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Taxation of Real and Personal Property

Cite this article as: Jason Mance Gordon, "Taxation of Real and Personal Property," in The Business Professor, updated January 8, 2015, last accessed April 8, 2020, https://thebusinessprofessor.com/knowledge-base/taxation-of-real-and-personal-property/.
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Taxation of Real and Personal Property
This video explains how taxation of real and personal property limits property ownership rights.

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What is “Taxation” of personal and real property?

Property taxes are a form of direct tax on the real and personal property owned by individuals or businesses. Property taxes (primarily on real estate) often fund local schools, police, and county administration. A common tax on personal property is a tax on the value of one’s personal vehicle, commonly known as “ad valorem” taxes or business equipment and inventory.

Discussion: The US Constitution includes the ability of the government to tax individuals. Do you feel that this power is overly broad? Why or why not? Should this power extend equally to the state and local governments? Why or why not? Should there be any specific limits on this power? Local property taxes are often linked to funding for schools, police, and fire departments. How does income level and property values relate to quality of public services? How do you feel about this method of funding for these public services?

Practice Question: The town of Pleasantville is considering building a new high school building. To raise funds for the project, what are some of the town’s options?

Proposed Answer

  • When trying to raise funds for public use, such as building government facilities, the organizers can apply to have some of the taxes collected from property in the area to be directed to the project.

Academic Research

Gurdgiev, Constantin, Land Value Taxation and Other Measures for Raising Public Investment Revenue: A Comparative Study (March 27, 2012). Available at SSRN: https://ssrn.com/abstract=2029515 or http://dx.doi.org/10.2139/ssrn.2029515

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