"When I began creating virtual economic systems and theories in 2005, I looked to the way our “real” economies were designed to see if I could find parallel systems. I wondered if excessively low property taxes would do the same thing in real life. The way this works is that if the tax or overhead on property is lower than the rate of increase of the value of that property, then this becomes an investment that generates profit. If the tax on property exceeds the value generated by appreciation, then this becomes a losing investment. Because of this interaction, high property taxes reduce the value of property, again due to the “hot potato” effect. Low property taxes raise the value of property and trigger speculation. In a “high tax” environment, only those that really need the property will be motivated to hold it. Families would be a good example of a group that “needs” property, some place to live. In a low tax environment, speculation makes property values so high that people seeking homes have a hard time affording them." - urbansheep@gmail.com