On Property Taxes

 The "Allodial Title" crowd will tell you that taxation is theft. Right idea, wrong crime. Taxation is extortion. Rents extracted under the threat of violence. But it's extortion by  an entity that has a local monopoly [1] on violence--once you've paid one tax collector, you don't have to pay another. And if a second tax collector tries to extort you, the first will do violence to them until they stop. 

The constitutional innovation of the Magna Carta was that it enshrined a right of the people being taxed to have a say in how much they were taxed. It became very traditional, so much that when an English King (Charles) figured a (legal) way to do an end-run around it, it fractured the state and caused what we call the English Revolution. (Aforesaid issue also a casus belli for the American revolution.)

“I like to pay taxes. With them I buy civilization” - Oliver Wendell Holmes, Jr., 

The counter-case is what goes in poor Latin American cities, where the state has collapsed and extortion is carried out by a patchwork of local gangs on an ad-hoc basis, without a schedule of how much is due or when it is due. When a gang acquires a territory (even a few blocks), tax collection is rapidly regularized--it's far easier to get money from people who are used to paying it, know how much to pay, and have set aside money for that purpose. Figuring out how much people can pay is always a tricky process--take too much and people go bust and lose the ability to pay in the future. Assessment is a tricky process--discovering the right level for "as much as possible but not too much" requires a lot of trial and error. 

In an inflationary context, ad valorem taxes (on the value) in general are necessary - a share of the value rather than a fixed value, lest taxes be degraded to peppercorn values by inflation over time. But inflation disrupts the local assessment equilibrium, requiring a lot of fresh 'price discovery', with the associated inevitable error. 

The less 'state capacity' exists, the more it relies on tariffs and other imposts. Limited number of locations, limited number of participants, and if the merchant doesn't return, you've overtaxed them, so the feedback loop for discovering the 'assessment equilibrium' is short and simple. Property taxes are the next easiest. Property is worth money; the worth of property is proportion to the income it brings. Real estate is an especially nice to tax--it doesn't go anywhere, and it doesn't change much. In a medieval context, the taxes your grandfather paid on farmland is probably a good rate for you as well. (With some local administration to adjust to circumstances i.e. bad harvests). The value of a house is generally a fixed ratio for the rents charged for it [2]. Hence the value of revenue a state can expect from property is relatively reliable. And for things like houses, comparables are readily obtained. 

An ad valorem tax on other economic activity (sales, VAT) is harder to collect and requires substantially more state capacity. The number of participants is larger, what is being taxed is more heterogenous, and people not cheating on their taxes requires substantial record collection. Income tax has yet higher tier of difficulty-requiring tracking not just corporations, but more numerous persons, and a commensurate level of state capacity required. 

A hierarchy of taxes thus runs:

• "Everyone pays X dollars"
• "Everyone pays X dollars per house"
• "Everyone pays X dollars per chair sold"
• "Everyone pays X dollars per dollar earned per chair sold" [3]

And it becomes a question of what your local unit of governance has the state capacity to administer. And across most of America, that local unit of governance is the county, with one or two people doing the work on a part-time basis. It takes a town (with fixed retailers) to make collecting sales taxes worthwhile, and a state (with fixed citizens) to make collecting income tax worthwhile. So for small urban aggregations, property taxes are the only viable taxation. Raise the sales tax too high, and the differential induces residents to shop elsewhere, and then local retailers close.  Property taxes are also very difficult to escape - real estate can't be moved, and so accidentally setting the exaction rate too high is less problematic. There is also a relative equilibrium - as property rates rise, property values fall, and hence so does the ad valorem revenue. So property taxes are simpler, safer, more resilient, and robust than any alternative. States maintain very large differences in property tax rates. 

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[1] There are, of course, always exceptions. But they represent cases where the state either hasn't noticed or hasn't bothered. Whether that is a rural town in the Old West, or an inner-city ghetto. 

[2] Why assessing owner-occupied housing is harder - there is no monetary rent, and the 'owners equivalent rent' has to be estimated. Owner 'customizations' in terms of improvements and tolerated nuisances also highly personal. 

[3] Right now, states are dealing with 'tax exiles'; people working remote in places with income taxes, and so we are seeing a shift to taxing people at 'place of employment', to which employers are responding to shifting the legal domicile to their employees to low-tax locations. To which states are adjusting by requiring additional 'local labor' requirements in procurement.