State lawmakers seeking to enact residential property tax relief have two broad options: across-the-board tax cuts for taxpayers at all income levels, such as a homestead exemption or a tax cap, and targeted tax breaks that are given only to particular groups of low-income and middle-income taxpayers. One increasingly popular type of targeted property tax relief program is called a “circuit breaker” because it protects taxpayers from a property tax “overload” just like an electric circuit breaker: when a property tax bill exceeds a certain percentage of a taxpayer’s income, the circuit breaker reduces property taxes in excess of this “overload” level. This policy brief surveys the advantages and disadvantages of the circuit breaker approach to property tax relief.
Property Taxes
The property tax is an important mechanism for funding education and other local services. But it is unpopular among many taxpayers, in large part because it affects low- and middle-income families more heavily than the wealthy. For example, the tax remains the same when a taxpayer’s income drops significantly due to job loss or retirement. ITEP’s property tax resources explain how property taxes work and evaluate a variety of policies to remedy the regressive nature of the tax.
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brief September 1, 2011 Property Tax Circuit Breakers
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brief September 1, 2011 Split Roll Property Taxes
In the past half century, state lawmakers have explored a wide variety of approaches to scaling back property taxes. One such approach is the split roll property tax, also known as a classified property tax. Unlike a regular property tax system which taxes all types of real property at the same rate, a split roll property tax applies different tax rates to different types of property. This policy brief looks at the advantages and disadvantages of the split roll approach.
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brief September 1, 2011 Property Tax Homestead Exemptions
State lawmakers seeking to enact residential property tax relief have two broad options: across-the-board tax cuts for taxpayers at all income levels, and targeted tax breaks. More than 40 states have chosen to achieve across-the-board tax relief by providing a “homestead exemption.” This policy brief explains the workings of the homestead exemption and evaluates its strengths and weaknesses as a property tax relief strategy.
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brief September 1, 2011 Capping Property Taxes: A Primer
In response to what anti-tax advocates have branded as “out of control” property taxes, a number of states have decided to make use of tax “caps” to restrict the growth of local property taxes. California’s Proposition 13 tax cap, approved in 1978, inspired numerous other states to enact similarly ill-conceived property tax caps. These caps can come in many forms, but all are poorly-targeted and costly. In most cases, these caps amount to a state-mandated restriction on the ability of local governments to raise revenue. While state lawmakers get to take credit for cutting taxes, local lawmakers are the ones forced to make difficult decisions regarding which services to cut. There are three main types of property tax caps in use around the country: caps on property tax rates, caps on assessed value growth, and caps on overall property tax revenue growth.
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brief August 1, 2011 How Property Taxes Work
The property tax is the oldest major revenue source for state and local governments. At the beginning of the twentieth century, property taxes represented more than eighty percent of state and local tax revenue. While this share has diminished over time as states have introduced sales and income taxes, the property tax remains an important mechanism for funding education and other local services. This policy brief discusses why property is taxed and how property taxes are calculated.