Property Tax Initiatives in the United States
Sirmans, G. Stacy, Sirmans, C. Stace, Journal of Housing Research
This study reviews the history of property tax initiatives in the United States. Major initiatives include California's Proposition 13, Florida's Save Our Homes'' amendment, and Massachusetts' Proposition 21.2. Enacting some type of limitation is most appealing when taxpayers feel overtaxed and underserved. There is some evidence to show that tax and expenditure limitations do bring local governments more in line with voter preferences. Tax limitation initiatives are often funded by vested special interests and are not pure grassroots movements. Studies show that tax limitation initiatives have a negative effect on education through lower teacher salaries and lower student test scores. Studies also show that other public service areas such as fire protection are also negatively affected.
Almost every state in the United States has enacted some limitation on the taxing authority of local governments. A restriction on the collection of property taxes is the most common form of limitation. According to Brunori (2005), the politics of anti-taxation have been occurring since the late 1970s. Between then and now, the three major historic tax and expenditure limitation initiatives have been: (1) California's Proposition 13 (that limits taxes on all properties); (2) Florida's Save Our Homes Amendment (that limits assessed values on homestead properties); and (3) Massachusetts' Proposition 21.2 (that limits property tax rates). Also, in 2010, the Georgia legislature passed a bill requiring that taxpayers be given immediate access to the sales data used to determine property values.1 This bill was precipitated by the perception that tax assessors and property appraisers were not sufficiently adjusting property values downward within the recent historic collapse in real estate prices after 2006.
Tax and expenditure limitations most often appeal to homeowners who feel overtaxed and underserved or who feel that local governments are not efficient in providing services. Thus, tax and expenditure limitations are generally designed to bring local governments more in line with the preferences of voters. This paper presents the history of property tax limitation initiatives in the U.S. Studies show that, in some cases, tax and expenditure limitations have had negative effects, such as overall declines in the levels of education and fire protection, as well as significant differences in market value and assessed value of property.
Real Property Rights in the United States
When the U.S. Constitution was ratified in 1789, the concept of individual property rights prevailed over the concept of community ownership. The 14th amendment to the Constitution set forth the right of private property ownership with the safeguard that no person will be deprived of life, liberty, or property without due process of law.
By a grant of power from the states to the federal government in Article VI, the Constitution became the supreme law of the land. Among other things, the Constitution authorized Congress to levy and collect taxes.2 However, real property taxation was one of the rights that states withheld for themselves.
In the U.S., real property taxes account for about 85% of the tax revenues for local governments and finance about half of all local government expenditures [for an excellent discussion on tax collections and expenditures, see Jennings (2005)]. Although the tax on real property is considered vital for financing local government services, it is often disliked and demonized. Some reasons include: (1) taxes may have little relation to household income, (2) taxes have the potential of being inequitable (horizontally and/or vertically),3 and (3) there may be inefficiency between the collection of property taxes and the services provided. Because of these issues, limiting property taxes or tax increases is appealing to voters and is generally perceived as a way to force local governments to be more efficient. …