A property deed should mean ownership, not a renewable lease from the government.
Yet that is what property taxes amount to in practice. A family can earn the income, buy the home, pay off the mortgage, maintain and improve the property, and still owe the government every year merely to retain possession of it. Miss enough payments, and the state can seize the property. That may be common. It is not normal in any morally serious sense.
That is why the standard economist’s line that property taxes are the “least bad tax” has always missed the deeper problem. The issue is not only economic efficiency in the abstract. It is whether a free society should tolerate a tax that permanently weakens ownership, punishes stewardship, ignores ability to pay, funds excessive spending, and treats citizens as perpetual tenants of the state. From a taxpayer’s perspective, and from a classical liberal, constitutional view of limited government, the answer should be no.
Our core humanity consists of responsibility, work, and the right to enjoy the fruits of honest labor. Property ownership flows from that principle. What people build, buy, improve, and care for should be theirs to keep. Property taxes invert that moral order. They place governments above the owner and convert secure ownership into conditional possession.
An Old Tax With a Long Record of Failure
Property taxes are not merely flawed in their current iteration. They are an old tax with a long history of administrative failure and political abuse.
In early America, taxing visible property was convenient because land and buildings were easier to identify than income or financial assets. But convenience is not justice. Over time, states expanded the old general property tax into a supposed tax on nearly all forms of wealth.
It sounded fair in theory. In practice, it became arbitrary and unworkable. As the economy modernized, wealth became more mobile, financial, and complex. Local assessors could not reliably find it, value it, or tax it evenly. Real estate, however, stayed put. So governments kept taxing what they could easily see and seize.
The history of property taxation in the United States shows the pattern clearly: what began as a supposedly broad and equal tax became increasingly narrow, uneven, and disconnected from any real measure of ability to pay. That problem never went away. Today’s system still leans heavily on immovable property because homes, land, and buildings cannot flee the jurisdiction.
In Texas, where I reside, the system became so contentious and inconsistent that lawmakers eventually created central appraisal districts and related review structures to standardize valuations. That did not make property taxes elegant. It merely professionalized the bureaucracy around appraisals, protests, hearings, and litigation.
Property taxes are not a simple tax. They are an elaborate administrative machine for guessing values and then fighting about them.
Property Taxes Violate the Meaning of Ownership
The core case against property taxes is moral rather than economic.
Property is the foundation of liberty because it protects the individual’s right to control what they earn, save, buy, and build through voluntary exchange. That right creates independence, responsibility, and the ability to form families, build communities, and leave a legacy. A government strong enough to tax ownership forever is a government already reaching beyond its proper role.
Defenders say property taxes help fund local services. Roads, police, and courts are not free. But that does not justify an annual tax on mere ownership. Governments exist to protect life, liberty, and property, not to establish a permanent claim on property once acquired. A tax that says, in effect, “pay us every year or lose your home” is not a neutral funding mechanism. It is legalized extortion.
That is why my research on securing ownership through property tax reform starts from a different place than much of the standard literature. The usual conversation begins with the government budget and asks how to preserve it. I begin with the taxpayer and ask what kind of tax system best protects ownership, respects the constitutional limits of government, and lets people prosper. On that test, property taxes fail badly.
The Tax Is Inefficient, Costly, and Detached From the Ability to Pay
Property taxes are often defended as stable and efficient. Stable for government, maybe. Efficient for taxpayers, not even close.
They require appraisal districts, valuation models, protest procedures, review boards, appeals, compliance staff, and legal disputes. That is a costly way to raise revenue. A broad consumption tax on final goods and services is not perfect, but it is generally more transparent and less administratively invasive than a recurring tax on ownership filtered through appraisal bureaucracies. And to be clear, the better alternative is not a value-added tax (VAT). The superior choice is a tax on final consumption, not a tax layered throughout production chains, and not a tax piled on top of property taxes forever.
Property taxes are also disconnected from the ability to pay. Income taxes apply when income is earned. Sales taxes apply when purchases are made. Property taxes arrive whether someone got a raise, lost a job, retired, or suffered a financial setback. A rising appraisal does not mean a family has more cash. It just means the government sees a larger tax base. That is why retirees and fixed-income households get squeezed so hard. They can be asset-rich on paper and cash-poor in real life.
Milton Friedman and many other economists in the free-market tradition preferred taxes on consumption over taxes that punish productive activity, investment, or saving. Property taxes do exactly that: they punish ownership itself. They are not neutral. They discourage improvement, raise the cost of holding property, and hit people for simply staying put.
Highly Regressive in the Real World
The standard defense of property taxes also downplays their regressive nature in practice.
Lower- and middle-income households spend a greater share of their budgets on housing. Renters bear a significant portion of the burden through higher rents. Businesses pass along property tax costs through higher prices, lower wages, and reduced investment. And assessments can be regressive, meaning lower-value homes may bear a higher effective tax rate than more expensive properties.
