PROPERTY TAXES A GREATER SOURCE OF REVENUE
September 2, 2004
Between 2001 and 2003, property taxes rose an average of 10 percent nationwide, and many states and localities are relying more on property taxes to prop up their ailing budgets, according to the Wall Street Journal.
An analysis by the Federal Reserve Bank of Boston revealed:
- In the first quarter of 2004, property taxes represented about 28.1 percent of state and local revenues, up from 25.5 percent in the first quarter of 2001.
- Income taxes fell from 22.4 percent to 19.4 percent of state and local revenues during the same time period, while sales taxes rose slightly from 31.4 to 32.2 percent.
- A weak economy, job losses and the stock market downturn contributed to the decline in state tax revenues by 8 percent during fiscal year 2002 -- the first decline in 10 years.
Two likely reasons for the increase in property tax revenues are that the booming housing market has increased the median value of single family homes by 15 percent to about $170,000. Additionally, states are reluctant to increase state income taxes and sales taxes due to political backlash. Yet state and local expenses have soared, says the National League of Cities:
- Sixty-two percent of cities have increased spending on public safety due to homeland security concerns.
- Thirty-eight percent have increased spending on infrastructure, while 10 percent have increased spending on education.
- Four out of five cities are expected to be less able to meet their fiscal obligations for 2004 than in the previous year.
However, increasing property taxes has also created a backlash as well. Maine, New Jersey, Ohio and Texas, initiatives to curb property taxes are on the states' November 2 ballots.
Source: Ray A. Smith, "Downturn Made States and Cities More Dependent on Property Taxes," Wall Street Journal, August 24, 2004.
For WSJ text (subscription required): http://online.wsj.com/article/0,,SB109330078325298979,00.html
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