties in the payment of property taxes. (Bahl and Martinez-Vazquez, 2007, p 6)
Discuss how the revenue stream may be made up if the revenues from property taxes have to
be decreased. Do you think the government will increase the tax percentage or increase taxes
in another area in order to compensate?
Property taxes are utilized for different purposes depending on the needs of some cities or
countries. Some countries depend heavily on property taxes while others incorporate it the
general fund or make use of in water and waste management projects. The United States
county governments raise most of their income on property taxes as compared to other
countries. (Brown and Hepworth, 2001)
The Proportion of Tax Revenues collected by the US federal and local Governments in
2012
Excise 3%
Individual income
46%
Corporate income
10%
Social sec & social
insur 35%
Others 6%
Sources: CBO historical sources
Property Taxes 3
The revenues from property taxes form a minor percentage of the total taxes on the other type of
taxes that make the 6% of the total tax collected by the government. A decrease on the collection
of this tax may have an impact on the local county governments and not on the overall US
revenue collection. The adjustment on the other taxes will be minimal. The government may
increase the other tax brackets to compensate the difference in the reduction of the property tax.
To conclude, the overall effect of property taxes is mostly felt on the local governments in the
US as they are charged with the responsibility of determining the rates to be charged, methods of
assessment and collection processes.
References
Almy, R. (2006) Improving the Valuation of Large Commercial Properties for Real Estate Tax
Purposes, Working Paper, Lincoln Institute of Land Policy, Cambridge, MA.
Bahl, R. and Martinez-Vazquez. (2007) Property Taxes in Developing Countries: Current Practice
and Prospects, Working Paper, Lincoln Institute of Land Policy, Cambridge, MA.
Brown, P. and Hepworth, M. (2001) “European Property Taxation: Changing Times”, Land
Lines, Volume 13, Number 2, March 2001, Lincoln Institute of Land Policy, Cambridge, MA.
www.CBO historical sources.
