Final answer:
Policies that can reduce the regressivity of property tax include introducing progressive features like graduated rates, homestead exemptions, tax relief for low-income homeowners, and shifting towards a redistributive tax policy. Other measures could involve alternative revenue streams and estate taxes.
Step-by-step explanation:
When seeking to understand what kinds of policies can reduce the regressivity of property tax, it's essential to recognize that a regressive tax is one where lower-income individuals pay a higher percentage of their income compared to those with higher incomes. To reduce regressivity, policymakers can introduce or enhance progressive taxation features, where tax rates increase with the ability to pay, into the property tax system. This can take the form of graduated tax rates depending on the property's value, homestead exemptions, or tax credits for lower-income homeowners.
An example of a policy to reduce regressivity is applying a homestead exemption which reduces the taxable value of a residence for owner-occupants. Additionally, tax relief programs that provide rebates or deferrals to low-income taxpayers can also help. Another approach involves shifting to a more redistributive policy structure where wealthier individuals bear a larger portion of the tax burden, which benefits low-income groups indirectly by funding public services or providing direct financial support.
To ensure that property taxes do not disproportionately burden those with lesser means, cities could also explore alternative revenue streams to lessen dependency on property taxes. Policies such as estate taxes, aimed at inheritances, could be used with careful consideration to avoid diminishing economic incentives while promoting economic equality.