Correctly pricing a scarce resource incentivizes more efficient use of that resource. If the property tax on your $4m SFH in Palo Alto is too high, you'll be v

Correctly pricing a scarce resource incentivizes more efficient use of that resource. If the property tax on your $4m SFH in Palo Alto is too high, you'll be very motivated to turn it into a 4-plex. You'll go to city council meetings, and vote against single-family zoning, and fight NIMBY lawsuits. (Or you'll have to sell to someone who will do all of the above or pay the higher tax that you can't afford)