The Variety of Property Tax Limits

This article was originally published in State Tax Notes, a journal by Tax Analysts, on November 19, 2007.

It is not surprising that the property tax gives rise to many efforts to limit tax liabilities, for increases in annual payments can be unpredictable, highly visible, and unrelated to cash income. Politicians and policy analysts who recognize the property tax’s strengths must address these difficulties while avoiding or minimizing the creation of new problems in the process. The magnitude of that task can be seen from the experience of states that have undertaken a wide array of property tax restrictions since Proposition 13 initiated a new era of constraints.

Tax reductions can take many forms, and no one approach will address every cause of dissatisfaction with the current system. Limitations on taxable values will not prevent tax increases if rates rise, and rate limitations may not restrict taxes if values rise. Restricting the total tax burden will not address problems in its distribution among taxpayers. Conversely, an equitably distributed burden may still rise rapidly if total spending increases substantially. All of these may be causes of voter discontent.

This article explores the perceived problems and benefits of the property tax and presents case studies of state experiences with tax limits, ranging from California to Massachusetts, Oregon, Florida, as well as the cases of New York City and Chicago.