You know that feeling, right? When that envelope
arrives in the mail, that annual property tax
bill. Oh, yeah. And there's that little sigh
you let out because you know it's this huge,
unavoidable chunk of your budget. You pay it,
of course. You have to. But I think what we're
going to dig into today is that beneath that
number on the page is a reality that is, well,
it's just... incredibly complex and really, really
different all over the world. It is. It's probably
the single most important and yet I'd say the
least understood mechanism for local finance
anywhere. Right. What looks like this really
simple charge on your home's value is actually
this tangled web of, you know, history, powerful
economic tools and some really different legal
ideas depending on where you live. OK, so let's
try and unpack that. Our mission for this deep
dive is to get way beyond that annual bill. We're
going to explore what property tax actually is
historically, legally, what it does in practice.
And we've got a whole stack of sources here that
show just how differently everyone approaches
this idea of taxing the ground beneath our feet.
And just to, you know, set the stage. The core
definition we're working with is that property
tax is an ad valorem tax. Ad valorem. Latin,
right. Latin, yes. It just means based on value.
That is the absolute foundation for almost every
system we're going to talk about. And crucially,
it's not just one government taking a slice.
It's really important to remember that you can
have multiple jurisdictions, national, state,
county, city. All of them can tax the very same
property at the same time. And the language they
use can get pretty specific. I mean, we keep
seeing this term millage or mill rate. Before
we even get to the math. What exactly is a mill?
So a mill comes from the Latin word millesimum.
A thousandth. Exactly. A thousandth part. So
one mill is simply one thousandth of a dollar
or a euro or whatever currency you're using.
The mill rate is just the tax you pay for every
thousand dollars of your property's value. It's
a system designed to make these calculations
manageable at the local level. OK, that helps
cut through the jargon. So let's walk through
it. How does that mill rate turn into the bill
that I get? Can you give us the hard numbers?
Sure. Let's use a really clear example. Imagine
your home is officially assessed, and assessment
is the key word here. It's not always the same
as market value at, say, $50 ,000. And your town
sets a mill rate of 20 mills. To get your tax
bill, you take the assessed value, the $50 ,000,
you multiply it by the mill rate, which is 20,
and then you just divide that whole thing by
1 ,000. So 50 ,000 times 20, that's a million?
Divide that by 1 ,000. And there you go. Your
property tax bill is $1 ,000 for the year. $1
,000. Okay. It's a simple formula, but the key
things for you, the listener, to remember are,
one, it's based on that assessed value, and two,
that 20 mils might actually be a combination
of rates from the city, the county, the school
district, all bundled together. Now, when we
say property, our sources show that tax authorities
break this down into four broad types. Can we
quickly define those? Because we're really only
focusing on two of them for this deep dive. Right.
So legally, we're looking at four things. There's
land. There are improvements to land. There's
personal property. And finally, intangible property.
Okay, walk me through those. Land is, well, it's
the bird itself. Pretty simple. Yeah. Improvements
are all the man -made things stuck to the land
that don't move. So buildings, driveways, that
kind of thing. Got it. Personal property is the
movable stuff. You know, machinery, equipment,
sometimes even farm animals, though that's often
handled differently now. And intangible property
is non -physical stuff, stocks, patents. That's
almost never part of a general property tax today.
And we're mostly focusing on what's called real
property. The land plus the improvements, because
let's be honest, that's where the money is. Precisely.
That combination is what most people think of
as property. And it's what we'll be focusing
on as we travel the globe. OK, so we've got the
baseline. We know what it is, how the mill rate
works. Let's lay out the road ahead because we
are covering a lot of ground. We're starting
with these foundational policy ideas. Then we're
going to jump around the world to look at some
really different systems from Canada's transaction
heavy model to what Hong Kong does. Before we
end with the, frankly, surprising history and
some of the really deep philosophical criticisms.
this whole idea. And this is where it gets so
interesting. You start to see that property tax
isn't just about raising money. It becomes this
powerful tool for, well, for social engineering
and economic policy. All right. Jumping into
section one. The foundations of property tax
are what are we actually taxing? The first thing
that just jumps out from the sources is that
to achieve those social goals you mentioned,
authorities almost never tax everything the same.
