You can easily tell this because a person who owns a home outright pays the same tax as someone who owns a similar home but has a large mortgage. These two people have different levels of wealth but pay the same tax. This is because their consumption is the same.
A property tax takes effect without sales occurring, without the property being used, etc. There is no act of consumption to tax, other than simply existing. And before anyone argues that the use of the land is the consumption, that would only make sense if the value of the house wasn't taken into account as part of the property tax.
If property taxes were only levied at the time of sale (e.g. stamp duty in Australia), then it would be fair to call it a consumption tax.
It is still a consumption tax. If you rent the house out to others, presumably you'll pass on the consumption tax (or not, it doesn't matter).
Is one year of your consumption equivalent to one year of my consumption? Like a car, the longer you use it the higher the likelihood that something expensive goes wrong. But unlike a car, our homes are probably appreciating at close to the same rate.
Yes. That's why both houses cost the same.
The interval technique makes sense to me on goods that are used over time or taxed over time. You can pay for a house all at once, and if you were only paying property tax once I think I would agree with you that the tax is consumption tax. Yet property taxes are annual, so in order for property tax to be a consumption tax we would have to enumerate how much consumption is occurring during that year.
Consider something simpler, like a sofa. We both buy the same sofa with a service life of 10 years. Did we consume the sofa when we bought it? Or do we consume it over its useful life? If I jump on the sofa daily and it lasts for 1 year, I've consumed it in a year. If you barely sit on it and it lasts you 20 years, you've consumed it over 20 years.
Does that make sense? How are you defining consumption?
So while it may not be a satisfying answer, in my experience, self-circular is just sort of the way it is.
Also, the consumed / depreciated value comparison doesn't sit right with me, since for business expenses (tax write-off purposes), it's based on zero value at end of life. Any previously depreciated value recovered at sale has to be (re)taxed; you only get to ultimately deduct true depreciated value, albeit (re-)payment is delayed to year of sale.
Regardless, real property (non-movable) is rarely disposed of for zero value, so "depreciated" value isn't a good estimate for "consumed " value.
You could just as easily charge the mortgage holder the property tax, and that mortgage holder will then charge the that amount as an extra fee on the mortgage. What does that do to your argument?
Seem to me Property tax is basically a toll. Just like you pay a toll to use a road, you pay a toll to use a house.
It does nothing to my argument. Because the tax incidence would all still be on the consumer of the property.
Just like with a rental property: the cost of the property tax is passed on to the renter.
If I have a $1M house and a $900k mortgage then I can sell it and only have $100k in cash.
If you put that money in the bank, you'd only pay taxes on the cap gain, not on the capital itself.
Now with a house, the consumption is living in it, and while you own the house, you pay for that consumption at some rate.
A bigger, more expensive house corresponds to more consumption, and thus you pay more tax on it.
Consumption of a house is basically the product of house value and time, and that's what you pay tax on.
If we believe rich people should pay more taxes (higher percentage), then we have already established a system for this. Why not making local taxes a fraction of income taxes?
Why are lower class people who's only capital is their house taxed on their capital, while rich people who own bonds and stock not get taxed on THEIR capital?