Are you referring to the almost comically small property tax reduction for primary residences? Or to the mortgage interest deduction?

This is how it works in Canada: principle residence has no capital gains on sale.

If you move to a new place, and don't sell the old one, then you have to change its status and the clock starts ticking on any price appreciation after the status change. Further if you rent out part of the structure (e.g., basement), then you have to pro-rate a status change of the property (generally proportional to surface area) and declare rental income.

People might try to get around this by forming corporations or trusts that hold max one property each. There is really no need to count how many other properties someone holds. Just do a re-assessment every year and ratchet up the assessed value on all housing that the owner does not occupy, including vacant property and renter-occupied. Seems a lot simpler.

That already exists in a way - there's the concept of a primary residence tax deduction, which is (more or less) what the name sounds like.

It varies widely by jurisdiction, (not just country, but state and local government as well), but the idea of trying to differentiate residents from landlords in tax policy is nothing new.

That sort of means testing isn't required (and would be open to system-gaming / perverse incentive creation anyway). You just apply capital gains tax to all properties with the exception of one primary residence per person, and you could even cap the primary-residence exemption at the median value of a home in a particular area. So if you own property and rent it out rather than living there yourself, it gets taxed as an investment, period.

So that this cost isn't just passed on to renters, you should make the rental payments for your primary residence tax deductible, again perhaps capped at a median level so as not to perversely encourage higher rents.

I think you could construct a tax regime that was revenue neutral pretty easily this way.

Because they are now wealthier, and can convert the wealth of that house into liquid assets (through sale, remortgage, etc), or income-generating assets (by becoming landlords). That's one of the points of property taxes: to encourage people to do productive things with their asset instead of just sitting on it.

An equally anecdotal counterpoint: "Why should a real estate speculator who bought a house twenty years ago not be forced to pay increasing amounts of property tax on it as they wait for its value to go up?"

https://smartasset.com/taxes/what-is-a-homestead-tax-exempti...

OP's original point still stands. Real estate in America is designed to have many economic advantages for wealth accumulation and preservation. You might even go as far as saying the economic advantages of real estate are a byproduct of regulatory capture

I'm not talking about sales taxes on the sale price of a home; the US doesn't tax those either. I'm talking about property taxes, as in the taxes typically assessed by a local government to property owners as a percentage of the appraised value of their property. I'm saying that such property taxes produce various undesirable effects (as mentioned several comments up).

That's orthogonal to questions of how to deal with people owning, buying, or selling multiple homes. It may or may not make sense to apply different rules in those cases, such as not providing an exemption for sales taxes on such properties. (Though you'd have to be careful there to not cause problems with rental prices.)

With the recent tax changes including increased standard deduction, SALT cap and mortgage deduction cap, this bias is greatly reduced.

In USA, a person's house value has become their retirement plan. A quick free-market solution is to eliminate the house mortgage interest deduction and make all of the sale price capital gains. Let the builders compete on quality, price, and maintainability rather than being subsidized by tax policy.

I would think dropping capital gains taxes on your primary residence, and have a property tax that scales with the market value of your home, would make the housing market more efficient.

Not necessarily. Relatively few homeowners occupy all that much land value; it's probable that most homeowners' dividends would entirely offset their tax burdens, in which case they stand to benefit if anything.

It’s a huge tax advantage for homeowners. One could argue that it is in itself unfair as it advantages people who already have large assets over those who do not.

That is something that could be done, to a degree.

You can increase transfer taxes and offer a partial refund over the course of some number of years, provided that the home has the homeowner exemption in place.

Increase the property tax rate while also increasing the homeowner exemption so that the total tax paid is the same as it was before.

Etc.

This is backwards. Such a tax will be a strong incentive to never ever sell since the seller would hand off all gains to the tax man. Who would want to sell?

Instead, you'd want to actually incentivize selling if you're not living on the property. Make the capital gain tax very low, that makes selling it off the most attractive option.

No capital gains isn't necessarily a great system either. It leads to people treating their primary home as a retirement savings vehicle.

Taxing inflation-adjusted capital gains on home sales is a sensible compromise. And maybe also allowing the gain to be divided over years of ownership.

I personally think that primary residences should have a 100% homestead exemption, because I don't think you should have to rent your home from the State. And to make up that percentage of income, other real estate should be taxed a little higher. At the same time, there should be intelligent programs in place to make it easier to reach the point where you can own that first home. This last point would undoubtedly work best if there were either financial and/or statutory restrictions on ownership of residential real estate for investment purposes. So, in principle, it makes perfect sense as part of a larger goal of promoting home ownership. The conversation of how to best do this is of course more complex and there are many factors that need to be balanced - more than anything because high taxes raise rents, which would point towards regulation as an important part of the best way of dealing with this.

Well, maybe if you get a "rollover" relief - but otherwise, such a tax would significantly lower the velocity of the property market (which is already suffering, not least because of a similar tax - stamp duty).