Patterns of Exclusion of Personal Property From American Property Tax Systems

Abstract

Selective and general exclusions, along with assessment practices, have made the personal property share of the general property tax base now smaller than at any time since the assumption of homogeneity emerged in the early 19th century. Of the types of tangible and intangible personal property, only business depreciable fixed assets remain taxable in a majority of states. Evidence indicates that removing personal property from the base, rather than crippling fiscal capacity, permits higher property taxation possibly because governments feel less constrained by interstate competition after extracting a physically mobile element from the base, possibly because an inequity has been removed (arguments for personal property taxation being less clear than for real property), or possibly because businesses become less vigilant when this property is excluded. Because uniform taxation of all real and personal property may have significant logical and practical problems leading to personal property exclusion, separate state taxation of such property may be appropriate.