Classification is everything. That's exactly
right. Property is almost never taxed uniformly.
It's classified by how it's used. Residential,
commercial, industrial, vacant land. And each
of those categories is often taxed at a very
different rate. And that's not random. No, not
at all. It's a conscious policy choice about
who or what kind of economic activity should
be carrying more of the weight for funding city
services. So a city could decide, for example,
that big office buildings get more benefit from,
say, the subway system. So they should pay a
higher rate than a single family home. It's a
way to shift the load around. Exactly. And once
you have that classification system, you can
use the tax to do more than just raise money.
You can actually try to influence behavior. And
the most striking example of that is the vacancy
tax. Which sounds like a direct shot at a problem
we see everywhere, right? Housing shortages in
big cities. But at the same time, you have investors
just sitting on empty apartments, treating them
like a stock instead of a home. It is a direct
response to that market failure. If you're an
owner and you're just sitting on a perfectly
good habitable apartment and keeping it empty,
the government can use property tax to give you
a very strong financial nudge to get that unit
onto the market, either for rent or for sale.
And we've got two really interesting specific
examples of this in our sources, right? One from
the Middle East, one from Europe. First up. In
Israel, the government just flat out imposes
double the property tax rate on vacant apartments
compared to occupied ones. Double. That's a huge
penalty. It's a massive financial deterrent.
It really forces the owner to do the math. Is
it worth paying twice the tax just to keep this
place empty? Or should I just rent it out and
get that housing supply back online? And then
there's France, where they did something similar
and the sources say it actually worked. Yeah,
the French experience is a really strong case
study. brought in their vacant property tax,
they actually measured a 13 % drop in the vacancy
rate in the areas they targeted. So this isn't
just a theory. This is using a tax system that's
centuries old to solve a very modern urban housing
problem. What's also fascinating is how the legal
definition of the tax changes things. When we
talk about a general property tax, we mean it's
based on fair market value. But there's this
really important legal distinction with another
kind of charge. The special assessment tax. This
distinction is so important because this is where
a lot of the confusion and frankly, the anger
from homeowners comes from. They get a bill that
looks like a property tax bill, but it's for
something completely different. So how are they
different legally? Yeah. I mean, if it's all
on my bill, what's the justification? A special
assessment tax is only levied because of a specific
localized improvement or benefit to your property.
Its legal justification is that benefit, not
your home's overall market value. The government
has to show that it's demonstrably making your
property better or more useful. Can you give
me a real world example? Sure. Let's say the
city decides to install a brand new sewer line
on your block or put in new sidewalks and streetlights
that directly serve your house. You'd pay a special
assessment tax for that. Oh, OK. That tax pays
for that specific project. It's totally separate
from the general Avaloran property tax that funds
the police, the fire department, the schools
and everything else. OK, so the general property
tax pays for the fire department that serves
the whole town. That's a collective good. But
the special assessment pays the brand new sidewalk
right in front of my house. That's a targeted
improvement just for my block. Precisely. One
is for the collective good. The other is for
a specific measurable benefit to your specific
piece of land. They're justified on completely
different legal grounds. And finally, for this
section, to really get what property tax is,
we should probably contrast it with two other
big ideas mentioned in the sources, the rent
tax and the land value tax. The rent tax is probably
the easiest one to understand. It's a tax based
purely on rental income or what the imputed rent
might be. You're taxing the money the property
makes, not the value of the property itself.
So it shifts it from a wealth tax to an income
tax. Exactly. A distinction we're going to see
come to life when we talk about Hong Kong later
on. And then there's the land value tax or LVT.
And this is a much bigger and often politically
charged idea. LVT is a totally different philosophy.
It says you should only tax the value of the
bare land itself and you should exclude the value
of any improvements like buildings or landscaping.
Because under an LVT system, if I own a prime
downtown lot, my tax bill is the same, whether
I leave it as a parking lot or build a 40 -story
skyscraper on it. Right. Proponents of LVT, who
are often called Georgists, see it as a way to
encourage development and kill land speculation.
It separates the value that comes from the owner's
investment, the building, from the value that
comes from society and nature, the location.
