June 09, 2005

Property Tax Boiling Point

Politicians at all levels of government are beginning to learn that over-reliance on property taxes can lead to problems.
The Christian Science Monitor has a good overview. The problem is the result, partly, of the fact that property taxes grow in two ways. First, the legislature can set the rate. Second, the value of your house can increase. The first method might be called "intentional" and second "accidental."

The problem with that sort of revenue source is that it does not take into account a taxpayer's ability to pay. A common situation is for a family to buy a house and over the years watch as it's value rises several fold. Now, eventually they retire so they're living on fixed income. Only their property tax bill has shot through the roof. The tax bill has increased while the family's income has leveled off. Some states have tried creative solutions to this problem such as homestead exceptions or circuit-breakers. Each is an attempt to find a way to acknowledge a taxpayer's income level on their property tax bill. This is an important factor in creating a fair tax system. Income-acknowledging property tax adjustments are a good start, but legislators need to learn the broader lesson when considering further tax reform.


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