Local Governments Need More Revenue. Try Progressive Property Taxes.
UVA Law Faculty Affiliations
Local governments are cash-strapped. Even if Congress agrees to give them financial support, it probably won’t be enough. Localities must raise revenue using the fiscal tools available to them — but without overburdening struggling households. The answer is a progressive property tax. The tax could feature rates that increase with property values, income-based tax relief or deferral of payment. Many states provide such deferrals to senior citizens and the disabled, and this could be extended to those eligible for unemployment benefits. Not only is a progressive property tax fair, but it can help stabilize household finances. Homeowners are far from being universally wealthy; more than 15 percent earn less than half of their area’s median income. Since tax rates would fall with home prices during a recession, households would have more to spend on the goods and services that keep people employed. Our research shows that cutting property taxes in a recession increases spending and reduces mortgage defaults.