Home sweet tax bite
Rising property taxes have some homeowners irate
Robert Ervin, superintendent of the 4,100-student school system in Bangor, Maine, has become a prophet of doom lately. Next month, Maine voters will consider a ballot measure proposing to sharply curtail property taxes, and Ervin reels off cuts that he says will follow if it passes. Most school buses will be gone. There will be virtually no physical education. No performing or visual arts. All extracurricular activities, including sports programs, will be history. A quarter or more of the teaching staff of 400 are likely to be fired. Class sizes will bulge by half or more. "The school system is exceptional, and this will gut it," Ervin laments.
Tax-cut supporters in the Pine Tree State decry such predictions as scare-mongering from public workers bent on maintaining costly empires. Whatever the rhetoric, though, Maine's strict measure is now the headliner in a series of similar questions to be decided across the nation this fall, at both the state and local level.
As home values have risen at a rapid clip, property-tax bills--and local government budgets--have marched up with them. Even though, in many cases, personal incomes have kept pace with the higher bills, there has nevertheless been growing antitax sentiment from coast to coast. "We are chasing fishermen off the shore," complains Phil Harriman, a financial planner and former state and local government official in Yarmouth, Maine. "We're seeing farmers forced to subdivide their land; our young people are leaving."
Backtracking. As a result, the effort in Maine--and others in Texas, Maryland, Ohio, and elsewhere--look to prune back one of the most vital, if not especially popular, sources of money for local government services, chiefly schools. "Of all the taxes folks are contending with, property tax appears to be most out of their control," says Peter Sepp, vice president of the National Taxpayers Union, which opposes tax increases.
Many states have already corralled property taxes, with California's Proposition 13, passed in 1978, being the granddaddy of the modern era. What distinguishes this latest wave of protest, however, is that backers are weaving in features designed to keep the lid firmly fastened once it's been clamped on. That's because in some places, wiggle room has allowed officials to replace lost revenue from other sources, such as new fees.
Because taxes are levied based on a property's value, the main force propelling higher property-tax bills has in many cases been the steady climb in home values. Median home prices are up 28 percent nationally since 1999, and more than triple that in some regions, such as Long Island, N.Y., and Sacramento, Calif. But local politicians can lower the tax rate to offset higher values.
On a per person basis and after adjusting for inflation, local property-tax collections are up in 46 states and the District of Columbia from 1996-97 to 2001-02, the latest year for which information is available, according to a U.S. News analysis of census data.
Yet at the same time, people's incomes have risen, in many cases offsetting the increase in taxes. In fact, the portion of personal income handed over to local property taxes is flat or down in 30 states and the District of Columbia. Nationally, this broad measure of property-tax burden has held nearly steady at 3 percent of personal income. Also, in 32 states and the District of Columbia, the property-tax portion of all local taxes raised has actually declined.
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