WSJ Your Money Briefing - A Property Tax Revolt Is Under Way

Episode Date: November 13, 2024

Property taxes in the U.S. rose nearly 7% in 2023, the largest increase in the last five years, according to property data firm Attom. WSJ reporter Will Parker joins host J.R. Whalen to discuss how voters in several states approved measures last week that will offer some relief.  Sign up for the WSJ's free Markets A.M. newsletter.  Learn more about your ad choices. Visit megaphone.fm/adchoices

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Here's your money briefing for Wednesday, November 13th. I'm J.R. Whalen for the Wall Street Journal. Property taxes in the U.S. rose 7 percent in 2023 compared to 2022, the largest increase in the past five years. Taxpayers have had enough. There are people who are just today getting a tax bill that includes this huge run-up in the value of their home that happened a couple of years ago. And they're seeing a 20% increase or whatever, and they're losing their mind a little bit. And so I think you'll definitely see more pressure on lawmakers from homeowners

to slow the pace of these increases. We'll talk to Wall Street Journal reporter Will Parker on the list. He's a naughty lister. Naughty lister? Dwayne Johnson. We got snowmen! Chris Evans. I might just go back to the car. Let's save Christmas.

I'm not gonna say that. Say it. All right. Let's save Christmas. There it is. Only in theaters Friday. Last week, voters in eight states approved measures that will lower their property tax bill. Wall Street Journal reporter Will Parker joins me.

Will, who pays property taxes and what do they typically fund? Property owners pay property taxes. That's commercial property owners and also homeowners, people who own residential property. And those taxes fund all sorts of local government needs and services, often fund school districts, for example. They're one of the main revenue sources for counties and cities and towns all over the country. How are the property taxes calculated?

Ben Trevino So typically they're based on the assessed value of the home, which is something that the local assessment authority comes up with that is supposed to be tied to its real market value. Marc Thiessen Give us an idea of some of the proposals that voters approved last week. Ben Trevino So what you've been seeing across the country is that in response to the huge surge in home values that we've seen over the last five years, basically unprecedented climate and home prices, is that means that more and more homeowners are seeing their

assessment values for tax purposes rise right alongside it. So they're getting higher and higher tax bills. They're coming in all at once. And so that anger at the pace and the climb in property tax bills has been made known to lawmakers by voters. And we've seen bills introduced at the state and local levels to make changes to property taxes. And also at the ballot, we had 10 states that considered some property tax related measure last week. In your story you highlighted Georgia and Florida among a couple of states. What was significant there?

So Georgia decided that they would essentially cap how much the assessment on a person's home could rise at any given time. And that cap would be based on the inflation rate, which is typically a single-digit number, whereas the market value of a home in a really hot year could be a lot higher than that. So that would keep taxes lower for current homeowners than they would be if it was purely tied to the market value.

Florida did an exemption that people receive off their property taxes that was designed so that it would increase more with inflation. So people would get a little extra tax savings because of that. But by far, the biggest one was Georgia, and that one will change property taxes there pretty significantly. Marc Thiessen Homeowners have been paying property taxes for decades. Why is this wave of opposition happening now? Michael S. Levy It's happening now because of how much home prices and home values have risen.

In a state like Georgia, you've had home values rise some 60% in five years. So that means that the assessed value of homes for tax purposes can rise a lot really quickly. And other costs for homeowners have gone up. They've faced inflation in other ways. They've had insurance costs go up, costs of maintenance, utilities. And the big swell up in property taxes is another rising cost that they are contending with. And we've seen this happen in American history before.

In the 1970s, another inflationary period, you had a similar kind of property tax revolt from middle class, upper middle class homeowners in places like California and Massachusetts who, you know, voted for ballot measures that restricted the growth in property taxes in some way. And this is really another phase of that. How much of property taxes risen around the country on average? There's a company called Adam data that showed that last year there was a 7% increase in that, which for a single year it was quite significant. It was a larger year-over-year increase than had been seen in a long time.

You spoke with a 61-year-old man who lives near Atlanta about his household finances, including his property taxes. What did he tell you? This is a person who moved from one area of suburban Atlanta to another largely for property tax reasons. He was living in a county that had a higher tax rate, moved to Cobb County where he would pay lower taxes, bought a house in 2020, which was, depending on when you got in, pretty good time to buy a home in most parts of America.

You hadn't seen the huge takeoff in prices yet, and you still could get a mortgage for less than 4%. So he did that, but since that time, the value of his home has risen quite a lot. And he finally got a new tax assessment that told him that your house has risen about 30% in value, and so your tax bill is going to be 25% higher now. And so he's appealing that, which is an avenue that homeowners have when they get a tax bill. Then he's talking about the same things other people are, that homeowners have seen the rise in insurance and utilities and these other costs and 25 percent jump in property taxes they just can't abide by. Marc Thiessen The property tax relief will leave money in

homeowners' pockets, but how could it impact local economies? Matthew Feeney, Ph.D., Ph.D., Ph.D. You have the potential over time for certainly the bill in Georgia for local governments, school districts to collect less tax revenue than they would otherwise. And this is one of the reasons that some analysts of tax policy don't like bills like this. There's a couple things going on here One is those current homeowners they pay this lower property tax

But a new homeowner who goes out and buys a house They don't benefit from that when a house sells it goes up to what its real market value is and the taxes go up to that So creates this inequality between current homeowners and those trying to get into the market quality between current homeowners and those trying to get into the market. Danielle Pletka Is the opposition to property taxes likely to expand beyond the states where voters cast ballots last week? Michael O'Brien That's very possible. We're still seeing people get these much higher tax bills. Every local government does it differently. Many don't reassess every year. They do it over a long period of time. So there are people who are

just today getting a tax bill that includes this huge run up in the value of their home that happened a couple of years ago. And they're seeing a 20% increase or whatever and they're losing their mind a little bit. And so I think you'll definitely see more pressure on lawmakers from homeowners to slow the pace of these increases. And naturally that will happen anyway because the home market is not what it was a few years ago. Home prices are rising much more slowly. So there will be some natural relief at least for a little while. That's WSJ reporter Will Parker. And that's it for your Money Briefing. This episode was

produced by me, JR Whalen, with supervising producer Melanie Roy. Thanks for listening.