The New York Times‘ “The Upshot” section ran an interesting analysis of property taxes this weekend. Maryland local governments, like most states, rely on property taxes more than any other revenue source (though our dependence is lower than many places). Their discussion looks at their unpopularity, but also their relative efficiency, as a tax levy.
A 2008 study by researchers at the Organization for Economic Cooperation and Development looked at a number of countries and found that taxes on real property caused the least drag on gross domestic product per dollar of revenue raised. Next came sales taxes, personal income taxes and corporate income taxes. In other words, property taxes were the best way to collect revenue without hurting the economy too much.
So from an economist’s perspective, it’s a bit of a problem that Americans have fought so strongly against property taxes for the last 40 years. Since the 1970s, most states have significantly restricted how high local property taxes can go. The main effect has been not to restrict the growth of government but to push government to rely on less economically efficient taxes.
Read the full article on “The Upshot” section of the New York Times.