Posted by Ed 

Local property taxes provide the lion’s share of education funding in many places. So the real estate boom, coming during the states’ recent fiscal crisis, helped cover shortfalls in school funding. As is happening now in Pinellas, Florida, rising property values mean that communities can lower the tax rate and still take in more money, allowing the state to limit is spending.

Six years ago I would have said increasing reliance on property taxes was unthinkable. Property taxes are thoroughly unpopular. Because low income renters (who pay the landlord’s property taxes via their rent) and homeowners put a larger share of their income into housing than the wealthy, they are regressive--taking up a larger share of the income of poorer taxpayers than wealthier ones. And corporations are able to avoid paying their share.

The tax has key virtues: it is local and it provides a stable source of revenue. Being local makes it tolerable to taxpayers – the money raised is kept in the community. But that means that inequalities in property wealth are locked into the school finance system, leading to our current problems with equity. Recognizing the flaws of this system, policymakers in the 1990’s floated and sometimes passed proposals to swap property taxes for income or sales taxes. I had thought the property tax would remain an important vehicle for communities going the extra mile in funding schools, but that responsibility for funding education would fall increasingly on the state. I still think that will happen, but as Florida indicates, we’ve hit some bumps in the road.

The property tax is the tax against which pitchfork armed citizens (or their legislators or Americans for Tax Reform and its astroturfy associates ) "revolt."  Property tax caps, curbs, cuts, rebates and limits have been discussed or passed in Pennsylvania, Rhode Island, Connecticut, New York, Texas, Florida, Georgia, South Carolina, Idaho and Nevada at the least over the last few months.

If legislators can be persuaded to shift the tax burden to more progressive state based taxes, there are opportunities to improve the fairness of state and local taxes (which are woefully unfair) and to target money to where it is needed most. Sadly, the example of Texas this year shows that many legislators and at least one governor are struggling with this task and that trepidation is in order. New Jersey is having a special session to look at the issue right now, and the Philly Inquirer has a good look at the challenges.