This contrast is really important because a lot
of the systems we're about to look at kind of
blur the lines between these different ideas.
OK, so we've got the basic concepts down. Let's
start our world tour in Section 2 and see how
this all plays out in the real world, starting
right next door in Canada. Canada operates on
a really sophisticated layered North American
model. It's fundamentally ad valorem, but it's
got all these other taxes and fees built in.
The annual tax bill is complex because it's usually
made up of three main layers. What are those
layers? So the calculation starts with the market
value, which is set by a provincial assessment
authority. That's your base. Right. Then that
value is multiplied by the municipal rate that
funds your local police, fire, parks. Then you
add an education rate on top of that for the
schools. And then finally, you might have some
special taxes for specific projects. And on top
of all that, how often they reassess your property's
value can vary wildly from province to province.
That layering really shows how any budget squeeze
was. it's for schools or for roads is going to
show up on your property tax. Yeah. But the source
material points out this really counterintuitive
thing about city tax rates. Yes. The Vancouver
paradox. It's fascinating. Vancouver has some
of the highest, most insane property values in
the world. Yeah. But for years, it's had one
of the lowest property tax rates in Canada as
a percentage of that value. How is that even
possible? It seems like it should be the opposite.
Well, it shows you something really important
about how this works. High property values don't
automatically mean high tax rates. Think about
it. If the city's budget, the actual amount of
money they need to run things, stays pretty stable,
but the total value of all the property in the
city has doubled because of a hot market. Then
you only need to take a much smaller percentage,
a smaller slice of that bigger pie, to get the
same amount of money. You've got it. The budget
is the constant, and the skyrocketing property
values are the variable that actually lets them
lower the rate. And it's not just Vancouver.
The sources also noted that at one point, Toronto
had the lowest rate among all the major cities
in its province, Ontario. So beyond that annual
tax, Canada also uses another big levy. The land
transfer tax, or LTT. Yes, and this is a huge
part of the cost of buying a home there. The
LTT is a provincial tax you pay when you buy
a property. So it's a one -time transaction tax,
not an annual ownership tax. And it's usually
progressive. The more expensive the house, the
higher the rate you pay. And this is everywhere
in Canada except for a couple of provinces. Correct.
Alberta and Saskatchewan are the big exceptions.
They generally don't have a provincial LTT, which
makes buying a home there cheaper up front. But
the costs can get really, really high in Canada's
biggest city. Oh, absolutely. In Toronto, they
have their own additional municipal land transfer
tax, which gets stacked right on top of the provincial
ones. So you get hit twice. You get hit twice.
It means buyers in Toronto pay two separate LTTs
on one purchase, and it can add tens of thousands
of dollars to your closing costs. It's a huge
upfront expense. Wow. That sounds like a major
barrier. But the system does try to help out
first -time buyers, right? It does. They use
rebates as a policy tool. So in Ontario, for
example, first -time homebuyers get a tax credit
of about $750. But more importantly, there's
a land transfer tax rebate of up to $4 ,000.
So if you're buying a home under a certain price,
I think the source said around $368 ,000, that
four grand rebate means you pay zero provincial
LTT. That's a huge incentive. It is. But on the
other side of the coin, you have British Columbia,
which has used property tax surcharges as a really
aggressive tool to try and manage foreign investment
in its housing market, especially in Vancouver.
Ah, so this is a clear case of using a tax to
change behavior. What do they do? So British
Columbia already has a tiered transfer tax, but
then they added a special surcharge that only
targets non -resident foreign homebuyers. It
started at 15 % and they quickly hiked it to
20%. 20%. On top of everything else. On top of
everything else. And the definition of a foreign
buyer is really broad. It even includes international
students and temporary foreign workers. It was
explicitly designed to cool down foreign speculation
in what was an incredibly overheated market.
Okay, so from Canada's layered model, let's jump
over to Germany. The problem there wasn't complexity,
it was. It was a complete system breakdown that
forced a massive reform because of a constitutional
ruling. Right. Germany's property tax brings
in almost 15 billion euros a year. It's absolutely
vital for their municipalities. It funds schools,
libraries, roads, all the local services. It's
the bedrock of their local government funding.
