Chile's property tax, traditionally defended as an efficient and stable revenue source, is creating ethical and distributive tensions in areas undergoing rapid gentrification. According to an analysis by latercera.com, this tax is functioning as a silent displacement mechanism for elderly homeowners.
In this context, gentrification is defined as the indirect displacement of long-term residents caused by rising land values and the influx of new socioeconomic groups. As property values climb, so do tax contributions, eroding the ability of those on fixed incomes to remain in their homes.
The core of the issue lies in the disconnect between the pension system and market property values. The analysis points out that, in most cases, Chilean pensions bear no relation to the value of homes purchased decades ago.
A homeowner who purchased their house in a modest neighborhood during the 1980s or 90s may now face tax burdens typical of high-end urban areas. While the surrounding neighborhood and fiscal assessments have surged, retirees' incomes have not seen a proportional increase.
The property tax operates under a legal fiction: the assumption that a taxpayer's economic capacity has grown in lockstep with the property's assessed value. However, the tax measures the potential value of the asset without considering the owner's actual liquidity or true financial standing.
From a tax theory perspective, the principle of 'ability to pay' requires that taxes be adjusted to a taxpayer's actual economic capacity. For older adults, applying taxes based on such abstract assumptions creates financial pressure that makes staying in their own homes increasingly difficult.
