Property Tax Revolt

En español | If anyone knows what her house is worth, it’s RoseAnne DeSantes McLarnon, a real estate agent in New Jersey. And she says it surely wasn’t worth the inflated value that local assessors assigned it last year in the midst of the nation’s worst housing collapse since the 1930s.

McLarnon’s four-bedroom home, perched on a lake just outside Atlantic City, has lost a third of its market value since she and her husband moved in three years ago, she estimates. So they were aghast when they opened their property tax bill of more than $9,100. “Our property tax bill went up and our home’s value went down,” says McLarnon, 59.

In communities all over the country, growing numbers of homeowners like the McLarnons are fighting back against property tax bills that remain stubbornly high or continue to rise even as average home prices have plummeted—22 percent between 2006 and 2009, according to the National Association of Realtors.

Many owners, including retirees living on fixed incomes, had been counting on financial relief in the form of lower tax bills.

But like it or not, local governments depend on property taxes to pay for schools, police, garbage trucks, libraries, pothole repair crews and other services and essentials of civic life.

Officials tend to keep property taxes high to make ends meet, rather than cut services: 25 percent of American cities raised property tax rates in fiscal year 2009, according to the National League of Cities, an advocacy group. Just a few weeks ago, Philadelphia officials raised property tax rates by 9.9 percent.

“Just because assessments go down doesn’t mean property tax bills will go down,” says Kim Rueben, a senior fellow at the Urban Institute, a research group in Washington. At the same time, she says, “local governments are aware of the fact that homeowners can revolt.”

The beginnings of revolt can be found in at least half a dozen states. In some, residents show their ire with flurries of assessment appeals—in Florida’s Miami-Dade County, 10,091 were filed last year, compared with 5,653 appeals in 2007.

In other places, homeowners are organizing protest groups, like one in Gaylord, Mich., that ran its own numbers on local property sales to argue that assessments were unfairly high.

Such protest groups contend that officials must balance their budgets responsibly, not on the backs of homeowners. The National Taxpayers Union, an advocacy group, says that up to 60 percent of all American homes are assessed higher than they should be.

The tension reflects a nationwide crisis in local government finances that is often overshadowed by the federal government’s huge deficits, but its impact is more immediate because local governments must balance their budgets. Local revenues of all kinds—including income, business, hotel and sales taxes—are down because of the recession. Los Angeles County, for instance, faces a $510 million gap this year and is proposing cutbacks in libraries, social services and health care.

To be sure, not everyone’s property tax bill is rising. A lot depends on which state you live in. In 1978, an uprising by California property owners brought voter passage of Proposition 13, which among other things generally capped property taxes at 1 percent of market value when sold. Many states have similar controls, while in others, local governments remain essentially free to raise tax bills if it’s done through an open process.