You might think property taxes have declined 30%, paralleling declines in housing values. But nope–property tax revenues have shot up 27% just since 2006.
Something remarkable happened to property taxes in the U.S. while housing lost 31% of its value from 2006 to 2009: they went up by $100 billion (27%). Equally remarkably, as we can see from this U.S. Census Bureau data on state and local tax revenues, property taxes went up even when housing slumped in the early 1990s.
So though U.S. housing continues losing value–U.S. home prices declined in January, continuing a downward trend that began in August, with average U.S. home prices retreating to summer 2003 levels, according to the S&P Case-Shiller home-price indexes–property tax revenues continue their inexorable rise.
…Add all this up and we can see that local governments have become far more dependent on property tax revenues than they were in 2000. Thanks to stiff increases in junk fees and taxes of all kinds, state and local government revenue has climbed back to its pre-recession height of $1.29 trillion, roughly equal to the $1.32 trillion collected in 2008. In terms of total tax revenue, the recession is over–yet the gap between expenditures and revenues continues to widen in most states and local governments.
As their properties continue sliding in value, devastating their net worth, do you reckon the average homeowner might start resenting the rapid rise of the taxes they pay for the privilege of owning real estate?
Imagine if your income taxes rose by 27% even as your income declined by 30%.
The ultimate tax hostage is the property owner. The business owner can pull up stakes and leave, the wage earner can transfer or get another job elsewhere, and the consumer can restrict his/her consumption to lower the burden of sales taxes, but the property owner is the perfect tax donkey because the transaction costs of selling are so prohibitive.