But that bedrock was built on, I guess. Quicksand.
The way they were calculating the tax base was
so old it was basically meaningless, which led
to this huge constitutional court challenge in
2018. The whole system was ruled unconstitutional
because it violated their version of the Equal
Protection Clause. The problem was that the tax
calculations were based on standard property
values that were decades old. How old are we
talking? In what was West Germany, they were
using values from 1964. In what was East Germany,
they were using values from 1935. 19. 35. You
can't be serious. Yeah. So they're taxing a modern
skyscraper based on the value of whatever was
on that land before World War Two. That's essentially
what was happening. It was stunning and it created
massive inequality. You could have two properties
with wildly different modern values paying the
exact same tax because their 1935 valuation happened
to be the same. The court just said this is fundamentally
unequal and has to stop. So. The court basically
ordered a complete reboot of the entire system.
That must be a bureaucratic nightmare. What's
the timeline? for a change that big. It's a very
long, very slow transition. The reform officially
kicked in in 2022. Then every single property
owner in Germany had until January 2023 to submit
a massive mandatory reassessment of their property's
value based on what it was worth on January 1st,
2022. OK. And here's the kicker. The new taxes
based on those new values won't actually be charged
until January 1st, 2025. So from the court ruling
in 2018 to the new tax bill in 2025. Yeah. That's
a seven year process. just to get the new rates
in place. That really shows you the scale of
this. It really does. And while they were redoing
the whole thing, they did keep a lot of the important
exemptions for things like public buildings,
churches and nonprofits, as long as the property
is being used for a public good. They also gave
cities the power to set a higher tax rate on
undeveloped land to, you know, encourage construction.
OK, let's pivot south now to France, which has
this really robust, multi -part approach to taxing
property. France's main tax is the tax concierge.
It's a local tax paid by the owner, and it's
pretty comprehensive. It's broken into three
parts. The tax on built properties, like houses.
The tax on unbuilt land, like farms. And then
a separate tax just for household waste removal.
So they've got you covered whether you own an
apartment, a field, or both. But the calculation...
This is one of the most conceptually tricky methods
we've come across. It is because it doesn't use
simple market value. For a house, the tax base
is 50 % of the property's cadastral rental value.
For unbuilt land, it's 80 % of that value. Whoa,
hold on. What on earth is cadastral rental value?
Is that what I could actually rent my house for?
No, and that is the crucial point. It is the
theoretical rent the tax authority thinks your
property could command based on its characteristics
compared to other similar properties. It's a
government -determined estimate of... So the
government dreams up a theoretical rent. And
then for my house, they only tax half of that
theoretical number. That's it. And then that
number gets multiplied by a government revaluation
coefficient to account for inflation. And then
that final number is multiplied by the tax rate
set by your local town. It's got all these bureaucratic
layers built in. Which I guess means your tax
bill is a lot less volatile than if it was based
on the wild swings of the housing market. But
it also means there's a lot of government input.
Yes. But the French system is also really notable
for its long list of exemptions, which are clearly
designed to achieve specific social goals. Yeah,
let's list some of those out because they're
perfect examples of policy choices. So first,
you have temporary exemptions to encourage certain
things. For instance, new houses are exempt for
two years. If you do major energy efficiency
renovations, you're exempt for five years, a
clear push for green investment. And new low
income housing projects can get a 15 year exemption.
Those line up perfectly with housing and climate
policy. What about permanent exemptions? The
permanent ones cover things like state -owned
property and buildings used for religious worship.
But the most important one, as a social policy,
is that owners over the age of 75 with an income
below a certain level are exempt from the tax
fonciere for life. It's designed to stop seniors
on fixed incomes from being taxed out of their
homes. And just like we saw in Israel, the French
system goes after empty homes pretty aggressively
with separate taxes. Oh, yes. They have distinct
additional taxes. There's one for furnished secondary
residences. And for properties that are just
sitting empty, they have two levels. One tax
for properties in high demand areas that have
been vacant for at least a year, and another
one for places that have been empty for more
than two years. It's a very clear, multi -layered
attack on passive property ownership. Okay. Moving
into section three, we're shifting away from
these traditional ownership models to look at
systems that are really different, often with
very clear social goals. Let's start with the
U .K., which is a real anomaly in the developed
world. It is because the U .K. is almost unique
among wealthy OECD countries for not taxing the
ownership of residential property itself. If
you own your house, you don't pay an annual tax
on the value of that asset, which is a massive
break from that ad valorem principle we started
with. So instead, they have the council tax.
