While there is a huge literature on the incidence of the property tax, little research has been done on the optimal design of property taxes. In the present paper I design a model suitable for examining issues relating to the optimal design of a property tax system. One important issue that is addressed is the choice of tax base. Should the tax be levied on the aggregate value of the property, the value of the land, the value of the building structure, etc., or should different tax rates be used for these elements of the total value of the property. These issues will be discussed within a model of welfare maximization.