The California High-Speed Rail Authority's board voted 7–2 to strip CEO Ian Choudri of his authority to independently approve and manage contracts worth less than $25 million after an investigation uncovered questionable taxpayer-funded expenses by four consulting firms. An audit found that $593,000 in travel expenses lacked proper justification or violated state rules, including premium airline tickets and rideshare trips to places like a cigar lounge and an escape room. Consultants also billed taxpayers for rides to and from Choudri's home, sometimes late at night. The authority paid the four consulting firms roughly $2 million in travel costs; the inspector general reviewed about $1.15 million of that total and found $680,500 had no prior approval.
If you have to pay a regular fee to maintain control and use of a home or other parcel of property, do you really own it? Or are you just renting it from whoever collects the money? That's the question behind a growing movement against property taxes, which is winning support across the country and may see its next big test in the form of a proposed constitutional amendment on the Florida ballot that would significantly trim taxes on owner-occupied homes.
'Property Is the Foundation of Liberty'—and a Big Source of Tax Revenue
Advocates of reform understandably champion the inviolability of private property, which is threatened by continuously rising levies. Opponents predictably include people who fear reduced government revenues, but also those who worry that cutting property taxes will shift power to state governments at the cost of local autonomy.
"Property is the foundation of liberty," argues economist Vance Ginn. "It represents the right to the product of voluntary exchange, investment, and saving—not a privilege granted by government. To tax property again every year after it has been bought with after-tax income is to deny genuine ownership. Property taxes operate like an annual wealth tax or unrealized capital-gains tax, applied regardless of income or ability to pay."
Opposing Ginn's argument in the debate is the Tax Foundation's Jared Walczak, who is not so much a fan of property taxes as a believer that they suck less than the alternatives.
"Spending restraint can reduce property tax burdens," argues Walczak. "But with property taxes accounting for 70 percent of local tax collections nationwide and upwards of 90 percent in some states, any discussion of property tax elimination must grapple with revenue alternatives."
"It is axiomatic that whatever you tax, you get less of," he adds. "Taxing income means less income-producing labor and investment, for instance. But because land is an immobile asset, taxing property does less to distort market decisions than taxing income or even sales."
Walczak also points out that while property taxes are usually imposed by local governments, most alternatives to property taxes come at the state level. That would move power further up the political food chain, away from the property owners worrying about their tax bills.
To this, Ginn responds that governments at all levels cost more than they should and that "the moral and fiscal failure of property taxes lies not only in how the money is raised, but also in how much government spends."
That means the debate over property taxes isn't just a struggle between those who want to trim the state's take and those who prefer larger government, but also between anti-tax activists and their frequent allies among advocates of local power. In a piece this week on the groundswell against property taxes, Politico's Liam Dillon notes that "the uprising's most pitched battles are being fought in Red States where the issue has emerged as yet another dividing line on the right."
Localities Are Dependent on Taxing Property
The debate over property taxes is fierce partially because governments have come to rely so heavily on them. "In fiscal year 2023, property taxes comprised 28.9 percent of total state and local tax collections in the United States, more than any other source of tax revenue, despite being levied almost exclusively at the local (not state) level," Janelle Fritts wrote for the Tax Foundation.
Property taxes in the U.S. range from roughly half a percent to just under 2 percent of assessed home value. States that rely most heavily on them, like New Hampshire (1.5 percent in 2024) and Texas (1.4 percent in 2024), also tend to leave a lot of government responsibility in local hands that might be exercised at the state level elsewhere. It's worth noting that Cato's Freedom in the 50 States ranks New Hampshire as having the second least burdensome tax regime among states, with Texas in fourth place.
The lowest taxed states in property terms are Alabama (0.37 percent in 2024), Arizona (0.48 percent), Hawaii (0.29 percent), and Utah (0.48 percent). Some states, such as Illinois (1.88 percent in 2024) and New Jersey (also 1.88 percent), tax the hell out of many things to support large and intrusive governments. Hawaii, despite low property taxes, is ranked as the most tax-burdened state by Cato.
