- Places a 3 percent cap on annual property tax increases for most homeowners, and
- Places a 10-year average growth cap (or 8 percent, whichever is less) on property tax increases for businesses and the majority of rental properties.
So what's wrong with this? In brief, it's a very poorly targeted approach to tax cuts-- too generous to homeowners, and too stingy in its treatment of renters. Simply placing a cap on property tax increases provides relief to all homeowners whose taxes are increasing, regardless of their ability to pay. Furthermore, it gives nothing to renters -- who typically are low-income and feel the heat from rising property values as well.
People hate property taxes, and there's a good reason: they often change in ways that don't reflect your ability to pay them. If you pay $2,000 in property taxes this year and lose your job next year, your property taxes won't go down (of course, your income taxes will-- they're the ultimate "ability to pay"-based tax). This basic disconnect between property taxes and ability to pay is what makes these taxes so painful to low- and middle-income families. A smart approach to property tax relief resolves that disconnect by explicitly tying tax relief to your income levels. Tax caps give indiscrimate tax cuts to everyone whose taxes increase-- and therefore leave the property tax disconnect unchanged.For more information on targeted property tax relief measures and other tax policy topics, check out ITEP's policy briefs here and here.