Do You Own Your Home If You Pay Property Taxes? | This Week's Economy Ep. 148
How property taxes undermine homeownership—and what states and localities can do to fix it.
Hello Friends!
Affordability is a major issue for voters. Families are feeling squeezed by higher housing costs, rising insurance premiums, and everyday expenses that often outpace income. For many Americans, the question is no longer just whether they can buy a home, but whether they can afford to keep the one they are in.
Across the country, states are beginning to confront one overlooked driver of the housing affordability crisis: property taxes.
From proposals to cap assessments to more ambitious efforts to reduce or even eliminate property taxes, lawmakers are reexamining a tax that quietly raises housing costs annually.
In This Week’s Economy, we’ll look at how property taxes undermine true homeownership, why they fall hardest on those least able to pay, and what meaningful reform would require if states and localities want to restore affordability and let people prosper.
Watch the full episode on YouTube, Apple Podcast, or Spotify, and visit my website for more information about Ginn Economic Consulting and me.
HOW WE GOT HERE
Property is the foundation of liberty. The Founding Fathers understood this well. Property 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 already been purchased is to deny genuine ownership.
In practice, property taxes turn citizens into perpetual tenants of the state. The idea that people can truly “own” what the government requires an annual payment to keep contradicts the very essence of a free society.
Defenders of property taxes argue they are “good” because they tie local services to local funding. Yes, government may provide schools, infrastructure, and safety. But this argument rests on a critical assumption: 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 more importantly in how much government spends — and how quickly those budgets grow. Rising property tax bills are not an accident. They are the predictable result of unchecked spending by governments.
That reality is becoming harder to ignore. A growing number of states are actively considering eliminating or significantly reducing property taxes — and many will have the opportunity to act during this legislative cycle. States to watch include Florida, Illinois, Kansas, Missouri, Montana, Nebraska, North Dakota, Oklahoma, Pennsylvania, South Carolina, Texas, and Wyoming.
Next, we’ll examine why property taxes create so many problems, what drives the tax burden higher, and the reforms that can restore true homeownership and let people prosper.
1. Undermining Property Ownership
The Principles:
Every year, homeowners must pay the government simply to keep their property. Property taxes are not a reasonable price for local services—they are an outdated, overly coercive, and economically destructive way to fund government. More people across the United States are realizing that property taxes—once accepted as a “necessary evil”—are neither necessary nor moral.
My Take:
A Wealth Tax: Nothing is free, but ownership should be secure once it’s earned. Property taxes act like a recurring wealth tax, penalizing homeownership, raising rents, and discouraging investment.
We All Rent: Even after you pay for your home, the annual requirement to pay a tax to “keep” it means you don’t fully own it. That perpetual rent-to-government model contradicts the philosophical foundation of private property and liberty.
Housing Affordability Crisis: We are already facing a housing affordability crisis in America. These taxes are fueling that crisis created by years of bad policy: excessive spending, loose fiscal rules, and governments that grow faster than the average taxpayer’s ability to pay for it. Families didn’t create this problem. Government did. Ending these unjust taxes would help restore the opportunity for homeownership.
Related Reading: I explained how these taxes contribute to the housing affordability crisis in a recent Substack piece.
2. Regressive & Distort Economy
The Principle:
No tax that allows the government to seize a family’s home for nonpayment can be considered good. Property taxes are deeply regressive because, unlike income taxes, they are owed regardless of a homeowner’s ability to pay. The Texas Comptroller’s Office, which uses the Suits Index to measure tax incidence, consistently ranks property taxes among the most regressive taxes in the state.
This regressivity is intensified by how property taxes are assessed and how rapidly they grow. When property tax collections grow faster than wages, population, and inflation, the burden increasingly falls on those least able to absorb higher costs—turning property taxes into one of the most inequitable and distortionary taxes in the system.
My Take:
Who Is Directly Impacted? Property taxes fall hardest on lower- and middle-income families because housing consumes a larger share of their household budgets. Research finds that lower-valued homes are routinely overassessed relative to higher-valued homes. As a result, owners of modest homes often face effective property tax rates at least 50% higher than owners of more expensive properties.
Renters Are Indirectly Hit: Property taxes also burden people who never receive a property tax bill. Renters pay through higher rents, and business owners pay through higher commercial lease costs—often passed on in the form of lower wages, fewer jobs, and reduced investment. For millions of Americans, property taxes are the least visible yet most unavoidable form of taxation.
Behavioral Distortions: Property taxes distort economic behavior in ways that are rarely captured in standard incidence studies. The lock-in effect discourages families from moving because purchasing a new home often triggers a higher assessment. At the same time, the push-out effect forces seniors and lower-income residents out of homes they have already paid off. Together, these distortions penalize both entry into—and exit from—the housing market, making property taxes uniquely harmful.
