A Brief History of Property Tax

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If you’ve studied your property tax statements looking for a way to save money, you’ve likely wondered where the whole idea of property tax started. It may surprise you to learn that the taxation of property dates back thousands of years to the ancient cultures of Egypt, Babylon, Persia, and China.

Antiquity

In ancient times, property was assessed primarily for its production value. For example, a landowner would be taxed based on what he was able to earn through his crops or livestock. In ancient Egypt, taxes were levied against cattle, grain, and even beer. Scribes maintained records that included details on land ownership, the size of each field, head of cattle, etc. Tax amounts were determined as a percentage of total production. The decrees detailed on the famous Rosetta Stone (196 B.C.) were actually related to rules governing the taxation of priests and temples. And in ancient Greece and Rome, the position of Tax Assessor was highly respected, owing largely to the fact that scribes were often among the few literate members of the community.

The Medieval Period

In Medieval Europe, ownership of land was limited to the royals, nobles, and gentry, though peasants lived on and worked the land. In England, for example, peasants paid an annual tax for use of the land, with tax amounts based on production. High-yield properties were subject to greater tax amounts. In 11th and 12th century England, a peasant typically paid approximately one tenth of his income to the Lord who owned the land. Under William the Conqueror, records were kept on all landowners, including the size and approximate yield of each parcel. Each town maintained a detailed record of the property owners, land values and taxes within its jurisdiction called The Domesday Book, which came to be known colloquially as the “Doomsday Book.”

 

The Colonial Era

During the Colonial era, property assessment and taxation made its way to the New World. Puritans instituted a practice of taxing all property owners, with the revenues going to support the church and the religious schooling of the community’s children. Landowners, regardless of their faith, were required to comply with the tax.  During this period the local Sheriff served as tax collector, and tax values were determined based on the value of homes, livestock, and industrial structures such as mills and granaries on the property. While municipalities had relatively low expenses, funds obtained through property taxes were used to fund institutions that the community deemed necessary—such as the first public school, founded in Boston in 1635. In the largely agrarian South, where most land was held by a few wealthy individuals, property taxes were seen as an undue burden on landowners, so community funds were raised largely through poll taxes rather than through property taxes.

Early America

The young American republic struggled to come up with a mutually agreeable system of property taxation. Because states were often unable to meet set tax quotas, the Revolutionary War was funded largely through sale of public land as well as through loans from other nations, a debt that took until the 1830s to repay fully. Several solutions were proposed, including a national property tax, but no agreement among the states could be reached. The essential battle was between Hamilton (who advocated for a larger central government with national taxation powers) and Jefferson (who advocated a system where revenue was raised locally).  In 1797, a looming conflict with France prompted John Adams to impose a national property tax to raise funds for a possible war. Known as “the window tax,” Adams’ system taxed property owners using the number of windows and doors per building as a proxy for a property’s size and value. Unfortunately these attempts at a national tax spurred several rebellions that had to be put down by the army.

 

During much of the 18th and 19tyh centuries, as the states struggled to implement a property tax system agreeable to all, the responsibilities of tax collection continued to fall, as they had in Europe, to the local Sheriff.

 

The Modern Era

By the early 20th century, property tax remained the chief source by which communities generated revenue. But amid cries for reform, the U.S. passed the 13th Amendment to the Constitution, allowing for the taxation of earned income. With the advent of the Great Depression in 1929, incomes and property values dropped almost universally throughout the U.S., and new methods were explored—both to decrease the burden on taxpayers, and to explore other avenues for revenue generation.

The repeal of Prohibition in 1933 restored some revenue sources, with taxes on liquor and the businesses that served it.  Reforms during this period included the virtual elimination of tax on intangible property, the establishment of tax exemptions for the poor and infirm, and the creation of property tax limits in many states. As incomes rebounded following the Depression, property tax became less essential as a form of revenue generation. Also, other forms of tax (such as sales tax on groceries, gasoline, and other items) began to take up the slack.

In the 1970s, in response to public pressure in the state of California, Proposition 13 placed strict limits on the amount that property taxes could be increased over time. The law relieved property owners from the skyrocketing property tax rates and placed a 2% annual limit on property tax increases within the state.

 

In the computer age, property tax assessment and collection have also become the responsibility of local departments of revenue, and assessment processes have been increasingly less subjective and more data-driven as advances in electronic information-gathering and storage have become commonplace.

We hope this brief history of property taxes has provided some perspective on the issue. To learn more about ways you can save money on your property taxes, visit us at Home Tax Savings.  

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