No one likes to pay property taxes. In fact, property taxes can be a big source of discontent in many communities, particularly when people feel their properties are overvalued. But in fact, paying property taxes, and having this money available to fund local services, does have advantages.
According to analysts in New York state, for each $1,000 of collected property tax, there are less than $7, or 0.7 percent in administration costs, so it is a very efficient way of funding local services. By comparison, the Tax Foundation estimates that the "compliance cost" --the cost to administer and collect--the federal income tax, is as high as 22 percent.
The level of revenue available from property tax is much more stable than that from income or sales taxes. Sales tax is dependent on consumer behavior, and income tax is dependent on employment levels, both of which can fluctuate year to year. Land does not move, and property values tend to be more stable over time, compared with employment and spending habits.
Property tax is locally controlled and responsive to local referenda on budget levels. Its local nature also means it's relatively transparent, and the process is easy to understand for property owners. Although individual owners may dispute their assessment, it's at least obvious that the system used to assess property is consistent. This is another point of difference with the federal income tax, which is so complex, and changes so frequently, that many people need the help of a professional to file their tax return.
Difficult to Evade
Property tax is one of the most difficult taxes to evade, and generally, collection rates are close to 100 percent in many communities. In this regard, it's fairer than other types of taxes, where honest taxpayers may end up footing the bill for evaders.
If the services provided by the municipality and funded by the property tax are well run, the value of the property is enhanced. For example, school districts are often funded by property taxes. Homes in good school districts are more sought after and their value is higher.
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