Related Reading: Read more on the regressive and distortionary effects of property taxes in my report for The James Madison Institute.
3. Government Spending Growth
The Principle:
Overspending is the root cause of the property tax crisis. High property tax bills are not the problem themselves — they are a symptom of government spending that grows faster than population and inflation. Unless spending is restrained, relief measures like exemptions, caps, or rebates are temporary and inevitably get eaten up by ever-expanding budgets.
My Take:
The Cost of “Stable” Revenue: Property taxes are often defended as a “stable” source of revenue. But that stability benefits government appropriators, not taxpayers. For families, renters, and employers, property taxes create ongoing instability as bills rise year after year. These increases do not occur because markets fail; they occur because local governments choose to spend more and then adjust tax rates to cover that spending.
What Drives the Growth: Local governments are the primary drivers of this problem, as property taxes remain their largest single source of revenue. Once governments grow accustomed to higher revenue levels, spending tends to ratchet upward. Cutting back becomes politically and fiscally difficult, creating constant pressure for higher collections as budgets expand.
The Real Issue — No Spending Limits: The unsustainable growth of property tax collections cannot be separated from spending trends. Research from Americans for Tax Reform’s Sustainable Budget Project shows that state spending growth nationwide consistently outpaces population growth plus inflation. Without enforceable limits tied to the average taxpayer’s ability to pay, property tax “relief” is little more than a pause before the next increase.
Related Reading: This Halloween, I shared why the scariest driver of rising property taxes is insatiable government spending.
4. Reform Requires Spending Restraint
The Principle:
Eliminating property taxes entirely will take time, but states and localities can begin immediately by adopting sustainable budgeting. That means ensuring government spending grows more slowly than population growth plus inflation. When governments live within these constraints, surpluses emerge—not from higher taxes, but from a growing economy generating sales tax revenue faster than restrained spending.
My Take:
What Spending Limits Are For: The goal is not revenue neutrality; it is smaller government in terms of both taxes and spending. Without firm spending caps, surpluses are quickly absorbed into higher budget baselines, leaving little room for permanent tax relief. Experience from other states is clear: slowing or eliminating property taxes requires constitutional or statutory limits that tie annual spending growth to no more than population growth plus inflation. Without such limits, even well-intentioned reforms are eventually undone by unchecked budget growth.
Avoid Short-Term Fixes: Expanding homestead exemptions or imposing appraisal caps may provide temporary relief, but they ultimately redistribute the burden and delay the problem. Lasting reform comes from limiting spending growth so that surpluses can be used to permanently reduce—and eventually eliminate—property taxes.
Repay Debts: Debt-financed property taxes add complexity, but they are the result of local choices. Voter-approved debt should continue to be repaid locally until retired, not shifted or socialized across jurisdictions. At the state level, the priority should be eliminating school-district property taxes while expanding universal education savings accounts, which allow funding to follow students directly and simplify school finance.
Related Reading: See my solutions for eventually eliminating property taxes at Liberty Taxed.
5. A Reimagined Tax System
The Principle:
Policymakers have several potential pathways to reduce—and eventually eliminate—property taxes. Each option comes with tradeoffs, and no single approach will work the same way everywhere. The primary strategies under discussion include incremental relief tools, surplus-driven buydowns, tax swaps, diversified revenue sources, property transfer or sales taxes, and hybrid reforms. Regardless of the approach, success depends on reining in state and local spending to fund only limited government. Without spending restraint, no tax reform can deliver lasting relief.
My Take:
A Responsible Path Forward: The good news is that property taxes can be reduced or eliminated responsibly—without gimmicks, carve-outs, or distortions like ever-expanding homestead exemptions, flawed appraisal caps, or arbitrary age-based freezes that have been proposed in some state legislatures. Structural reform, not temporary patches, is the path to lasting change.
Why Consumption-Based Taxes Work Better: Rather than propping up an outdated system, states should consider redesigning their tax base toward consumption—such as a broader, more neutral sales tax—paired with disciplined budgeting. A broad-based consumption tax applied to final goods and services is more transparent, more stable, and less harmful to economic growth than property taxes. Done correctly, it can fund essential services while ending the moral and economic harms of taxing ownership—without increasing total tax revenue.
The Future of Property Tax Reform: States and localities have a rare opportunity to adopt tax systems that are less hostile to growth, more transparent for taxpayers, and consistent with true property ownership. By embedding these principles in law—or even in state constitutions—policymakers can secure lasting homeownership, restore economic freedom, and provide housing stability for generations to come. The time has come to end the property tax burden and let people truly own what they have worked to earn.
Related Reading: I compare consumption-based taxes and property taxes in this piece.
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God bless you, and let people prosper!
