The Problems with Property Tax Revenue Caps

Publication Date: June 2007

Publisher: Center on Budget and Policy Priorities (Washington, D.C.)

Author(s): Karen Lyons; Iris J. Lav

Research Area: Banking and finance

Keywords: Economic projections; Tax code; State budgets

Type: Report

Abstract:

While such caps may hold down property taxes, they are likely to impair local governments’ ability to provide education, public safety, and other services residents demand and need. They also are likely to make the local revenue system more regressive. Property tax caps do nothing to change the main drivers behind higher property taxes. They cannot slow the increase in the cost of health care or fuel, for example, which reflects forces outside of the control of local officials. Nor do they change the demand for local public services, such as quality K-12 education, public safety, and good roads. There are ways to mitigate the effects of property tax caps by replacing the lost revenue, but each of them has serious drawbacks.