Stanford University: Property Tax Hatred is Good for You

All taxes are paid out of income – whether by writing a check, engaging in a transaction, or having it withheld. But the manner in which the tax is paid seems to matter – a lot --with respect to public acceptance of the tax.

People hate the property tax more than any other tax. There are regular tax revolts against the property tax. Property tax limits often remain binding for a number of years--even decades. In contrast, outrage and revolts against high collections of income or sales taxes are rare or non-existent.

Two Stanford professors wondered why. They hypothesize the “in your face” nature of the property tax had much more to do with public hatred than the actual levels of property taxes collected. To test this hypothesis they examined the relationship between tax levels/tax revolts and the use of tax escrow. Escrowing property taxes into mortgage payments smooths the bill out over 12 months, eliminates the need to write a big separate check, and generally makes the local property tax far less visible and superficially obnoxious – even if the exact same amount is eventually paid.

Lo and behold, as reported in a new National Bureau of Economic Research working paper, “The Hated Property Tax: Salience, Tax Rates and Tax Revolts” the researchers found that areas in which the property tax is less visible because of higher use of escrow are also areas in which property taxes are actually higher and property tax revolts are less likely to occur.

Among the conclusions they draw is this:

“A primary implication of our results is that a non-benevolent government will wish to decrease
the salience of taxes and that voters facing a non-benevolent government will wish to keep taxes' salience high--even if the forms of taxation that are highly salient cause inconvenience and animus such as that generated by the property tax.”

Using a trusty “Academic to English” translator, you get this:

“A primary implication of our results is that a government which seeks to prioritize and advance its own internal interests over the interests of citizens will want to reduce the visibility of taxation. Voters dealing with a government exhibiting this characteristic should want very visible taxes – even if it causes extreme annoyance and anger like the property tax does.”

Want lower taxes? Make sure the property tax remains the bedrock of local government finance and, most of all, embrace your hatred.