“I can’t keep affording property taxes, and there is no place for me to downsize to except for maybe a senior apartment, which I’m not ready to do that yet,” stated Vermont state Senator Ann Cummings, who chairs that state’s Finance Committee. While many Americans, and certainly a large number of Iowans, feel the same way Senator Cummings does, most are not in a position to do anything about it. However, Senator Cummings and policymakers across the nation are attempting to address escalating property taxes for constituents who have grown frustrated with the heavy burden.
Those policymakers are finally recognizing that the root cause of high property taxes is rising government spending. Whether it is school districts, cities, or counties, local government spending drives taxation. In Vermont, Senator Cummings and her colleagues are considering advancing a bipartisan bill that would place budget caps on school spending. The proposal would apply a gradual budget cap starting at 2% for school districts. It is estimated that, if approved, the budget cap “would trim about $67 million in spending.”
Vermont Governor Phil Scott, who is backing the budget cap, stated last year that the state “tried to buy down” school property tax increases, “but when some districts saw that, they upped their spending.”
This is another lesson that many states, including Iowa, have learned. When states use general fund dollars to offset or “buy down” local property taxes, local governments often respond by increasing spending instead of reducing taxes long term. History demonstrates that shifting funding responsibilities or injecting state dollars does not structurally fix the issue and can actually encourage further spending growth.
In Iowa, this occurred when Governor Kim Reynolds and the legislature absorbed mental health care funding from counties. As a result, some counties did reduce their property taxes, but more used the change as an opportunity to increase spending while the state footed part of the bill.
It is not just in Vermont that policymakers are considering spending limitations. In Kansas, Representative Adam Smith, who chairs the Tax Committee, has introduced a measure to limit local government spending in order to provide property tax relief. Rep. Smith is proposing a 3% property tax cap, and if localities want to exceed the cap, it would require an election to override it.
In Nebraska, state Senator Tom Brandt has proposed a measure that would cap property tax collections at 2% plus any growth of the tax base itself. “The relief that the state gives will never ever keep up,” stated Senator Brandt, echoing the warning of Governor Scott of Vermont. Nebraska has also tried to use the state budget to “buy down” property taxes and other tax-shifting gimmicks, which have only made the situation worse.
“So we’ve got to slow the spending down on the other end,” stated Senator Brandt.
In New York, Senate Republicans have introduced a substantial series of taxpayer protections aimed at lowering tax rates and limiting spending. A package of measures called “Keep What You Have Earned” focuses on income tax reform, property tax relief in the form of a “freeze,” and spending limitations.
One proposal would limit state spending to 2% or the rate of inflation over the previous three calendar years, whichever is lower. A second measure “would create a special rule a two-thirds supermajority vote in the state legislature and on local councils to pass any law that raises taxes or fees—it would also apply when local governments request special permission from the state to increase taxes.”
Finally, the Tennessee legislature is also considering a 2% property tax cap. The measure would “limit annual property tax increases to 2% above the certified rate, plus the annual consumer price index of inflation.” The proposal includes an override mechanism: if a locality wants to exceed the cap, it would require a public referendum. This would not only allow taxpayers to have a voice in whether they approve additional spending, but it would also force local governments to justify why it is needed.
“Because there is a referendum option in place, I don’t view this bill as limiting in any way,” noted Tennessee state Senator Bo Watson.
This past summer, Texas Governor Greg Abbott stated that he was making property tax reform a priority by focusing on limiting local government spending. Governor Abbott is proposing to limit local government spending to 3.5% or the rate of population growth plus inflation, whichever is less. Governor Reynolds is also proposing to limit local government spending by placing a 2% property tax cap on cities and counties.
What is becoming clear across the country is that property tax relief will not come from shifting dollars or temporary fixes. It will come from structural reforms that bring discipline and accountability to government spending. If lawmakers are serious about protecting taxpayers, they must address the spending side of the equation, because without limits, property taxes will continue to rise no matter how much revenue government collects.
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