And that's paid by the person living in the house,
not necessarily the owner. Correct. Council tax
is considered a hybrid. It's part property tax,
part personal tax. The liability is on the resident.
The owner only has to pay if the property is
empty. And even then, there are often discounts.
And this is where it gets even more complicated.
The amount you pay isn't a percentage of what
your house is worth today. It's based on these
historical value bands. Exactly. Your property
is put into a council tax band. There are nine
in England. based on what it was worth on a single
day back in 1991. Wait, 1991? So if my house's
value has, say, tripled since 1991, I'm getting
a huge accidental tax break. Doesn't that completely
violate the whole based on value idea? It creates
huge equity problems, yes. It makes the system
really out of step with the modern market. It's
a common criticism. And the bands are rigid.
On top of that, the amount you pay depends on
how many people live there. If it's just one
person, you get a 25 % discount. The UK also
relies heavily on a transaction tax, right? the
Stamp Duty Land Tax, or SDLT. SDLT is a big one.
It's a progressive tax you pay when you buy property
in England and Northern Ireland, and they really
use it as a housing policy tool. For a regular
UK resident buying their main home, the first
£250 ,000 of the price is tax -free. And for
first -time buyers, it's even better. They pay
0 % up to £425 ,000. It's clearly designed to
help people get on the property ladder. And just
like we saw in Canada, they use this tax to discourage
foreign investors. They do. Don't UK residents
have to pay a 2 % surcharge on the SDLT on top
of all the other rates? It's a theme we see over
and over. If a market gets too hot because of
foreign money, transaction taxes are the go -to
tool to try and cool it down. OK, so from the
UK taxing the resident, let's go halfway around
the world to Hong Kong, which offers... Maybe
the clearest, most fundamental difference of
all the systems we've looked at. Yeah. Hong Kong's
property tax is just flat out not ad valorem.
It's a pure income tax. This is the critical
distinction. The tax is not on the value of the
asset. Owners only have to pay property tax if
they receive consideration, which just means
rental income during the tax year. So if I own
a multimillion dollar apartment in Hong Kong
and I live in it myself, I pay zero property
tax. Absolutely correct. Because you're not deriving
any income from it. The wealth that's tied up
in that asset is untouched by this particular
tax. So how do they calculate the tax then? It's
computed on what they call the net assessable
value, which is 80 % of the assessable value.
And the assessable value is basically your total
rental income minus any unrecoverable rent and
minus any local rates you paid as the owner.
It's purely a tax on revenue. That's a huge difference.
It shifts the entire tax burden away from just
owning wealth to actually generating income from
that wealth. It's the ultimate contrast to, say,
the German or Canadian systems. Now let's look
at Chile, which uses its property tax for something
else entirely, explicit social redistribution.
They basically nationalize the tax base to spread
wealth between different towns. Chile's system,
the territorial tax, is paid quarterly. It's
based on a low percentage, maybe one or two percent
of the property's physical value. And that fiscal
value is set by their IRS based on things like
construction materials and age. And it's usually
much lower than the actual market value. So the
tax burden is already pretty light. But the sources
point to these really powerful exemptions designed
for social equity. The exemptions are key. Residential
properties valued below about U .S. $40 ,000
are completely exempt. And for homes valued above
that, you only pay tax on the amount that exceeds
that $40 ,000 threshold. It's designed to protect
lower value homes and only tax the higher end
of the market. So it's very progressive at the
collection point. But the really unique part
is what happens to the money after it's collected.
It doesn't just stay in the wealthy town where
it was raised. This is the social mechanism that
sets Chile apart. While the money initially goes
to the local municipality, they have to contribute
a big chunk of it to a common municipal fund.
