TAX CUT, OR SHIFT?
August 25, 2006
Many states are offsetting property tax cuts by raising other taxes, especially the sales tax, and spending budget surpluses to replace lost revenue, making the trend more of a tax shift than a net tax cut, says Dennis Cauchon in USA today.
Polls show the property tax is the most unpopular tax, says Cauchon, mainly because the growing burden it puts on homeowners:
- Property taxes have risen 27 percent since 2000, after adjusting for inflation and population growth.
- That growth is less than the 41percent inflation-adjusted increase in home values, but it's twice as fast as the growth in sales or income taxes.
- Property taxes now consume a greater share of personal income — 3.4 percent — than any time since 1992.
However, the attack on property taxes hasn't happened everywhere. Some states haven't experienced soaring real estate values, and the trend could also be tempered by recent declines in home sales and prices.
But many states are feeling the pressure to cut property taxes, albeit most with tax increases elsewhere:
- The Idaho Legislature will vote on whether to eliminate the local property tax, raise the sales tax to 6 percent from 5 percent and dip into its budget surplus to replace the $260 million lost.
- In New Jersey, after raising the sales tax to 7 percent from 6 percent in July to help cut property taxes by about $600 million, the Legislature returned in special session to find more ways to cut.
- Florida voters will decide in November whether to grant $36 million in new property tax breaks to seniors and disabled veterans.
- Arizona, New York, Pennsylvania, Rhode Island and Indiana also expanded property tax breaks this year; Texas and South Carolina raised other taxes to pay for property tax cuts.
Source: Dennis Cauchon, "States attack property taxes," USA Today, August 25, 2006.
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