Question

What advantages and disadvantages are associated with diversifying a local revenue structure so that it includes local slaes or income taxes in addition to a local property tax?

Answer 1

Advantages :

• Diversification benefit of additional sources of revenue. Any slump in the property market will less of an impact on local revenue
• The burden of generation of local revenue will not be borne by property owners alone, but by a wider section of the population
• Higher local revenue is generated, which means more funds available for local infrastructure, repairs, maintenance, and other productive expenses

Disadvantages :

• More taxes means more regulatory compliance, which is burdensome and an unproductive activity
• Higher tax burden on locals can lead to discontent