When Florida Gov. Ron DeSantis called for the repeal of property taxes, he was doing something at once novel and familiar. Eliminating the property tax would be unprecedented. Calling for a bold change and charging the legislature with sorting out the details, however, is a tried-and-true part of the gubernatorial toolkit.
The challenge for Florida’s legislature is finding a way to replace, or do without, a tax that will raise an estimated $55 billion for Florida’s local governments and schools this fiscal year—and to do so, per the governor, without raising state taxes.
To put that dollar figure in context, the revenue generated by Florida property taxes is considerably more than the $46 billion a year raised last fiscal year by the state’s 6 percent sales tax, its primary source of tax revenue. This is not revenue Florida could easily do without. Schools, in particular, derive more than half their funding from property taxes.
To make up for the loss of the property tax, Florida’s average combined state-local sales tax rate would have to exceed 14 percent, according to Tax Foundation estimates.
That kind of sales tax hike isn’t likely to happen, but it hasn’t quashed the governor’s enthusiasm for property tax abolition. In this, he’s echoing refrains heard in other states, including in North Dakota, where a property tax repeal proposal made the ballot but voters rejected it; in Nebraska, where in 2024 activists pushed a sweeping proposal to replace income, property, and other taxes with one massive sales tax only to see it fail to gather enough signatures to qualify for the ballot; and in Wyoming, where lawmakers ultimately rejected a bill that would have eliminated property taxes for most homeowners.
This is something new under the sun, and it’s not just affecting sun-drenched Florida. Citizen activists have called for property tax repeal before, and the occasional state lawmaker has made repeal a personal hobby horse, but never before has the idea garnered so much attention or—at least in a few states—been taken so seriously.
If you want to understand why, check your local real estate listings.
Rising home values.
Between 2020 and 2024, home values soared 54 percent in nominal terms, growing at twice the rate of inflation. And that’s the national average. In particularly fast-growing parts of the country, the increase can be staggering. If local officials haven’t reduced property tax rates in response to skyrocketing assessed values, homeowners are getting hit with higher tax bills.
Aggrieved homeowners are clamoring for relief, much like they did during the first property tax revolt of the late 1970s and early 1980s. This time, some of that energy has been channeled into advocacy for a once-unthinkable idea: getting rid of property taxes altogether.
Residents of every state pay property taxes. Always have and, policymakers long assumed, always will. Yet nothing lasts forever: The property tax was once a mainstay of state as well as local tax collections, but states replaced their property taxes as income and sales taxes came into vogue in the early decades of the 20th century. Today, the property tax is the primary source of tax revenue for local governments, responsible for 72 percent of local tax collections nationwide. That makes it hard to abandon without a replacement revenue source—and there’s the rub.
How do property taxes stack up against other taxes?
Even by the already low standards of tax popularity, property taxes are not well-liked. Economists, however, point out that property taxes are considerably better than the alternatives.
In addition to property taxes, local governments in 38 states impose local sales taxes, and some states also levy local income taxes. Utility fees and a variety of lesser taxes and fees round out localities’ own-source revenue, which is supplemented by federal and state aid.
Property taxes do less economic harm than other taxes that could raise the same amount of revenue, making them more economically efficient than the alternatives. If you want a tax code that doesn’t stand in the way of economic growth, shifting this much revenue generation to another tax should make you nervous.
Property taxes have less of an effect on decision-making—including decisions on where people choose to live—than most other taxes, making them less distortionary than other forms of taxation. If you don’t want government policies to interfere with market forces any more than necessary, the property tax is your kind of tax.
Property taxes roughly align with the benefits that property owners receive from local government, making them more equitable than the alternatives. If that fits with your notions of tax fairness at the local level, the property tax is hard to give up.
And property taxes are highly transparent and correlate strongly with services that enhance the value and utility of property, making them unusually sensitive to local taxpayers’ preferences on the size and scope of government. If you prefer to pay taxes that come with their own built-in pressure against unwarranted increases, you won’t like the alternatives.
Transparent taxation.
Growing discontent with rising property tax burdens does not undermine the point that property taxes are better aligned with local preferences. On the contrary, the current discontent reinforces one of the benefits of funding local government through property taxes. Few people know what they pay in sales tax. Due to withholding, some don’t even know what they pay in state income tax. But homeowners know their property tax bill and can evaluate whether they believe it’s justified by local services.
When property owners perceive a misalignment between what they are paying and what they get back in return, as many do now, they are stirred to action. The present discontent is evidence that the transparency of property taxes, and the degree to which they are aligned with local services that broadly benefit those paying them, enables a level of accountability that is virtually nonexistent with other taxes.
Research consistently finds that property taxes are less economically harmful than other common methods of taxation. A study of taxes across 21 Organization of Economic Co-operation and Development member countries found that a 1 percentage point shift from income taxes to consumption taxes (like sales taxes) improves GDP by 0.74 percent, while shifting to property taxes increases GDP by 1.45 percent. An International Monetary Fund paper concluded that a 1-point shift from income to consumption taxes drove a 0.92 percent GDP increase, while shifting to property taxes yielded a 1.22 percent GDP improvement, and limiting the shift to just real property (land and structures) grew GDP by a full 2.47 percent.
Income taxes fall on labor and investment, and can reduce jobs, productivity, and capital formation. An ideal consumption tax is quite economically neutral, but the real-world sales taxes in the United States fall substantially on capital investment as well because it taxes many of the purchases that businesses make in the course of producing goods that are then taxed again at the retail level. But a tax on land does not decrease the amount of land. It can, at the margin, change how much land is used productively, but studies show that the economic impact of property taxes is relatively light.
What may ultimately doom the movement to eliminate property taxes is the lack of appealing alternatives. A 14 percent sales tax in Florida? Doubling the income tax (or worse) elsewhere?
Nebraska’s proposed property tax overhaul failed to make the ballot. North Dakota voters resoundingly rejected property tax abolition at the polls last November. Wyoming lawmakers landed on a relief plan that preserves the property tax. Thus far, proposals for property tax elimination have not survived contact with reality.
Still, Gov. DeSantis and others are tapping into a very real discontent with rising property taxes. Homeowners burdened by skyrocketing tax bills have a legitimate grievance, as there’s no reason why houses becoming more expensive means that governments should experience a tax windfall.
Is there a middle ground?
Some states have implemented levy limits to automatically reduce tax rates when valuations rise. These policies prevent the large unlegislated tax increases that are fueling the new property tax revolt. Levy limits are found in red states like Arizona and Montana and blue states like Massachusetts and New York.
Levy limits work by automatically reducing mill levies (property tax rates) in response to rising assessed values for existing properties in the jurisdiction. They don’t freeze the value of any particular property, but if a county’s taxable value jumps, the rate ratchets down in response, restricting property tax growth to increased collections from new construction plus any allowable growth factor (for instance, inflation or 2 percent per year) allowed under the limit.
In most states, abolishing the property tax would be incredibly difficult. Replacing the revenue it generates with something less harmful, meanwhile, is virtually impossible.
The property tax is an unlovable tax. At times it may even seem like the worst tax—except for all the others.
