The United States is in the throes of the largest tax revolt in a generation, and the revolutionaries are winning.
Since 2020, nationwide home values have climbed roughly 50 percent, leading property-tax bills to increase 19 percent and contributing to a 71 percent increase in the cost of homeowner’s insurance. At the same time, the price of gas, utilities, food, and everything else has risen, stamping out entrepreneurship, dimming the fertility rate, and making even six-figure earners feel financially strained.
Homeowners have had enough, and grassroots groups have mobilized to turn private kvetching into public policy. Over the past four years, nearly two dozen states have slashed property taxes: Alabama by capping annual assessment increases, Colorado by lowering marginal rates, Indiana by creating credits, Nebraska by setting a limit on local collections, New York by sending checks to homeowners, Wyoming by carving out loopholes for seniors. My back-of-the-envelope accounting suggests that the measures have reduced property-tax revenue in those states by 7 percent, saving homeowners as much as $45 billion a year.
This November, voters will consider a spate of similar proposals, the most radical one coming from legislators in Tallahassee, Florida. Amendment 3, popularly known as “Save Our Homes,” would raise the “homestead” exemption on owner-occupied properties in the state from $50,000 to $250,000, meaning a couple with a condo with an assessed value of $400,000 would pay their county’s property-tax rate on $150,000 of their home’s value, rather than on $350,000. The amendment would eliminate levies on more than half of dwellings. In time, Florida legislators want to phase out property taxes on owner-occupied homes entirely.
Amendment 3 would give property owners a giant tax cut: $12 billion a year by one estimate. It would ease the local cost-of-living crisis too, its proponents argue. “Affordability is a problem for all Floridians,” Byron Donalds, a Republican congressman and the front-runner in the governor’s race, said on the stump last month. “It doesn’t matter what your politics are. It doesn’t matter what the color of your skin is. Because when taxes and insurance are more than principal and interest, you got a problem.”
Yet what is being framed as a populist fight for affordability is in reality a form of class and generational warfare. Property-tax relief gives to the rich and takes from the poor. It aids seniors and harms children. It puts homeownership even further out of reach for many Americans, and it makes daily life even more expensive for low-income Americans.
[Annie Lowrey: So nobody is going to pay taxes now?]
To be fair to the amendment’s supporters, these arguments are not exactly intuitive. The annual cost of owning a home has climbed precipitously. Millions of working-class and middle-income families own their home. If you cut property taxes, you reduce their costs. This much is true.
Yet homeowners’ insurance and property taxes don’t function on a family’s balance sheet in the same way that rent, groceries, gas, cars, child care, and airfare do. Their cost goes up when familial wealth goes up. In Florida, real-estate appraisals have increased 83 percent since 2019, according to the state’s revenue department, suggesting that homeowners’ net worth has increased by trillions of dollars. Does public policy really need to solve the problem of rising taxes due to rising valuations? Is it even a problem at all?
If retirees on fixed incomes can’t afford their insurance payments and families can’t figure out how to cover their tax bill, maybe. Yet the number of Florida homes and buildings that are delinquent on their property taxes has fallen slightly since 2020. The number of foreclosures has increased a bit, but remains low. The state’s housing market is fraying and distressed sales are increasing, but that’s because of climate change and mortgage rates, not tax assessments. Floridians may not like paying a higher tax bill, and carrying costs might be spurring some of them to downsize. But in general, property taxes are levied on people who can afford them. The typical homeowner earns twice as much as the typical renter, and has 43 times the net worth.
Tenants are “the loser in all this,” Ken Johnson, a professor of finance at the University of Mississippi, told me. Many cities and counties offset lower taxes on owner-occupied properties with higher taxes on commercial residential properties. Landlords pass those costs on to their renters. The policy will also benefit longtime homeowners at the expense of prospective homebuyers. Low property taxes increase home prices, making it harder for people without a lot of money in the bank—such as new parents and just-married couples—to get approved for a mortgage. Then they remain tenants, subject to never-ending rent increases.
