The Case Against Property Taxes

Originally published on Liberty Taxed. 

Property ownership is the cornerstone of a free society. It reflects the natural right of individuals to control what they create, earn, or voluntarily exchange with others. From that right flows responsibility, independence, and the ability to build a legacy.

Yet today, homeowners must pay the government every year simply to keep what they already own. Property taxes are not a reasonable price for local services—they are an outdated, overly coercive, and economically destructive way to fund government. They should end.

Across Texas, Florida, Wyoming, Iowa, and Montana, more people are realizing that property taxes—once accepted as a “necessary evil”—are neither necessary nor moral, especially when government spending is not properly restrained. The principle is simple: nothing is free, but ownership should be secure once it’s earned.

​Property Taxes Undermine Ownership and Prosperity

Property is the foundation of liberty. It represents the right to the product of voluntary exchange, investment, and saving—not a privilege granted by government. To tax property again every year after it has been bought with after-tax income is to deny genuine ownership. Property taxes operate like an annual wealth tax or unrealized capital-gains tax, applied regardless of income or ability to pay.

Defenders argue that property taxes are “good” because they connect local services to local funding. I understand the intuition—communities need schools, infrastructure, and public safety—but it assumes government spending is inherently justified. It isn’t. The moral and fiscal failure of property taxes lies not only in how the money is raised, but also in how much government spends.

When government grows beyond its limited role of protecting life, liberty, and property, it erodes the foundation of those rights. Property taxes turn citizens into perpetual tenants of the state. The idea that people can “own” what the government requires an annual payment for contradicts the essence of a free society.

The Regressive and Hidden Nature of Property Taxes

Property taxes fall hardest on lower- and middle-income families because housing costs make up a larger share of their budgets. High-value properties are often under-assessed, while modest homes are over-assessed. The Texas Comptroller’s Office uses the Suits Index to measure the tax incidence of different taxes in Texas and consistently ranks property taxes among the most regressive.

But it’s worse than the tax incidence data suggest. Property taxes also hit people who never receive a property-tax bill. Renters pay indirectly through higher rent, and business owners pay through commercial leases, lower wages, and reduced investment. For millions of Americans, property taxes are the least visible yet most unavoidable form of taxation.

They also distort behavior. The lock-in effect discourages families from moving because new homes trigger higher assessments, while the push-out effect forces seniors and low-income residents from homes they’ve already paid off. These distortions are not captured in incidence studies, making property taxes uniquely harmful—penalizing both entry and exit from the housing market.
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No tax that allows the government to seize a family’s home for nonpayment can be considered good. That isn’t sound public finance, it’s legalized coercion.

Overspending, Not Undertaxation

The Tax Foundation’s Jared Walczak notes that property taxes supply roughly 70 percent of local-government revenue and argues that replacing them would be difficult. He’s right that any transition must be designed carefully, but he assumes that today’s level of state and local spending is acceptable. It isn’t.

Across the country, overspending is the root cause of the property-tax crisis. High property tax shares are a symptom of the problem that needs to be addressed, not a reason to abandon reform as property taxes become an increasing burden.

• In Texas, local governments now collect more than $80 billion in property taxes—up roughly 70 percent from 2015 to 2024, while population growth plus inflation rose only 50 percent, even after several years of high inflation.
• Florida collects about $55 billion per year—nearly equal to all its state-level taxes combined.
• In Montana and Wyoming, property-tax collections have surged even though energy revenues could have offset some of the burdens.

Some also argue that reliance on property taxes is necessary because sales taxes or other revenue sources are too volatile. But families, not governments, deserve income stability. Revenue fluctuations should be managed through sustainable budgeting and rainy-day funds, not by taxing people out of their homes.

In Texas, property-tax revenues are actually less stable than many believe. From 1998 to 2024, the standard deviation for sales-tax growth was 0.057, compared with 0.037 for property taxes. The overall trend shows property taxes rising much faster and disconnected from economic activity or taxpayers’ ability to pay.

Sustainable Budgeting: The Principle for Every State

While eliminating property taxes entirely will take time, every state can start by adopting sustainable budgeting—ensuring that government spending grows slower than population growth plus inflation. This limit should serve as a ceiling, not a target. When governments live within it, surpluses emerge from a faster-growing economy supporting increased tax revenue that exceeds spending.

States should use those surpluses to permanently reduce, and eventually eliminate, school district property taxes. The tool used for this process should not pick winners and losers through property tax exemptions and abatements, or by short-term tax swaps that increase sales taxes to reduce property taxes, which simply shift the heavy burden elsewhere.

Because education is largely a state responsibility, states can gradually replace school-district property-tax funding with simpler, broader, and more transparent sources—such as a low, uniform, flat sales tax on final goods and services (not a VAT)—while constitutionally prohibiting the return of property taxes.

Local governments can apply the same surplus-buydown approach to lower their property-tax rates over time or use tax swaps to eliminate them. Differences in tax bases—property-rich versus sales-tax-poor areas—can be managed by reducing spending, forming local compacts, and establishing shared service arrangements rather than implementing state mandates.

Debt-financed property taxes are more complex, but they are also local choices. Voter-approved debt should continue to be repaid locally until retired; it should not be socialized across jurisdictions. The state’s focus should remain on eliminating school-district property taxes while advancing universal education savings accounts, which allow money to follow students directly and simplify school finance over time.

​This principle applies everywhere:

• States without income taxes (Texas, Florida, Wyoming) should prioritize property-tax elimination next.
• States without sales taxes (like Montana) should pair property tax elimination with strong spending restraint and targeted consumption-based alternatives.
• States with all three central taxes should prioritize controlling spending before pursuing any tax swaps or other tax changes. For states with income taxes, the surplus buydown method should be used to eliminate them first.

The goal is not revenue neutrality—it’s smaller government in terms of taxes and spending.

The Moral and Economic Case for Ending Property Taxes

Property taxes distort markets, destroy mobility, and erode liberty. More fundamentally, they violate the natural right to ownership—the right to control one’s property free from perpetual government claim.

Property tax relief is about redesigning government to live within its means. When governments spend and tax less, they unleash growth, investment, and genuine ownership.