Well, here we go again. CNN tells us that a property tax revolt is spreading, with a nationwide movement to eliminate property taxes on the march.

Most of us are familiar with the basic scenario of property taxation. Every state is replete with numerous political subdivisions commonly known as “municipal corporations.” These are counties, cities, school districts, fire districts, water districts, sewer districts, diking distraction, etc., etc. Each of these is known as a “taxing district” because state statute authorizes these districts’ legislative authority to adopt an annual budget and levy that budget as a tax on the property owners in the district.

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Unfortunately, CNN presents this news in such a way as to perpetuate the two major misconceptions about property taxation: (1) the “rental” misconception, and (2) the “single value” misconception.

It’s easy to see why the rental concept is appealing. Elon Musk has likened property taxes to “a de facto lease from the government.” Failure to pay rent will put you out on the street. Likewise, if you don’t pay your property tax, the government can initiate a judicial process that results in the sheriff seizing your property and selling it at a public auction.

But this is a distorted view of property taxation. Suppose you owe a large debt you cannot pay. Is that debt a property tax? Odd question, you say? But your creditor can take you to court, get a judgment against you for the debt, and then move the court to issue a “writ of execution” against your property for the amount of the judgment. That writ commands the sheriff to seize your property, sell it at public auction, and pay the debt from the proceeds of the auction.

So, just like unpaid rent, any unpaid debt has the potential to put you out on the street. But we would laugh at the claim that we rent our property from our creditors.

The single-value concept is far more serious than the rental concept because it provides camouflage for government expansion without citizen awareness.

The single value concept holds that property tax liability is a function of a single variable: the assessed value of the property. Hence, inflation conceals government expansion from the citizen’s view because, under the single value concept, the taxpayer expects that inflation of property values will be matched in sync by inflation of tax liability.

So, imagine the chagrin of our friend who just received a notice from his county that a 4.7% in assessed value resulted in a 10.94% increase in tax liability. This makes no sense under the single value concept, and it adequately demonstrates that the single value concept is false.

In fact, property tax liability is a function of three variables, not one: namely, property value, district value, and district budget.

To explain this carefully, one must dip the explanatory plow into the soil of algebra. Taxpayer liability, denoted TPL, is a function of three variables: These three variables are:

(1) The taxpayer’s assessed value, denoted TPAV, which is the assessed value of all the taxpayer’s taxable property in the taxing district.

(2) The taxing district’s assessed value, denoted DAV, which is the sum of the assessed values of all the taxable property in the taxing district.

(3) The district budget, denoted B, which is the most recent annual budget adopted by the district’s legislative authority.

Using this notation, we have:

(a) TPL = TPAV x (B / DAV).

In this line (a), we see the familiar “value times rate,” where the “value” is “TPAV and the rate is “B / DAV”.

Line (a) can be equivalently rendered as:

(b) TPL = (TPAV / DAV) x B

This line (b) is algebraically equivalent to line (a), and in this line (b), we see that the taxpayer’s share of the budget is his share of the wealth of the district.

For an illustrative example, suppose the assessed value of the taxpayer’s property in the district was one percent of the total assessed value of the district; that is, TPAV is one percent of DAV. Then, per line (b), the taxpayer’s tax liability would be one percent of the district budget!

For a second illustrative example, suppose that at the stroke of midnight the assessed value of all property in the district was inflated by 25%. The TPL in line (b) is unaffected by this inflation because both the numerator and the denominator of the ratio (TPA / DAV) are inflated by 25%, meaning the ratio is unaffected. Thus, we see that inflation that increases values uniformly throughout the district has no effect on tax liability.

And for a third illustrative example, note that line (b) shows that a 25% increase in the budget would result in a 25% increase in tax liability.

So, what’s the takeaway from all this? The takeaway is that what really drives property taxes is increasing district budgets, not inflation or assessments.