Property taxes grew significantly in the recession, according to the Tax Foundation. Nationwide, state and local revenue from property taxes totaled nearly $474.2 billion in the 12 months ended September 2010, according to U.S. Census Bureau data, up 38.8 percent from the same period in fiscal 2005. Corporate net income tax fell 10.3 percent in the same 2010 period, while total state and local tax revenue rose 15.7 percent.
“Property taxes tend to be the more stable revenue source,” says Mark Robyn, an economist at the Tax Foundation. Local governments “can set their rate every year. Property tax policy is very flexible for local governments.” New Jersey residents pay the most residential property tax in the U.S.: an average $7,576 last year, up 78.7 percent from 1999, according to data from the state’s Department of Community Affairs. Homeowners in Millburn Township paid an average $19,441, the most among major towns in the state.
Among the more than 3,100 counties in the U.S., Hunterdon County, N.J., had the highest median real estate taxes per year — $8,216 — from 2005 to 2009, according to a Tax Foundation report. Other counties with high taxes in the five-year period: Nassau County, N.Y., where homeowners paid $8,206, and Westchester County, N.Y., where median property taxes on homes were $8,160. (One-year data show Hunterdon ranked fourth in 2009, after Westchester County, Nassau County, and New Jersey’s Bergen County.)
Upset voters in various parts of country have resisted the recent tax hikes — though not always with the same result as in Miami. In Chattanooga, Mayor Ron Littlefield’s push for a 19 percent property tax increase sparked a recall effort by the Chattanooga Tea Party and other groups, which failed in 2010. Omaha Mayor Jim Suttle has raised property taxes a total of 15 percent, also leading to a recall election this past January that failed to remove him from office. In Jersey City, the municipal tax rate has increased 84 percent since 2005, but efforts to recall Mayor Jerramiah Healy fell through in February. Last year, New Jersey lawmakers capped property tax increases by local governments at 2 percent.
About half of property tax revenue goes to public elementary and secondary schools, according to the Lincoln Institute of Land Policy, a think tank in Cambridge, Mass. Public elementary and secondary schools get about 43.5 percent of revenue from local and intermediate sources. State sources provide 48.3 percent, and the remaining 8.2 percent comes from federal sources, according to National Center for Education Statistics 2007 to 2008 estimates.
“From a political standpoint, pressure to provide adequate funding of schools and pressure to provide property tax relief are often intertwined,” states a report by the Lincoln Institute of Land Policy. “Taxpayers who want to see reductions in their property tax liabilities sometimes press state government for particular school finance restructuring measures.”
While residents battle tax hikes, some school boards say avoiding increases will lead to job losses. In Georgia, Chickamauga city councilmen voted for a 17 percent property tax increase in October to generate about $200,000 for schools. In South Portland, Me., the South Portland School Dept. proposed a budget that increases taxes to avoid losing 21 full time positions (including two teaching jobs) next year. In Austin, Tex., the teachers union is discussing a tax increase because the Austin Independent School District may cut $94 million from its budget.
As state-level funding fell around the country, many school districts relied on money from the $100 billion federal stimulus in 2009 as well as increased property tax revenue. Yet with most of the stimulus used up now and many taxpayers reluctant to accept more tax increases, schools may have to adjust to a lower level of spending.
“This might be a longer-term situation where there will be more control on school spending,” says Eric Hanushek, Paul and Jean Hanna Senior Fellow at Stanford University’s Hoover Institution. Unfortunately for schools in need of funds, until the real estate market recovers some value and the economy improves, homeowners may continue to fight back against city hall.