On the Subject of Property Taxes

Since most of the funding for our schools comes from local property taxes, perhaps we should take a minute to think about the subject of property taxes.  Property taxes are not really "property taxes" at all.  They are, in reality, a form of income tax.  What I mean is that while the tax that you pay is certainly based upon the value of a piece of real property, you do not pay them by selling a piece of that property or deeding a piece of that property to the taxing body.  You pay the tax out of your income.  It is, therefore, a type of income tax, and a highly regressive one at that (meaning that, on average, the lower your income, the higher the percentage of that income is taken in property taxes).  Therefore, when property taxes are increased, it typically has the most impact on those least able to afford the increase. 

It is true that you get a deduction on your state and federal income tax return for the property taxes that you paid.  But a "deduction" is different from a "credit."  A "deduction" does not reduce your income taxes dollar for dollar the way that a "credit" does.  A "deduction" merely reduces your taxable income.  So, if your tax rate is 15%, for example, your income taxes are reduced by 15% of the amount of property taxes you paid.

If you rent property, such as a home or an apartment, you may think that you are not affected by property taxes.  But, it doesn't matter if you own property or rent property, you still pay property taxes (out of your income).  If you are a renter, of course, you do not get a property tax bill, but your rent is based in part upon the property taxes that the property owner pays.