This national fund is then redistributed back
out to all the municipalities based on need bin,
things like the poverty rate and how much infrastructure
they need. So it basically nationalizes the local
tax base. Money from a rich coastal suburb could
end up paying for a school or a clinic in a poor
rural town. That's precisely the goal. It's a
powerful example of using property tax not just
to raise money, but as a deliberate tool for
national wealth equalization and to fight regional
inequality. And finally, in this section, let's
touch on Italy and the, well, the pretty confusing
history of its local tax structure. Before 2020,
Italy's system was called the Imposta Unica Cominale,
or IUC. Now, despite the name Unica, which means
single, it was actually this awkward combination
of three totally separate taxes all bundled together.
It was a real headache for homeowners. To make
it clear, the IEC was kind of like having three
different faucets all flowing into the same sink.
What were those three components? The three were
the IMU, the TASI, and the TARI. The IMU was
the basic ownership tax on buildings and land.
The TASI was a tax for indivisible services,
things like streetlights and road maintenance
that benefit everyone. And the TARI was just
the tax for garbage collection. So IMU paid for
owning the property, TASI paid for the general
upkeep of the town, and TARI paid to take out
the trash. A single name for three different
calculations. Exactly. It was a mess. So in 2020,
they finally got rid of Tassie and rolled it
into the new IMU, which simplified things a bit.
Today's IMU rates are usually between 0 .4 %
and 0 .8 % of the property's cadastral value.
And like France, primary residences are often
exempt, right? That's right. Your main home is
usually exempt from IMU, as is agricultural land
that's actively being farmed. But one really
interesting thing, given our global topic, is
that Italy also has a special wealth tax, the
LVIE, that's levied specifically on Italian residents
who own real estate abroad. So they're trying
to stop capital flight. Exactly. It's an aggressive
attempt to capture and tax the global assets
of their citizens. So wealthy Italians can't
just buy property elsewhere to avoid paying tax
at home. That trick around the world really shows
that property tax isn't one single thing. It's
this incredibly flexible machine. Now let's take
a step back in Section 4 and look at the history
and the biggest criticisms. It's important to
know that this all didn't start with market value,
did it? It started with, what, crops. Oh, absolutely.
Before you had widespread currency, tax was just
a physical slice of what you produced. We've
got records from the ancient city -state of Lagash
in modern Iraq from around 6000 BCE. They had
a system called bala, which means rotation. To
make the job of tax collection manageable, because
you had to physically go and count everything,
they would just tax a different part of the city
each month. It was a rotating burden, so the
whole city paid over the course of a year. But
no single area got crushed by constant collection.
And systems like in ancient Egypt started to
move away from just area and towards potential
output, towards value. Yeah. Ancient Egypt taxed
the value of grain, cattle, oil and the land
itself. And they had a professional class of
tax assessors, scribes who are highly respected.
They kept these detailed records of who owned
what and they would check crop yields. If you
couldn't pay, you went to court. So it was a
slow shift from taxing area to taxing value or
income. OK, let's fast forward to the American
colonial period. Property tax became the foundational
tool for building communities. In the 13 colonies,
it was used to fund the most essential services.
The Puritans in Boston, for example, use it to
pay for the church and for religious education.
And everybody had to pay. It didn't matter what
your own religion was. It was seen as a civic
duty. And they also built in this measure of
social compassion, but also social control that
we don't really think about with taxes today.
Not at all. The sources note that the assessors
would explicitly consider your social situation.
A widow with kids was often not only forgiven
her taxes for the year, but she might actually
receive a monthly payment from the town treasury.
A kind of guaranteed income funded by property
tax. Exactly. But on the other hand, there were
clear punishments. If you destroyed public property,
like you damaged a road, you had to pay for the
repairs through a direct increase in your property
tax. It was a very transparent tool. for both
welfare and local justice. Now, after 1776, in
the early United States, property tax became
the center of this huge political fight between
two of the founders, Alexander Hamilton and Thomas
Jefferson. And this fight really sealed the fate
of property tax as a local thing in the US. Hamilton,
who wanted a strong central government, argued
for a high national property tax to give the
new federal government more power and more money.
