Tax relief is a government program that aims to reduce the amount of taxes amount on individual or business organization. Personal property tax policy plays a critical role in ensuring equity in post-tax income distribution. In the United States, some cities are blooming while others are suffering due to high tax (Perry, 2018). Texas, Washington, and Florida, for instance, levy no income tax. Thus, a large population tends to move to these cities to minimize their tax expenses. However, the provision of uniform tax relief on marginal personal income tax rates and properties does not necessarily lead to desirable equity but may result in community stratification.
First, with tax relief tax, avoidance may still result. In the long run, tax evasion and detailed negative behavioral responses could translate to community stratification (Schnell, 2019). For example, reports revealed that despite tax relief, the migration patterns in the United States reflects Americans “voting with their feet” from high-tax to more business-friendly states (Perry, 2018). Equally, evidence shows that investors tend to invest in lower-tax, business-friendly, and economically vibrant and tax-free states, which further creates community stratification.
Moreover, property tax relief has many other prominent and less well-understood shortcomings. The transparency of the tax relief may also sometimes reveal inconsistencies. For example, residential tax relief may benefit only rich and powerful individuals who are accustom to manipulating the tax relief system to acquire valuable residential property (Carter, 2019). Additionally, such practices arguably lead to the creation of property owners at lower-class, middle-class, and upper-class level. Thus, tax relief has minimal effects on bridging the gap between the rich and the poor. These arguments affirm the need to approach the domestic tax relief reforms cautiously to avoid community stratification.
Schnell, F. (2019). Pros and Cons of Tax Relief. Avenir-Suisse. Retrieved from https://www.avenir-suisse.ch/en/pros-cons-tax-relief/
Carter, A. (2019). How tax can reduce inequality. Retrieved from: http://oecdobserver.org/news/fullstory.php/aid/3782/How_tax_can_reduce_inequality.html
Perry, M. (2018). Americans Are Voting with Their Feet for Economic Freedom. Foundation for Economic Freedom. Retrieved from: https://fee.org/articles/americans-are-voting-with-their-feet-for-economic-freedom/