The growing revolt against property taxes
In the mid-1970s, Californians watched home values spike and then watched tax bills surge with them. That backlash, led by Howard Jarvis, culminated in June 1978, when voters easily passed Proposition 13, the landmark tax limitation that capped property taxes at 1% of assessed value and limited assessed-value growth to 2% annually until a property changes hands. Proposition 13 is now sacrosanct in California, and calls to reform it don’t go well, even in a land friendly to some of the highest state taxes in the nation.
Prop 13 has become part of the political lore of modern conservatism, often credited with providing energy to the Reagan Revolution and a broader, nationwide anti-tax climate.
But it’s not just history. Property tax relief is again climbing up the statehouse agenda nationwide, driven by worsening affordability and cost-of-living pressures. For many lawmakers, property tax relief is also appealing because it’s one of the most direct cost-of-living levers some state lawmakers can actually pull.
Florida, New Hampshire, North Carolina, Oklahoma, Kansas, Iowa, Nebraska, and Texas are just a few of the places that I’ve seen recently where governors and state lawmakers are now actively pushing property tax relief. I’m sure there are others. In a recent interview at American Habits, NH state Rep. James Thibault brought up the importance of property tax reform to help prevent young residents from fleeing the state while promoting overall affordability for all.
One reason I’m a property tax skeptic is that, beyond the “you never really own your home” critique, they effectively tax unrealized appreciation, something homeowners feel sharply when those assessments spike. Why are homeowners expected to pay so much more in a strong market even when they have no intention of selling?
The very idea of taxing unrealized gains is also a great reminder of overspending appetite for more revenue by governments, and it is no surprise that similar proposals targeting stock holdings in this manner have rightly failed. Just because your home is worth more on paper does not mean your quality of life or income has improved. We’re all aware just how much it crushes those on a fixed income. I’ve spoken with several longtime residents in my neighborhood who say they intend to leave the area once they retire. The reasons they most often cite are the influx of “New Yorkers,” frequently used as a catch-all pejorative for outsiders, and rising property taxes. And for them, the issue is directly correlated.
Statehouses are converging on a handful of recognizable property-tax relief playbooks. Some states want to cap assessment growth to prevent “assessment shock” (like Kansas’ talk of a 3% valuation cap), while others aim to cap levies or local revenue growth to restrain how fast tax bills can rise (as in Iowa’s structural reform push). A third approach expands homestead exemptions, credits, and circuit-breakers to target relief to homeowners most at risk, seen in proposals like North Carolina’s broader relief package and credit-based models like Nebraska’s. And at the far end, Florida Gov. Ron DeSantis represents the “go big” strategy: pushing a November ballot-style approach to dramatically reduce or even eliminate certain property taxes.
Of course, a major challenge to property tax relief measures is the strain it can place on local revenue and local autonomy, as Jared Walczak outlines in a piece for the Tax Foundation. “Doing away with the property tax may be popular. Replacing it won’t be,” Walczak writes. Overall, the Tax Foundation favors levy limits, which essentially function as a speed limit on the growth of property tax collections by local governments.
Still, property tax relief looks to remain a hot issue in statehouses, and sits at the intersection of federal failure and state responsiveness. Much of today’s affordability squeeze, caused by inflationary policies, is tied heavily to national economic policy well beyond the control of local governments. As the federal government continues to overspend and fuel inflation, state and local officials are increasingly left to deal with the consequences. And as Rep. Thibault stressed, it’s one of those immediate levers state lawmakers can pull for New Hampshire residents.
And while Proposition 13 was very much a local initiative, the crisis was very much connected to the inflationary environment of the 1970s. Proposition 13 endures because it captured a truth that still resonates: when government-driven economic pressures make it harder to afford everyday life, taxpayers will demand limits on the government easiest to influence, which is closest to home.
—Ray Nothstine
— The Federalism Beat