The Effectiveness of Prabowo's Tax Reduction Policy: A Comprehensive Analysis

Introduction
Prabowo's proposed policy of reducing property tax by 16 percent is a significant step that reflects the determination to push for fiscal reform in Indonesia. This policy is not only intended to reduce the tax burden on the people, but is also designed to stimulate economic activity in the property sector which is often considered as one of the main pillars of the national economy. By reducing property tax, the government hopes to increase people's purchasing power, attract more domestic and foreign investment into this sector, and facilitate access to property ownership for low- to middle-income groups.

In the economic context, property tax has long been one of the stable sources of revenue for local governments in many countries, including Indonesia. However, this tax burden is also often considered regressive because it is more burdensome for groups with fixed or low incomes. As stated by Kelly (2004), the regressive nature of property tax can exacerbate social inequality and hinder the economic mobility of low-income people, especially in urban areas that experience rapid property value increases. Therefore, this policy can be seen as an effort to address these structural challenges in a direct and broad-based manner.

Fiscal economic theory supports this move through the concept of tax incentives. Reducing or eliminating property taxes is thought to increase household disposable income, which in turn encourages consumption and investment. In addition, a more dynamic property sector can create significant multiplier effects on other sectors, such as construction, building materials manufacturing, and financial services. In this regard, Prabowo's move can be considered a strategy to strengthen economic fundamentals through an incentive-based approach.

However, it is important to remember that reducing property taxes also presents challenges to fiscal sustainability, especially for local governments that are highly dependent on Local Revenue (PAD) from this sector. According to Mukti and Muhafidin (2023), PAD currently only contributes 5-15 percent of total local fiscal revenue, meaning that any significant reduction in property taxes must be offset by alternative revenue sources to avoid a fiscal deficit that could disrupt the provision of public services.

Theoretical Approach
Property tax reduction can be described through the concept of tax incentives that increase disposable income and people's purchasing power. This theory is supported by the view of Musgrave (1993) who emphasized the importance of fiscal autonomy in maximizing local revenue without burdening the community. In addition, tax reductions can increase demand for property, which in turn encourages investment in the construction and property sectors. 

However, the implementation of this policy requires critical evaluation given the regressive nature of property taxes. As stated by Kelly (2004), property taxes in Indonesia have historically experienced problems of efficiency and fairness, mainly due to the mismatch between property assessments and market values.

Policy Effectiveness
Eliminating the 16 percent property tax is considered to provide a direct boost to the local economy, especially in accelerating the property buying and selling process. In a study conducted by Mukti and Muhafidin (2023), it was found that property taxes have a positive correlation with increasing poverty rates, because high tax burdens often burden low-income groups. Therefore, this reduction has the potential to ease the economic burden on households and increase their access to decent housing.

However, this policy also brings challenges to local fiscal sustainability. The elimination of property taxes can reduce Local Original Income (PAD), which currently only contributes 5-15 percent of total regional fiscal revenue. Without adequate compensation mechanisms, local governments may have difficulty in providing adequate public services.

Critical Analysis
From a critical perspective, this policy can be seen as a strategic step with the potential for positive short-term impacts, but its long-term impacts on the taxation system and fiscal decentralization need to be examined. The article by Cahyadini et al. (2023) underlines the importance of sustainable and consistent tax reform to ensure economic fairness and efficiency, especially in the context of digitalization and economic globalization. In this context, the elimination of most property taxes needs to be complemented by alternative sources of revenue to avoid fiscal deficits. In addition, this step can affect economic inequality. While this policy has the potential to benefit the lower middle class, the greater benefits are likely to be felt by high-income groups who own high-value properties.

Conclusion
Overall, Prabowo's move to eliminate the 16 percent property tax reflects the courage to reform fiscal policy. Key indicators such as property sector growth, poverty rates, and regional fiscal capacity must continue to be monitored. With the support of appropriate complementary policies, such as digitalization-based tax reform or the introduction of alternative taxes, this initiative can have a more sustainable positive impact. This study shows the question above is answered with reducing property taxes can directly improve people's welfare, but still requires careful management to prevent long-term negative impacts on the national tax system and fiscal decentralization (Mukti & Muhafidin, 2023; Kelly, 2004; Cahyadini et al., 2023).