Property Taxes Pinch Homeowners

By: Paul Katzeff: REALTOR® Magazine Online
To the great ire of many homeowners, local governments increasingly are leaning on property taxes to support increased municipal spending.

The NATIONAL ASSOCIATION OF REALTORS® reports a 140 percent increase in the median price of homes since 1990, which accounts for some of the increase. Even so, property taxes have grown disproportionately compared to personal income tax revenues, with the former having increased 25 percent from 2001 to 2004 and the latter having dropped 1 percent in the same period.

Many states have implemented tax caps to stem the problem and hopefully rein in soaring local spending. Some are even considering eliminating property taxes altogether and recouping the revenue through statewide sales and income taxes, which would benefit many cash-strapped homeowners who have seen their assessments shoot up in recent years.

Some legislators have pursued subtler means of extracting revenue from the real estate market—such as transfer taxes, which siphon off a small percentage of the transaction price from both buyers and sellers. But National Taxpayer's Union President John Berthoud believes taxpayers are taking notice. He warns: "Over the next couple of years, some politicians are going to lose their jobs because they've been so cavalier about spending."