Question

Assume a local government has determined they will increase taxes in order to raise revenue to support their capital improvements plan. Contrast and compare the merits of increasing property taxes versus sales taxes. Consider the various forces which effect public budgeting in your response.

Answer 1

The property tax is a more stable and reliable revenue source than any other tax. That’s because property values are usually less susceptible to short-term economic fluctuations than other major revenue sources, including sales and income taxes. Since property taxes can be secured by the property, they are difficult to evade. This ensures that a broad segment of the population shares in the costs of government. Property tax systems are more open and visible than those for other taxes. For example, property owners can examine their assessments and those of nearby properties; they have the opportunity to appeal the assessment; and they are usually faced with a bill that shows their entire liability, which makes the full magnitude of the tax obvious. This is not the case with taxes that are collected in small amounts as part of the purchase price (sales tax) or are withheld from pay

Typically, sales tax revenue is added to the county's general fund, which is then dispersed to support community needs such as public schools. The school system uses the funding to purchase textbooks, pay teachers, build new schools and other educational purposes. Sales tax revenue, added to the city and county general funds, is often dispersed to the parks department accounts and used to enhance the services and activities offered to the public. When you are filled with pride because your child plays on great fields, thank your sales tax dollars.