With home values rising across the country, some residents are increasingly unhappy with their rising property tax bills. As legislators search for solutions, it is important to realize we have been here before — and we know what does not work.
The last time states were persuaded to “fix” their property taxes by passing tight restrictions, in the 1970s and 1980s, they enacted a wave of measures that have fallen spectacularly short of their promises, as we explain in a new in-depth report. These restrictions have failed to curb housing cost growth and instead led to greater inequality, loss of vital public services, and – ironically – even more public frustration with how we pay for schools and other local services.
Across-the-board property tax cuts create less fair local tax systems in the long run. State legislators and local governments should prioritize the residents who can least afford their property taxes, not the residents and businesses who can.
Key Takeaways
- Property tax limits have done nothing to reduce the cost of housing, and in some cases have made new housing construction more expensive.
- Property tax limits create inequities in the property tax system and generally favor wealthy property owners over low-income property owners by taxing properties differently depending on length of ownership, whether someone rents or owns their home, or if they live in a fast-growing community.
- Property tax limits have led to reduced local services, instability in local finance including local debt, increased reliance on regressive tax options, and more state funding to fill the gaps.
- Property tax limits have failed property owners and fueled frustrations that there is inherent unfairness in the system. This has paradoxically led to proposals to abolish property taxes, particularly in states with extreme property tax limits.
Instead of focusing on broad-based property tax cuts and limitations, lawmakers should focus on managing property tax growth for those least able to pay by:
- Passing property tax circuit breakers for homeowners and renters
- Allowing local income taxes to partially offset property taxes
- Equalizing school funding formulas
- Improving assessment practices
