Study Critiques the Fiscal and Racial Consequences of Capping Property Taxes

Brian J. Charles shares the findings of a new report by the Center for Budget and Policy Priorities (CBPP) that issues a sharp critique of property tax caps.

The tax caps, which first became popular during the 1970s tax revolt and have since spread to 44 states plus the District of Columbia, have created fiscal stress for the states that adopted the limits. As a result, states have cut aid to cities and counties, and municipalities have become more reliant on sales taxes and fees that disproportionately hurt the poor and people of color.

The study examined property taxes in Michigan, Massachusetts, Oregon, and New York, explains Charles. The findings show evidence that the caps "strangle" funding for public education, "which the researchers see as a pathway for minority and low-income children to move up the socioeconomic ladder," while benefitting wealthy white homeowners, "because they have historically owned homes at a greater rate than people of color and on average own more valuable homes."

The Center for Budget and Policy Priorities (CBPP) includes a proposed solution to solve these issues in the report. "Right now, most states limit the annual increase in property taxes to 1.5 or 2.5 percent or the rate of inflation -- whichever number is lower. Setting the limit instead at whichever number is higher, the researchers say, would provide more cash for governments and make revenues more predictable," explains Charles.

For more on the property tax situation around the country, see also Planetizen coverage of the Lincoln Institute of Land Policy's annual "50-State Property Tax Comparison Study."