Property taxes are a sensitive subject in Greater Hartford. Just about every year there is a budget referendum in at least one local town as angry residents fight yet another property tax increase. The debate in some towns is more heated than in others (but we wonâ€™t mention any names).
You may be happy to know that rising property taxes are a hot topic in other cities and states as well. An editorial in this weekendâ€™s Wall Street Journal highlights a number of areas that are experiencing increasing taxes at the same time as they see falling home prices. In Arizona, where there is a state property tax, property values have fallen 17% on average in the past year. But taxes are on the rise. Ouch!
Unfortunately the root cause of property tax tension throughout the US is likely to get worse. The economics of running a town are deteriorating. Letâ€™s consider the revenue and expenses separately.
Nearly all of town revenue comes from property taxes. Although real estate has historically been an appreciating asset, that is perhaps not the case today. Letâ€™s assume that property values have stagnated. Therefore town revenue has also stagnated.
Expenses, on the other hand, are rising even more quickly than their historical rates. Education (much of a townâ€™s budget) is rising at 2.5x general inflation, healthcare (another significant piece) is rising at 2.0x general inflation. We all know about energy prices, which impact many of the services the town provides (police, fire, trash pickup, snow plowing, heating city buildings, â€¦).
Revenue is stagnant while expenses are accelerating. We all better sharpen our pitchforks and ready our torches because in the current global economic environment, this dynamic looks like it will only get worse.Â Other than protest, is there anything we could or should do?Â Â Or should we just ride it out?Â This is shaping up to be a big problem throughout the country.