In addition to distorting the housing market, Amendment 3 will devastate public finances. Property taxes provide 43 percent of revenue to Florida’s municipal general funds, the bank accounts that cities and counties use to finance day-to-day services. Amendment 3 will cut collections by as much as 30 percent, and will hit hardest in areas with a lot of homes and not a lot of commerce. To cover the $12 billion budget hole, cities and towns will likely raise or impose sales taxes and sin taxes; increase fees at the DMV, permit offices, registrars, and courts; charge more for waste removal and water; and put additional taxes on tourists. The state will trade out a solidly progressive, uniformly applied tax for an obscure, regressive mishmash of charges.
[Read: American suburbs have a financial secret]
But municipalities aren’t expected to make up all of the lost revenue. They’re expected to cut. Amendment 3 explicitly protects tax financing streams for schools, meaning that cities and counties are contemplating draconian budget reductions for public-safety offices, libraries, after-school programs, summer camp, day care, flood prevention, public transit, roads, parks, senior services, homeless shelters, legal-aid clinics, domestic-violence shelters, and many other things. Austerity will be regressive too, harming the poor more than the wealthy. Rich Floridians aren’t relying on the bus to get to work. They’re not picking up free meals, taking adult-literacy classes at the library, or seeing a dentist at a pop-up clinic in a middle-school gymnasium either.
In the worst-case scenario, State Senator Tina Polsky told me, cities and counties “wouldn’t have enough money to keep going, even to pay their elected officials.” They would need to merge, or “come begging in Tallahassee, and those with the best lobbyists and the best connections are going to get the money.”
Add the possibility of a recession to that worst case. In a downturn, Florida would have no revenue from individual income taxes. (Florida voters banned them in a 1924 constitutional amendment.) It would have less income from property taxes than it did before. Yields from sales, corporate, and tourist taxes would fall. The state’s revenue base would collapse, meaning cuts to public services and layoffs and a secondary decline in consumer spending, leading the revenue base to shrink even more.
Despite these risks, Amendment 3 is expected to pass, as are many similar measures on the ballot in November. Voters have approved 78 percent of statewide property-tax measures in recent years. No wonder: Americans hate inflation and love homeownership. They believe in higher taxes, but also think other people should be the ones paying them. They may not perceive the connection between slashing property taxes and cuts to services, rising sales taxes, and increasing fees. They don’t understand that slashing property taxes means gutting the most effective wealth tax the country has, or taking from the poor to give to the rich. “It is an intellectual challenge to figure out ways to talk about these things, if you even have the guts to talk about them at all,” Texas State Senator Nathan Johnson, the solitary holdout on a property-tax relief measure that passed last year, told me.
Maybe California could convince them. Back in 1978, state residents revolted against a brutal cost-of-living crisis, a miserable housing market, and ever-increasing tax bills. By a two-to-one margin, they passed Proposition 13, which capped most property-tax rates at 1 percent, reset assessments to their 1976 level, and barred assessments from increasing more than 2 percent a year, unless a property changes hands or a new structure is built.
Prop 13 broke California. It nudged homeowners to remain in their properties for as long as possible, freezing neighborhoods in amber and trapping would-be buyers in rentals. (One recent study found that raising California’s average property-tax rate from 0.8 percent to 2 percent would increase the state’s homeownership rate by 4.6 percent.) It starved towns and cities of revenue, prompting them to rely on less progressive, less reliable, less equitable, and more distortionary taxes. It helped Boomers and it hurt younger generations. (I would say, “It helped Boomers and hurt their grandchildren,” but that would not be literally true. In California, Pappy and Gamma can bequeath their home to Junior without triggering a property-tax reassessment, meaning the state directly subsidizes dynastic fortunes.) Perhaps most salient: Prop 13 made California less affordable, radically so. It stymied real-estate development and created a trillion-dollar incentive for property owners to fight against reform.
What California did two generations ago might be the best argument against what Florida and other states are doing today. With these property-tax measures, well-off families are helping themselves now and hurting everyone else tomorrow.
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