The Problems with Property Taxes

Property taxes are imposed on people who own property, the amount typically based on what the government deems the property to be worth. 

Many states in Australia have property taxes (typically known as land tax). Local government also charges property taxes, generally known as council rates

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Property taxes are one of many taxes that affect everyday life and increase the cost of living. In this article, I will explain why I believe property taxes should be abolished. 

Firstly, and most obvious, if people supposedly own their property, why should they have to keep paying for it? If you are paying to live on your own property, you don’t really own it at all. Especially given that the government has the authority to evict you and sell it off if you fail to pay the property taxes. I firmly believe that ownership of property should not be subject to the vagaries of government. 

Secondly, as property taxes are calculated based on apparent property value, an increase in value brings an increase in taxes. The result is some low-income people cannot afford to pay and are driven out of their own home. Given significant inflation over the last few years and cost of living pressures, this is likely to become more common in the near future. 

Thirdly, property taxes create a range of perverse government incentives, particularly at the local government level. For example, since some people pay more property taxes than other people, this can encourage local governments to create policies that favour people who pay more, which erodes equality under the law. 

Both state and local governments have the power to compulsorily acquire property for development in hopes of being able to benefit from higher property taxes compared to what the current owner is expected to pay. 

Known as eminent domain, this is a process in which the government takes someone’s property from them against their will for what is meant to be a ‘public purpose’, though the government may choose to obtain the land for use by a private entity under the guise of ‘promotion of economic development’. 

Although the government is meant to provide someone with ‘fair compensation’, there is no legal obligation at the state and local government level, and in practice is not common. They often ironically claim the property is worth less than the value used to calculate the property taxes during the process of acquisition. 

Local governments are also financially incentivised to drive lower income people out of the area to attract higher income people who build higher value properties that result in higher property taxes. In a quest to increase property values and property taxes, there is an incentive to regulate what people do on their properties which has impact on personal freedom and property rights.

I believe that property taxes, along with many other taxes such as sin taxes, inheritance taxes and GST, should be abolished, leaving us with a simple flat tax for all money earned over a certain threshold paid by both individuals and businesses.