As mentioned above, economists tend to like property taxes because they are efficient, minimally distort economic decisions, and empower localities relative to state and federal authorities. But as Politico's Dillon emphasizes, "everyone who is not an economist seems to hate property taxes."
Homeowners Don't Like the Insecurity That Comes With Property Tax Bills
Property taxes rise with assessed property valuations that homeowners have no control over, as the market shifts with supply and demand. They require what feels an awful lot like an annual rent payment to keep a roof over people's heads many already paid for. That reduces the sense of security that owners feel in their homes, since their habitation remains conditional on meeting local authorities' demands. The bite of sales taxes can be reduced by buying less, and income taxes are dependent on earning paychecks, but property taxes (with some local exceptions) come due no matter what.
Soaring property valuations in recent years drove property tax bills higher for Americans who did nothing but remain at their established addresses, though localities can and sometimes do adjust tax rates to offset rising values. USA Todayreported that "between 2019 and 2023, the median value of annual property taxes increased nearly 25%." That has energized the movement to cut or abolish the taxes.
Efforts to reform property taxes have been effective in more than a dozen states, according to Governing. Most of these efforts involved reducing taxes, though eyes are currently on Florida where Amendment 3, a proposed change to the state constitution, would incrementally raise the homestead exemption to $250,000. It also would require "the Legislature to prescribe a uniform procedure for counties and municipalities, for their respective levies, to increase the homestead exemption up to full assessed value," effectively abolishing property taxes on owner-occupied dwellings.
As a constitutional amendment, the measure requires 60 percent of votes to pass. Polling shows more support than opposition, but not necessarily at the supermajority level necessary for victory.
According to the Tax Foundation, in Florida, "the statewide average sales tax rate would have to rise from 7.02 to 15.34 percent to replace the property tax" with equivalent revenue. Rates could widely vary if localities implemented sales taxes instead of leaving them to the state.
Of course, that assumes state and local governments continue spending and providing services at the same level. But as economist Ginn points out, the problem lies not only in how property taxes raise money "but also in how much government spends." If the property tax revolt represents revulsion not just at the tax, but at the expense of large government, that may require less revenue to fund a smaller Leviathan.
A proposed "wealth tax" on California's billionaires could backfire and cost the state tens of billions of dollars in the long run.
If the proposed tax drives wealthier residents out of the state, California could end up losing between $1 billion and $3.5 billion annually in income taxes, according to a working paper published this week. A pair of researchers at Stanford University warn that the state could end up losing an estimated $39 billion because of the consequences of the wealth tax.
"These findings suggest that the Billionaire Tax Act will not fulfill the primary functions for which it was designed," write researchers Benjamin Jaros and Joshua Rauh.
Voters in California will decide next month whether to impose the one-time, 5 percent tax when they vote on Proposition 40. The ballot measure is dividing Democrats—Gov. Gavin Newsom opposes it, while progressive Rep. Ro Khanna (D–Calif.) claims it is the "most important ballot initiative in America and a fight for the soul of our party."
And it's already spurring some billionaires to flee the state—including venture capitalist Peter Thiel and Google co-founder Larry Page. Including those two, the seven billionaires who have publicly said they are leaving the state represent more than $539 billion of the nearly $1.9 trillion aggregate net worth of California's billionaires, the researchers note.
With other departures likely happening more quietly, the new study estimates that the tax will generate about $30 billion, a far cry from the $100 billion that the tax's supporters expect. The "behavioral response" from billionaires in California "has eroded most of the projected tax base," write Jaros and Rauh.
That's still a pretty big pot of revenue. In the long run, however, the state is likely to lose out.
After running 100,000 simulations using different assumptions, the two researchers report that "85 percent of plausible outcomes produce a negative" result in state revenue.
Capital is always mobile, despite the best efforts of politicians. And if you were a billionaire living in California, why would you stick around?
Polls show voters are narrowly divided over Proposition 40. A Politicopoll published earlier this month showed 46 percent of voters plan to vote for the measure, while 43 percent oppose it. Voters were similarly divided when asked if they expected it to pass or not.
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