Better Ways to Head Off Spiking Property Tax Bills

America is in the midst of a property tax revolt. In 2024 and 2025, more than a dozen states passed laws meant to slash property taxes for homeowners. And in several states, including Florida, Georgia and Texas, policymakers want to go even further and eliminate homeowner property taxes altogether.

These solutions may be politically appealing, but draconian measures are not the answer. They hobble local governments’ ability to raise necessary revenues to provide essential services for their residents and undermine progressivity in our tax system. In many cases, they amount to a solution in search of a problem. There are more efficient and targeted ways to address concerns about the property tax.

Headline-grabbing legislative actions have been driven largely by concern that the surge in housing prices will lead to a similar spike in property tax bills. But overall, growth in property taxes has been far less dramatic.

Since 2020, housing prices have grown more than 50 percent nationally. Over the same period, however, property tax revenues grew at about half that rate — roughly keeping pace with inflation and below the growth in personal income.

That may come as a surprise to many people, who assume that property tax bills more closely track property values. But in fact, the relationship between tax bills and values is much looser, because most local governments routinely adjust tax rates to offset changes in property values. When home values rise rapidly, tax rates often fall. That’s the main reason property taxes have not spiked in proportion to housing prices in recent years. This stands in contrast to sales and income taxes, where rate changes are far less frequent.

For most taxpayers, local property tax cuts are sufficient to prevent excessive growth in tax bills. Yet the extent to which local governments lower rates when values rise varies widely across states, which can explain why some states have seen property taxes grow more quickly since 2020.

Why are rate adjustments routine in some states, but rare in others? One reason is that areas where property values have historically been stable may simply be accustomed to leaving tax rates largely unchanged from year to year. State laws and practices matter too — states should structure their property tax systems in ways that encourage regular rate adjustments.

The types of property tax limitations used in a state are particularly important. Whereas limits on growth in property tax revenue encourage tax rate adjustments, limits on property tax rates discourage them, and limits on growth in assessed values have no clear independent effect. But after weighing the evidence, it seems that all of these tax limits do more harm than good, with assessment limits having especially severe unintended consequences. A better approach is “truth in taxation,” which by requiring disclosure of expected increases in property tax revenues creates political pressure on local policymakers to reduce rates when values increase.

Even with significant rate reductions, however, taxpayers with the fastest growth in assessed values may still face above-average increases in their tax bills. That’s why targeted state relief is important. Circuit breakers are the most cost-effective way to help overburdened taxpayers, because they target relief to households paying the highest share of their income in property taxes.

But sweeping efforts to slash property taxes across the board or eliminating the tax altogether are likely to leave states worse off. Replacing the property tax with higher sales or income taxes would be enormously expensive. In Florida, for example, the Tax Foundation found that replacing the revenues from eliminating the property tax would require more than doubling the combined state-local sales tax rate. In Ohio, it would require increasing the income tax rate from roughly 4 percent to 13 percent. That’s not a good swap.

It may be unpopular, but the property tax has major advantages compared to sales and income taxes. It’s more stable over the business cycle, causes less harm to the economy and its immobile tax base is particularly suited to local governments since it’s less vulnerable to destructive tax competition among neighboring jurisdictions. It’s also more progressive than the sales tax, meaning that tax swaps would shift the burden toward lower-income households.

State and local governments should work together to effectuate the simplest but most effective way to control property taxes: cuts in local property tax rates to offset rising property values, combined with targeted state relief. Sweeping state tax changes are likely to cause more harm than good.

Adam H. Langley is associate director of tax policy at the Lincoln Institute of Land Policy. Thomas Brosy is a senior research associate at the Urban-Brookings Tax Policy Center.

---

Governing's opinion columns reflect the views of their authors and not necessarily those of Governing's editors or management.