If the property is devalued, the property taxes lower accordingly. Portland, Oregon has been facing this problem recently. The devaluations caused the tax revenues for the city to drop, which in turn has caused budget issues.

For example, "Big Pink" is an office tower in downtown Portland. It's last sale was for about $370 million. Out of desperation in a saturated market, the owners sold it last year for about $45 million. No one - the owners, the city, or the citizens - wants to have the vicious downturn of values, and there is no easy solution. Adding a vacancy tax just exacerbates the problem.

As citizen I might prefer downturn of values. At least in medium term. Yes there is lot less tax income. But on other hand lowering values would mean lower rents which would mean lower overheads and potentially cheaper prices or more business being viable.

Adding taxes in a downturn obviously adds additional friction. One might ask, what happened to the tax revenue of that $370M transaction, where is it now when the city needs it.