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Market-based tax valuation of real estate -- i.e. taxation based on {how much the market thinks it's worth} rather than {how much the owner paid for it} -- is a problem because it prioritizes market forces over considerations of social stability, history, diversity, and resiliency.

The primary circumstance I'm thinking of is someone is forced to sell (and move off) property they inherited -- such as a family farm or a childhood home -- when the area becomes desirable to people who have more money; it gives money the loudest voice in determining who lives where, and how long they can stay.

It effectively says to the family farmer in an area transitioning from agriculture to suburbia "you can keep this land only if you can find a way for it to make huge amounts of money that you can't possibly make by doing what you've been doing".

...and don't imagine for a second that this is a democratic force at work, taking property from landed aristocracy and devoting it to low-income housing; much more often, when a family farm is redevloped, the former owners couldn't have afforded to buy even a single lot if it weren't for the money they made selling the land -- and sometimes not even then.

If someone's working-class parents were able to save up and buy a home over the course of their lives, then left that home to their kids... and then the area becomes gentrified, the kids are forced to pull up roots -- the neighborhood is effectively destroyed as a community -- and find a home somewhere else, generally of lower quality... while a higher income-bracket now sees that same home (formerly a working-class abode) as desirable. Everyone levels down, everyone loses (unless there's room enough to knock the house down and make a bigger one... in which case you've got a larger house on a smaller lot, so it's still more crowded even if the quality of the house might improve some).

This argument isn't as solidly backed by data as I'd like, but it reflects patterns that I've seen repeatedly over the past 20 years -- both regarding situations that I've been in and regarding land owned by people I've never met (and probably never will)... so I can only think there is something to it, although there are probably counterissues I haven't yet explored.

Yes, I do understand that the market forces theoretically help prevent land from falling into stagnant disuse -- but they can also do the opposite; I have witnessed repeated instances of properties that people very much wanted to buy and put to good use being kept off the market because the owners expect to make a killing during the next boom.

At the very least, I think this shows that this argument is not propertarian at heart, but rather usage-based. If someone is using a piece of land for something productive -- whether that's just living there or actually farming (or something else) -- that should weigh heavily in the decision over whether or not it should change hands. When we allow property taxes to be raised when one's neighbors find more lucrative uses for their land, we are essentially saying that profit should be more important than productivity.

Adapted from a comment on this thread