Wealth Tax - Property Tax

A tax on net wealth permits an offset for debt and should not be confused with a property tax on real property or certain assets. For example, a tax on real property will generally be based on a percentage of the market value of the property whereas a net wealth tax applicable to the same property applies to the market value less the outstanding mortgage. A net wealth may be practical for all types of wealth where a country, such as the United States, has worldwide tax jurisdiction but less suited to countries with territorial tax jurisdiction or for taxation at the state or local level.

In the United States, property taxes are annual taxes on the market value of real estate (ranging from about 0.4% in Alabama to 4% in New Hampshire) assessed both locally and by state governments to pay for local schools, as well as other services and infrastructure of various kinds. Local jurisdictions rely upon property taxes because real estate cannot be moved out of a jurisdiction, whereas paper wealth, income, etc. are more easily moved to other localities where they may be taxed less or not at all.

Over time, the property taxes add up significantly, such that over a generation of 25 years, a family may pay, with annual increases for inflation, up to 50% of a property's market value in taxes (though over the same period of time, the land value of the family's home could have increased substantially as well). Heavy property taxation and especially sudden, large increases in appraised valuations caused by infrequent or inaccurate appraisals are major causes of local political discontent in jurisdictions throughout the United States and in other countries (see California's Proposition 13 or Proposition 2½ in Massachusetts).

Because property taxes have often been labeled unfair (other assets such as CDs, equities, or partnerships are taxed rarely, if at all), some properties, such as certain farms or forest land, may have reduced valuations. However, unlike the value of most other assets, the value of land is largely a function of government spending on services and infrastructure (a relationship demonstrated by economists in the Henry George Theorem). This relationship argues that the land value portion of property taxes, at least, satisfies the "beneficiary pay" criterion of tax fairness.

Non-profit (especially church) and government-owned properties are often exempt from property taxes. Some exempt organizations make payments in lieu of taxes to support or maintain good relations with their host communities.