The real property tax is local government's primary source of revenue, providing 48 percent of local governmental revenues nationwide. Of all local government expenditures, 37 percent go to elementary and secondary schools. Therefore, problems with property tax become problems of school finance. Taxes and subsidies generally do not change the underlying value of land, only the distribution of interests between public and private landowners. The preferential assessment of farm, open space, and forest lands represents a nearly universal program subsidy by local government to landowners. USDA findings suggest that revenue losses by new entries receiving preferential assessment are greater than the revenue gained by lands leaving preferential assessment, and that preferential assessment does not preserve agricultural land use. The real property tax can be improved by levying taxes on property in proportion to value; eliminating exemptions; assessing land and capital improvements separately; appraising and assessing at 100 percent of market value; reducing the number of classes and categories of land for differential assessment or rates; eliminating caps, circuit breakers, senior preferences, and other forms of social engineering through the real property tax system; and incorporating appraisal and assessment activities into a comprehensive geographic information system. Contains seven references. (TD)