Property Tax
Property tax is a tax imposed on a taxpayer’s property and is based upon the value of the property. Property can be categorized into three types: real property (land), improvements on real property, and personal property (movable property). Property tax is usually a percentage, not a flat sum, and is based upon an appraisal of the value of the property. Property taxes on real property are usually imposed by local government authorities, such as municipalities. Taxes collected by local governmental authorities are usually used to fund municipal budgets for schools, libraries, parks, hospitals, and other local services. Personal property that may be subject to tax includes automobiles and stocks and bonds.
As property tax may apply disproportionately to those of low income, it is viewed as a regressive tax. An individual, for example a pensioner, may have a high level of assets but low income. This creates a situation in which this type of individual may face a high level of tax liability beyond his means and may even be forced to sell his property because of an inability to pay the property tax. These individuals are literally “taxed out of their homes.” Some states provide exemptions in an effort to protect individuals from the risk of being taxed out of their homes. These exemptions are normally available for individuals whose property is their primary residence rather than a second home used for investment purposes. As a result of this problem, some have advocated for the abolishment of property taxes and their replacement with income tax, consumption tax or some other type of tax.
The US Supreme Court ruled that Congress is not authorized to impose a direct tax on the ownership of land unless the tax is divided among the states based on representation or population. On the other hand, indirect taxation on land transfers, as in the case of the capital gains tax, without representation is permitted. Property tax can also affect the demography of an area due to the incentives it provides for developing land. One of the debated side effects of property tax is whether it encourages urban sprawl or not.
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Banking - Business Finances - Economics - Insurance - Investing
Major Purchases - Personal Finances - Stock Market - Taxes
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