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Property Tax Base Erodes Just When Needed Most, Experts in Lincoln Institute Book Say

Erosion of the Property Tax Base: Trends, Causes, and Consequences, edited by Nancy Y. Augustine, Michael E. Bell, David Brunori, and Joan Youngman (2009 / 368 pages / Paper / $30.00 / ISBN: 978-1-55844-186-6), details how a variety of policies designed to reduce property tax burdens -- and to accomplish other social and economic goals through property tax exemptions or abatements -- has threatened the largest single source of state and local revenues across the country.

"A tax with a broad base and low rates is generally simpler, fairer, and more efficient than one that raises the same revenue with high rates on a narrow base," said Joan Youngman, senior fellow and chair of the Department of Valuation and Taxation at the Lincoln Institute. But, she added, "A variety of political, social, and economic factors make the tax a prime target for reduction, limitation, and exemption proposals."

This is in part because the property tax is a highly visible tax, and requires cash payments even if property may not be yielding cash income. State lawmakers may find political gains in tax limitations that reduce local, rather than state, revenue. But, Youngman noted, the property tax is a mainstay of local government finance in the United States, and a revenue source that offers many benefits, including greater stability than many sales and income taxes during economic downturns.

Erosion of the Property Tax Base analyzes efforts to limit property tax growth, reviewing the political, economic, and social reasons for this trend and its implications for local finance. It also examines the growth of property tax exemptions, both for nonprofit organizations and for open space and agricultural land; residential property tax relief measures as well as tax and expenditure limits; the use of override votes to lift tax limits; and the increasing use of property tax abatements as tools to influence business location decisions.

Based on a 2007 collaborative conference between the Lincoln Institute of Land Policy and the George Washington Institute of Public Policy, Erosion of the Property Tax Base brings attention to the challenges to maintaining a broad base for the property tax, advances understanding of the property tax, and offers policy recommendations for its improvement. The topics covered include:

    --  The value of housing stock of all residential property and
        owner-occupied property as a share of GDP, noting that since 2000 there
        has been a clear upward trend in both;
    --  Implications of various property tax exemptions on local property tax
        bases, revenues, and equity;
    --  Various tools used by state and local governments to provide property
        tax relief, primarily to residential property owners;
    --  State-imposed limitations on local governments' ability to raise
        property taxes, referred to in the literature as tax and expenditure
        limits (TELs), which include assessment limits, rate limitations, and
        revenue and expenditure limits; and

    --  The growth and impact of tax abatement programs, property tax incentives
        to support local nonprofit organizations, and incentives to encourage
        open space through the preservation of land used for agricultural
        purposes and setasides to create green spaces.

About the Editors

Nancy Y. Augustine is a project manager at The Pew Center on the States.

Michael E. Bell is research professor at George Washington Institute for Public Policy and president of MEB Associates, Inc.

David Brunori is research professor at George Washington University Institute for Public Policy and teaches state and local taxation at its law school.

Joan Youngman, senior fellow and chair of the Department of Valuation and Taxation at the Lincoln Institute, is an attorney specializing in state and local taxation and the legal problems of valuation.

Erosion of the Property Tax Base: Trends, Causes, and Consequences

Edited by Nancy Y. Augustine, Michael E. Bell, David Brunori, and Joan Youngman

2009 / 368 pages / Paper / $30.00 / ISBN: 978-1-55844-186-6

The Lincoln Institute of Land Policy is a leading resource for key issues concerning the use, regulation, and taxation of land.

SOURCE Lincoln Institute of Land Policy