Why property tax may be a benefit to citizens

Almost every developed country has a property tax system that provides financial incentives to its citizens. However, in developing countries like Trinidad and Tobago, property tax is a more recent initiative that is already being perceived with dread.

Property tax is a tax paid on property owned by an individual or other legal entity, such as a corporation. Most commonly, property tax is imposed on real estate and based on its assessed value and can, in some cases, be considered a regressive tax. It is calculated by the local government authority in the area in which the property is located and the fees paid by the owner of the property. The tax is usually based on the value of the owned property, including land. The property tax bill, recently introduced by the Prime Minister, is now the most dreaded and misunderstood tax across the island and is a source of much debate and political anxiety.

However, there are benefits for both the property owner and the local government. Property tax income is fairly predictable. It is much more stable than sales or income tax which can fluctuate based on consumer behaviour and employment levels. Despite spending habits, property tends to maintain its value over time in keeping with the overall economic conditions. The benefits to the community and individual property owners include the services that property tax finances such as local fire and ambulance services, garbage and recycling pickup, leaf and lawn waste pick up, street cleaning, funding public libraries and schools as well as other special projects which communities might be able to advocate for.

It can be efficient when compared to other forms of taxes such as consumption and value added tax because its imposition does not affect resource allocation by distorting the decision to supply and invest in the form of human and physical capital. Because it is a tax on wealth, rather than productive activities, it does not undermine productive incentives – and can also encourage more productive use of land and property. This advantage holds because of the ‘immobile’ nature of the tax base. Of course, this is providing that there are checks and balances on both sides.

Property tax can promote transparency and accountability because it is highly visible to taxpayers and, in principle, linked to improved local services. As a result, it holds the unique potential to act as a foundation for bargaining between taxpayers and local governments over revenue and public spending, hence, making policy makers and local officials more accountable. How all this may pan out and be implemented is still a mystery and remains a concern to residents.

If the Prime Minister’s words are credible, and the average person’s property tax will cost $3 a day, or “less than a dinner mint”, then citizens stand to benefit tremendously from many new and uplifting services to improve the quality of life on the island.  This means clean drains and less open garbage disposal which will alleviate the flooding problems, well maintained playing fields and recreational spaces for youths and youngsters to play football, less “ broken windows” and abandoned buildings which can prevent criminal elements and crime. It could mean regular maintenance of critical infrastructure like roads, dependable transit and public transportation especially in rural areas and so much more.

In other developed countries, property taxes are the financial backbone of local governments. If our property tax system works the way it should, citizens should see a significant local revenue source for financing education, especially kindergarten, support for our police department and fire departments, parks, and other services. Property taxes will also shape local housing markets by influencing the costs of buying, renting, or building homes and apartment buildings.

Though politically unpopular, property taxes do have the potential to alleviate some level of suffering on citizens, however, there must be accountability among local officials to provide adequate human resources and allocate resources to make smart, sharp-witted investment decisions that citizens will benefit from in years to come.

Subrina Hall-Azih is a Trinidadian educator living in the United States.