Local governments balance property taxes with sales taxes to reach its revenue objectives. Sales taxes are considered regressive since the poor consume a higher proportion of their income and thus pay a high portion of their income on sales taxes.
States try to ameliorate this fault by removing sales taxes on food and drugs. There is an effort in Georgia to remove sales taxes on menstrual products. There are two problem with these exceptions. First is it raises the amount that must be raised on the remaining products which will adversely affect the poor, and secondly these exceptions do not discriminate by wealth status. The rich get to buy their food and drugs tax free as well.
It would be better to include all items as taxable and target the relief to the lower income brackets in the form of tax credits or payments.
It is assumed that property taxes are disproportionately paid by the wealthy and thus fairer. Aside from the competitive problem of discouraging property investment compared to neighboring or lower taxed areas, property taxes can also be regressive.
In The Inclusive Economy, Cato Fellow Michael Tanner explains. Poor people spend a greater percent of their income on housing. 40% of the poor own their home, and landlords pass on the property tax to those that rent. The myth persists that renters do not pay property tax. Just as the poor consume and thus pay a higher percent of their income in sales tax, they also pay a higher percent of their income on housing, including the property tax.
Further, the poor are less likely to itemize and thus claim their property tax deduction, especially after the Tax Cut and Jobs Act of 2017, adding to the regressive nature of property tax.
The tax cut limited the deductibility of state income tax and property tax which reduces the regressive nature, especially in states with high income taxes. This helps to reduce the spread between the statutory and the actual tax rates and increases the taxes on the rich. It is interesting that the left objects to this increase on the rich because the states with the highest state income tax rates are heavily blue.
The reality is that the cost of the welfare state will not be covered by taxing the rich; the math just does not work. In Europe the welfare state taxes the middle class heavily. The United States already has one of the most progressive income tax systems in the world. The contest between the sales tax and the property tax obscures the true problem: a government that spends too much and tries to hide from its responsibilities with these shell games.