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The Revolutionary Potential of Property Tax

Image of Lagos, Nigeria with Cavalry Logo.

Over the years I have used downtime during the holidays to read a new book or take on a project that I don’t have the mental space for during a work week. During Thanksgiving 2021, I came across an article in the Washington Post about population growth across various cities in Africa. This ultimately led me down a rabbit hole of reading that included a 650-page book on property tax across the African continent.

In summary, the WaPo article reported on a recent prediction that over the next 75 years dozens of cities in Africa like Khartoum, Lagos, and Kinshasa are set to outpace the population growth and size of today’s most densely populated cities. More specifically, by the year 2100, out of the 100 most populous cities in the world, at least 38 of those will be in Africa. Consequently, property tax revenues will skyrocket.

This is critical for economic growth, as property tax is more than a way for governments to generate revenue; it is also a way for local governments to create tax and spend autonomy. Although most taxpayers don’t like paying property taxes, the simple truth is that those property taxes generate more than half of a local government’s revenue. And revenue at the local level is what allows for more acute and prescriptive investment in local economies and local infrastructure that correlate directly to growth and economic stimulation. In short, the more control local governments have in their ability to raise revenue, the more opportunity there is for economic growth.

One of the reasons the United States has been successful in accelerating sustained growth comes down in large part to the tax and spend autonomy local governments have – and a majority of that revenue comes from property taxation. In theory – and often, practice –local governments are more agile when they can raise revenue through taxes and spend it on what they feel matters most. It simply allows for a surgical and effective outlay of that capital. Typically more so than a national government affecting spending at the local level.

Of course, there are areas of investment needed at large scale by a national government, but without supplemental local revenue and spending authority, countries simply will not thrive on that same long-term trajectory. This isn’t to say that real estate tax must always be the central source of local revenue, but they have been proven to be the most effective and sustainable method of driving economic growth in developed countries.

From a property tax professional’s perspective, it’s fascinating that something we deal with every day at Cavalry (property tax), and is such common practice in the United States, has the revolutionary potential to change the economic trajectory of developing countries around the world. An interesting take on the power of local taxation and a premonition that property taxes aren’t going away, ever. So, while I don’t recommend you spend your next holiday break reading about property taxes, I do recommend taking a long shot and picking up that niche article related to your own industry that could lead you down a similar rabbit hole of enlightenment. Because who knows, maybe you’ll find yourself opening up your next office in Africa, too. See you there.

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