Many individuals express conflicting economic desires regarding property values and taxes. Homeowners often wish for their home values to rise, enhancing their wealth, while simultaneously desiring lower prices for other homes, enabling them to upgrade to larger or better properties. Additionally, there is a desire for rising home values without an increase in property taxes. David Schleicher discusses these issues in "The Great American Property Tax Freak Out," published on SSRN on September 1, 2026.
In recent years, several states have significantly reformed their property tax systems, providing substantial tax benefits to owner-occupied homes. These reforms have shifted the financial responsibility for services such as schools and police from homeowners to commercial property owners and other local taxes, as well as state funding derived from sources like sales and income taxes. States such as Florida, Ohio, North Dakota, and Texas have considered further reforms, including the potential elimination of property taxes for owner-occupied housing or even abolishing property taxation altogether.
Despite the appreciation of home values, particularly in suburban areas following the COVID-19 pandemic, property owners have expressed political dissatisfaction. This dissatisfaction has prompted changes in property tax policies, often resulting in increased rates for commercial property owners whose values have declined during the same period.
These reforms have transformed property taxes from a collective tool for homeowners to fund local services into a more redistributive form of taxation, placing the financial burden on commercial property owners to support services for homeowners. This shift may lead to greater state control over local governments, less stable funding for local services, and stricter zoning regulations, while also increasing housing costs. Consequently, these property tax reforms may contribute to a significant transfer of wealth to existing homeowners who have already seen their net worth rise in the post-COVID housing market.
Additional insights include:
1) Property taxes serve as a primary revenue source for local governments in the United States, funding essential services such as education and public safety. The political push for lower property taxes often involves state-level interventions that restrict local tax authority. Voters advocating for reduced property taxes may not fully recognize the potential impact on local public services.
2) As a form of wealth tax, property taxes present challenges; individuals can experience an increase in wealth—such as home value—without a corresponding rise in income. Older voters, who typically possess greater accumulated wealth, often advocate for the reduction or elimination of property taxes, as they may have lower current incomes.
3) Reducing or abolishing property taxes decreases homeownership costs. For instance, if homeowners could ensure that essential repairs would never be necessary, this would lower ownership costs and potentially increase home values. Ironically, rising housing prices can lead voters to seek limits on property taxes, which may further escalate housing prices. Current homeowners benefiting from increased home values would gain additional advantages, while prospective buyers may find homeownership increasingly unaffordable.