Making Property Taxes Less Taxing

July 19, 2012
By Doug Gavel

The process by which nations and municipalities attempt to reform their property tax codes can be incredible complex, politically charged, and oftentimes fruitless. In a new Working Paper, Harvard Kennedy School Lecturer Jay Rosengard outlines potential strategies for making property tax reform efforts more simple, transparent and effective.

"The property tax is the tax everyone loves to hate," Rosengard writes. "Countries can seldom live with the tax as initially designed, yet neither can they live without the tax at all."

Rosengard lists the many common obstacles that often impede reform efforts -- including political landmines, technical shortcomings and miscalculations.

"Although much tax policy is actually made in implementation, administrative reform is often neglected, leading to the frequent unintended negative consequences of conceptually sound but poorly executed property tax laws and regulations – something might look good on paper, but simply cannot be credibly implemented as designed," Rosengard writes. "Tools to improve administrative cost-effectiveness include simplification, rationalization, standardization, and automation of property taxation."

Rosengard identifies four fundamental principles of property tax reform which he argues must be followed in order to succeed:

  • Simple in practice trumps optimal in theory.
  • Revenue generation trumps social engineering.
  • Economics of taxation trumps political mathematics.
  • Behavioral change trumps paper tigers.

"The challenge [facing property tax reform efforts] is to strike a balance between two conflicting sentiments," Rosengard concludes. "The first sentiment is well-articulated by former U.S. President James Madison: 'The power of taxing people and their property is essential to the very existence of government.' The second sentiment is reflected in this rueful observation by the political philosopher and statesman Edmund Burke: 'To tax and to please, no more than to love and to be wise, is not given to men.'"

Jay Rosengard, Lecturer in Public Policy, has 35 years of international experience designing, implementing, and evaluating development policies in: public finance and fiscal strategy, tax and budget reform, municipal finance and management, intergovernmental fiscal relations, banking and financial institutions development, microfinance, SME finance, and public administration. He has worked for a wide variety of multilateral and bilateral donors, as well as directly for host governments and private sector clients.

The Working Paper, titled "The Tax Everyone Loves to Hate: Principles of Property Tax Reform," will be published as a chapter in a forthcoming book, "A Primer on the Property Tax," edited by Gary Cornia, William McCluskey and Larry Walters (Malden, MA: Wiley-Blackwell).

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Harvard Kennedy School Lecturer Jay Rosengard

Jay Rosengard, Harvard Kennedy School lecturer in public policy

"Countries can seldom live with the tax as initially designed, yet neither can they live without the tax at all," writes Rosengard.