Homeowners in many metropolitan areas are bracing for another round of higher
tax bills as a hot real estate market and other factors push property taxes
to new levels.
State and local property taxes in the first nine months of 2004 totaled $204.5
billion, up 7.9% from the same period in 2003 and 30% since 2000, the Census
Bureau says. The trend is expected to continue this year. (Related story:
Retreat to Small Town Offers No Escape)
In reaction, property owners in at least eight states are urging legislators
to limit increases in property taxes, which finance everything from police
and fire services to parks and schools.
But a widespread tax revolt appears unlikely this year. "People are grumbling
... (but) except in a few spots, there isn't a lot of movement to control
property taxes," says David Brunori, contributing editor of State Tax
Notes magazine.
Homeowners and local elected officials are squeezed between opposition to higher
taxes and strong public demand for better schools, roads and other services.
"People say, 'If we cut back on property taxes, where will we get money for
schools or the police department or the fire department or whatever we want to
spend our money on?' " Brunori says.
The major factor pushing taxes higher in many areas is rising home values. Low
interest rates for buyers are fueling the housing market, with many Americans
buying second or third homes, says Joseph Mulcahy, national deputy
managing principal of Deloitte & Touche LLP's Property Tax Services Group.
Most local governments are keeping tax rates stable. But faced with cuts in
state funding, many are reassessing homes every year to keep pace with surging
sales prices. The higher assessments mean higher tax bills.
Among states studying the issue:
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Legislators in New Jersey, which has some of the nation's highest average
property taxes, are pushing for a constitutional convention to revise the
tax system. Proposals include raising income or sales taxes.
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Texas legislators are considering a plan to reduce property taxes by up to
one-third. Options to fill the gap include new business taxes and higher
taxes on cigarettes, alcohol and automobiles.
