How would this be an incentive for Microsoft to require RTO though? Even if Microsoft would receive tax breaks from the city because employees own property and pay property taxes - the city would get the same amount of property taxes if employees work from home. Microsoft would receive the same tax breaks.

AFAIK Microsoft mandated RTO only for employees that live within 50 miles of an office. So far Microsoft does not require employees to move to a city - and bolster the property taxes the city collects.

I still do not understand the logic behind RTO.

I was stating that's a consideration of why a City/State offers the incentives... I can't speak to MS in this case in particular. It's far more likely a soft layoff strategy.

I'd also say, I've seen far more people just sandbag and slack off in WFH than in an actual office.