Then there are the behavioral distortions. Property taxes create lock-in effects, where people stay in homes that no longer fit their needs because moving means a new assessment and often a higher bill, driving up prices for everyone else. They also create push-out effects, in which seniors and lower-income residents are forced from homes they have already paid off because taxes too quickly to absorb. They also prevent people from purchasing a home. That is a rotten combination. It punishes staying, moving, and buying. All things that typical regressivity calculations cannot easily compute, thereby making property taxes much more regressive than those calculations suggest.
Stable Revenue for Government Means Endless Revenue for Government
One reason property taxes remain so popular with officials is that they are a wonderfully stable way to finance bigger government.
That stability is often praised as a virtue. But stable revenue for the government is not the same thing as stability for households. It simply means politicians have a dependable stream of money to keep spending. Local officials can hold nominal rates steady while appraisals rise and collections swell, then pretend they never raised taxes. That is not transparency. It is camouflage.
The real driver of the property tax problem is not undertaxation. It is overspending.
This is why so many so-called reforms disappoint. Levy limits, appraisal caps, homestead exemptions, and rebates may slow the growth of the burden for a while, but without strict spending restraint, they do not change the underlying trajectory. Kansas and Texas have both tried versions of these limitations, and property taxes remain a major problem because spending has continued to grow and loopholes have remained.
Levy Limits Can Help, but Only if They Are Truly Tough
This is where the debate needs more honesty.
Yes, property tax growth can be limited with levy caps. But most caps are too weak, too narrow, or too easy to bypass. A serious limit should apply to all property, with no carveouts, no games, and no exemptions that merely shift burdens around.
The right standard is simple: zero percent levy growth in all property taxes collected unless a supermajority of voters explicitly approves more. Even then, truth-in-taxation rules should require that rates fall automatically when values rise, unless voters say otherwise.
That is a good guardrail. But even a strict levy limit mostly slows the growth of property taxes. It does not reduce them meaningfully on its own. People do not want a slower climb up the hill. They want the burden reduced. That is where my budget surplus buydown approach comes in.
The Best Path: Spend Less, Use Surpluses, Buy Down the Tax
Real property tax reduction should start with a hard spending limit below population growth plus inflation for state and local governments, not as a target but as a ceiling.
When government spending grows more slowly than the average taxpayer’s ability to pay, as measured by population growth plus inflation, budget surpluses emerge. Those surpluses should not be used for new programs, bigger bureaucracies, or one-time political goodies. They should automatically go to reducing property tax rates.
This surplus-driven buydown is a sustainable path to durable relief. It is predictable, pro-growth, and fiscally disciplined. It allows taxes to come down without sudden budget shocks. And unlike gimmicks, it works because it directly reduces the government’s claim on property.
At the state level, the first priority should be school district maintenance-and-operations (M&O) property taxes, because states already control most school finance systems. That is the obvious place to start.
States should use surpluses generated above strict spending caps to buy down school district M&O rates until they reach zero. That can also support a transition toward truly universal education savings accounts, where money follows students rather than being routed through district monopolies.
Yes, state constitutions still generally require some form of schooling system, and that language is unlikely to disappear anytime soon. But nothing in that reality requires permanent dependence on school district property taxes.
Local governments should use the same surplus-buydown model to reduce city, county, and special district property taxes until they reach zero as well. The logic is the same: spend less, generate surpluses, and use those surpluses to compress rates downward over time.
Could this be accelerated? Yes. States and localities could also broaden the sales tax base to include more final goods and services, and even raise the rate if needed, to replace property taxes more quickly.
But the key is not the exact mix. The key is spending limits. Without strict limits, any tax swap just funds the same bloated government through a different collection method.
The Goal Should Be Elimination
My argument runs counter to much of the conventional wisdom because it starts with the taxpayer, not the tax collector. From a constitutional perspective, the government’s role is limited. It should protect rights, not build endless revenue structures around violating them.
From a pro-growth perspective, income taxes are more destructive and should be eliminated where possible. But after income taxes are gone, property taxes should be next. They are more coercive than a sales tax on final consumption, less connected to the ability to pay, more administratively wasteful, and more corrosive to secure ownership.
That is why more states are now reconsidering them. As my work shows, lawmakers and commissions in Florida, Illinois, Kansas, Missouri, Montana, Nebraska, North Dakota, Oklahoma, Pennsylvania, South Carolina, Texas, and Wyoming are debating reforms ranging from modest relief to full elimination. They should aim higher than temporary relief.
Property taxes are arcane. They are immoral. They are inefficient. They are highly regressive once all effects are counted. They fund excessive spending and never let people fully own what they have earned. A free society should not settle for trimming them at the margins forever. It should start reducing them now through strict spending limits and surplus buydowns, and it should put in place a serious path to eliminating them for good.
