Home prices are up, and homeowners are angry — over the tax billI Would Like the Value of My Home to Rise, While My Property Taxes Fall

Several US states have overhauled property taxes in recent years, shifting the burden off owner-occupied homes onto commercial property and state coffers, which pushes home prices even higher.

In the US, property tax is not based on what you earn but on what your house is worth. When the house goes up in value, the tax bill follows.

After COVID, suburban home values jumped. Owners were pleased their biggest asset had thickened, and furious that the tax bill had thickened too. Over the past three years, several states rewrote the rules: big tax breaks for owner-occupied homes, with the money for schools and police pushed onto commercial landlords, sales taxes and state funding. Florida, Ohio, North Dakota and Texas have discussed going further, even scrapping property tax on homes altogether.

The classic flaw of a wealth tax

Property tax is levied on wealth, not income. Your house and your retirement account can gain value without you having any spare cash to pay with. Older voters, rich in home equity and thin on current income, are exactly the group with the political weight to demand relief.

The catch: the people voting for lower taxes may never have connected the cut to the likelihood of thinner local services. Local governments fund schools and hire police out of property tax. Cut it, and the money has to come from somewhere else — or from the state, which means the state decides, not the town.

Cut the tax, raise the price

When the cost of owning a home falls, its market value rises. So the loop closes: high prices make voters want to gut the tax, and gutting the tax makes prices higher. People who already own a home win twice. People who do not can only watch.