Property tax caps are hampering municipalities’ ability to fund basic services and are exacerbating inequality, according to a report released by the Center for Budget and Policy Priorities (CBPP) last week.
The tax caps, which first became popular during the 1970s tax revolt and have since spread to 44 states plus the District of Columbia, have created fiscal stress for the states that adopted the limits. Because of property tax caps, “states are pushing too many costs down to the lower level,” said Ron Deutsch, executive director of the Fiscal Policy Institute, during a press call about the report. The report has a recommendation to alleviate some of these issues: Flip the current property tax cap formula.
Right now, most states limit the annual increase in property taxes to 1.5 or 2.5 percent or the rate of inflation — whichever number is lower. Setting the limit instead at whichever number is higher, the researchers say, would provide more cash for governments and make revenues more predictable.
“We never thought the tax cap was the right solution,” said Deutsch. “Property tax caps should be eliminated. If they aren’t eliminated, at the very least, they should be amended.”
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