Jefferson, who was all about states' rights and
local control, wanted that revenue to be raised
locally. He saw property tax as the most democratic
way for communities to fund themselves. And Hamilton
actually got his national property tax for a
little while, right? But it was a total failure.
Why? It was a bureaucratic disaster and it was
deeply unpopular. The states hated the federal
government meddling in their local revenue. There
were protests. People refused to pay. And it
was repealed pretty quickly and never successfully
brought back. That failure is why, to this day,
property tax in the U .S. is almost exclusively
a local revenue stream. It's what pays for our
schools, our police, our fire departments. That
history is fascinating. But the most powerful
part of this section is the ultimate... fundamental
criticism of property tax. It asked this really
deep question about what it even means to own
something. The criticism basically asks, does
property tax mean that true absolute ownership
of your home is just an illusion? That's a pretty
heavy statement. What's the argument? The argument
is that property tax proves that property owners
are really just long term renters and the government
is the true landlord. And the proof is what happens
if you don't pay because the government can legally
kick you out of your home for not paying this
annual fee. Your ownership is conditional. And
the consequences for not paying can be incredibly
extreme. We have this really shocking specific
story from Southfield, Michigan, that just illustrates
the brutal reality of this idea. This is a well
-documented case that really gets to the heart
of the criticism. A resident fell behind on her
property taxes by about $900. The town, following
the law, refused to accept a late payment after
a certain point. Instead, they confiscated her
home, which is valued at nearly $300 ,000, and
sold it to cover the debt. Wait, they took a
$300 ,000 home over a $900 debt? They did. and
it highlights the most severe implication for
property rights. The value of the asset they
took was wildly out of proportion to the debt
owed, but the state's right to collect its tax
and the lien that comes with it was more powerful
than the individual's claim to her own home.
Critics say this is definitive proof that your
ownership is contingent on paying that annual
fee to the state. It changes how you see the
whole thing. It really does. It's not just a
tax. It's the annual renewal fee on your tenancy
with the government. And just to round out the
picture, even though this tax is so common, it's
worth noting there are some surprising places
that don't have it at all on residential property.
It's a surprisingly long list for such a fundamental
tax. Who are the big exceptions? Well, in the
People's Republic of China, there's no tax on
homeowners because the government technically
owns all the land. We also see no property tax
in places like Kuwait, Malta and Greenland. And
even inside the U .S. sphere of influence, there
are some tax free zones. Yes. The U .S. territory
of American Samoa has no property tax. And even
in a state like Alaska, only about two dozen
municipalities actually levy one. But where they
do, it makes up the vast majority of local revenue,
which shows you just how effective this tax is
when it's applied. This has been a really fascinating
and, I think, exhaustive breakdown. It shows
property tax is a financial tool. It's a social
lever and it's a bit of a philosophical hot potato.
Yeah. Let's try and synthesize the two big takeaways
from this deep dive. I think the first one is
that property tax, even though we think of it
as the simple local thing, is incredibly adaptable.
We saw systems where it works like an income
tax, like in Hong Kong. Right. Or a tax on residents,
like in the UK, or even a national wealth redistribution
tool, like in Chile. Its application is always
a policy choice, whether you're trying to equalize
wealth or just get landlords to rent out empty
apartments. apartments like in France and Israel.
And the second big takeaway is that despite all
that global variety, its core function at the
local level is still absolutely fundamental.
It is, for lack of a better term, the cost of
local civilization. I mean, in the U .S., it's
the engine that funds 97 percent of local infrastructure,
police, fire, schools, roads. You just can't
run a city without it. It is the necessary engine
of local government. But let's end with that
really provocative thought that the critics raised,
building on that example from Michigan, where
a $900 debt led to losing a $300 ,000 home. If
failing to pay your property taxes, even a tiny
amount, can lead to the state taking and selling
your home, does that mean true absolute property
ownership is fundamentally an illusion? Are we
at best just long -term tenants of the state
paying an annual rent on the land? It's a powerful
question. And it challenges the very core of
our ideas about property rights. It really encourages
us to look seriously at those other ideas we
mentioned, like Georgism and the land value tax,
as maybe potential solutions. Understanding the
history and the philosophy behind that annual
bill, it really changes everything about how
you read it next time it shows up in your mailbox.