What is the theory/rationale behind property taxes?

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Shawady

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I was just wondering what is the resoning behind taxing property?
Is it (A) A tax to pay for facilities enjoyed by the home owner/occupier or (B) A tax on an (reasonably valuable) asset?
What's the thinking in other European countries?
 
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I would of thought a property tax was a simple means of raising revenue for the government - simple as that and not as complicated as the above!
 
In France there are two property taxes - one paid by owner, one paid by inhabitant (who could be one and the same)

I agree with bazermc that it is just a way to raise money, but in France, at least, the monies raised are largely collected and spent by the local councils on local services so there is some level of democratic control at a local level. Parties in control of Local Councils that overspend are likley to be thrown out at the next election.

Surely one of the premises of a representative democracy is that once a government is elected by a mojority of the electorate who voted, then the population is morally obliged to pay taxes,etc raised by that government. If we start wityh the premise that I'll only payt the taxes that I agree with, democratic government would soon fall to pieces
 

What if the democratically elected government went back on their pre-election promises and then imposed a tax that a majority of people disagreed with? Is it democracy to have absolutely no regard for the feelings of a majority of your electorate?
 
jpd said:
In France there are two property taxes - one paid by owner, one paid by inhabitant (who could be one and the same)
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Thats interesting.
The reason why I asked the question is if it is seen as a tax to provide services you would expect the occupiers of the house to pay for it as they will get the benefit of them.
Also if the tax is to pay for services I don't aggree that people in larger homes should pay more. Surely they are getting the same services?
 
Property taxes have advantages over other taxes.

(1) Difficult to evade - can't hide house.

Income taxes are easier to evade.

(2) Steady flow of revenue - number of houses won't fall.

Stamp duty / transactions taxes can be very volatile.
 
(3) No distortionary effects.

A problem with many taxes is that they interfere with markets and cause quantity produced to fall.

But not in the case of a PT.

You must live in a house, and a PT won't cause any distortion in this choice.

Whereas 52% income tax does cause people to refuse work / jobs / overtime, etc.
 
By it's very nature a property tax is a tax applied on assets rather than income. However, the difficulties in collecting these taxes, are that assets are not wealth generators. I.e. the fact that someone lives in a house worth 1M soes not necessarily mean that the owners can afford to pay a higher level of tax than someone living in a house valued at 100K.
While it's now inevitable that a property tax (residential rates) will be re-introduced in Ireland, the current impasse on payment of the Household Charge suggests that the collection of the tax will be problematical. I.e. The can't pay V's won't pay arguement.
You can't tax an asset, so unless there is both a willingness and an ability by the majority of house owners to pay rates, the imposition of a property tax seems doomed to failure.
It will be interesting to see how the Governmant address this problem, coming up to the next Budget!
 
More than half a century ago, when I attended the lectures of the late Garrett Fitzgerald at UCD, he regularly articulated the economic benefit which one receives from house property. The economic benefits include shelter, comfort, personal esteem and satisfaction, etc. as well as the opportunity to benefit (or lose) as the market value changes. The monetary value of this benefit is not easy to assess - some would say that it is equivalent to the market rental price for a similar property.
Just as a bank deposit produces a monetary return which is taxable, a home produces a return which is taxable if assessed correctly
 
I am getting confused by all these new charges. I know we have to pay for services but as someone mentioned previously, we are actually paying for mistakes of others.
1. Household charge
2. Septic tank charge
3. Water charge
4. Installation of water meter charge
5. Soon to be Property tax??

Are there any others I am missing?
 
I agree with Gulliver and the late Garrett Fitzgerald.

I'll add a couple of points from history:
- Property was first formally valued for taxation purposes in the middle of the 19th century (the famous Griffith's Valuation). The value was calculated as an annual value, not a capital value, and was a calculation of the annual benefit of using the property -which is the market rent such a property should command (one of my forebears occupied a house that was valued at 4 shillings a year!).
- We older members of the forum remember paying rates, which were linked to the valuation scale devised by Griffith.
- There were also income taxes levied on the enjoyment of property (Schedule A: Ownership of Property; Schedule B: Occupation of Land).
 
a home produces a return which is taxable if assessed correctly
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... so by that rationale, if house prices drop - should the tax owed be "reduced / written off" ?
 
I was very surprised at the amount of council tax paid in the UK. The cost includes council tax, water charge & sewage charge. If your house is valued at over £212,000 the annual cost to the household is £3213 - in Glasgow anyway. There is also a charge for desludging septic tanks the of £159 for a scheduled visit & if the septic tank is over a certain size extra charges. It won't be long before these charges are introduced here. By the way, there are ver few exemptions but people on low incomes can apply for help in paying, but as far as I know it comes through as a benefit which is paid directly to the council. A lot of pensioners would be covered under this type of benefit. The council websites also give information on where this money was spent. I'm not agreeing with it - just giving the information if anyone is interested.
 
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See p2-3 of this recent ESRI paper on PT for the rationale behind them.
 
What's the rationale behind any taxes?

The general population uses state provided services/facilities so the general population needs to pay for them.

Taxes on income (including profits, investment income, capital gains, capital acquisitions, etc) and expenditure (transactions) are easiest to work as they can be taken at source as the cashflow exists by definition.

Taxes such as property taxes, household levies, TV licence, car tax, etc are more difficult to collect as there is no cashflow associated with them.

Either way there's no objectively "right" way of levying taxes, just some ways are more likely to succeed than others.

People often form opinions such as high earners or the wealthy should pay more, it would be a mistake to dogmatically hold these subjective beliefs to be objectively fair.

The closest thing to a "right" way to fund public services would be to pay according to usage. Anything beyond that involves philosophies on why some people should subsidise others.
 
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