American taxpayers could see relief from property taxes in the future as at least five states are currently considering eliminating property taxes altogether, which could force states and localities to turn to other sources to fund key public services.
An analysis by Realtor.com broke down the effort to eliminate property taxes in five states and noted that some of the proposals are more fully developed than others in terms of finding a replacement for lost tax revenue to avoid straining state and local government budgets.
Property taxes provide a key source of revenue for state and local governments, accounting for 90% of school funding, 70% of local revenue, and 25% of all aggregate state and local tax revenue, according to Billy Hamilton, deputy chancellor emeritus at Texas A&M University.
While they play a key role in state and local government finances, they can also pose a challenge to the affordability of homeownership – particularly Americans who live on a fixed income and can face large payments when the tax bill comes due.
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Here’s a look at the ongoing state efforts to reduce or eliminate property tax burdens that were detailed in the Realtor.com report:
North Dakota
North Dakota’s Republican Gov. Kelly Armstrong has proposed using about $483 million from the state’s general fund along with future earnings from the state’s oil tax savings account to offset property tax cuts and credits over time with the goal of eventually eliminating them for most homeowners within a decade.
Armstrong’s plan would start with expanding an existing tax credit for primary residences, lowering property tax bills up to $1,550 per household annually.
It would increase every two years from there with more of the proceeds from the oil tax savings account offsetting the shift, while capping annual increases in local property taxes at 3%. Further relief would come from expanding a property tax credit for senior citizens who meet income limits as well as people with disabilities.
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Georgia
A proposal by GOP state lawmakers would eliminate most property taxes by 2032, with the effort starting with a $1 billion expenditure by the state government to lower current property taxes. It would also hike property tax exemptions for primary residences from $5,000 to $150,000 in 2031, with most property taxes eliminated the following year.
Local governments would then compensate for the lost revenue by billing homeowners for services such as garbage collection, stormwater control and fire protection. The proposal would require voter approval for other improvements, such as those to government infrastructure or schools.
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Florida
Policymakers in Florida have been debating property tax elimination or relief measures for about a year, with more than half a dozen proposals discussed over the course of last year that would phase out or ease property taxes on primary residences.
Republican Gov. Ron DeSantis has pressed lawmakers to coalesce behind one package that the state can put before Florida voters.
To illustrate the challenges with replacing lost property tax revenue, an analysis by the Tax Foundation found that replacing lost property tax revenue with higher sales taxes would require hiking the sales tax rate from an average of 7.02% to 15.34%. The nonpartisan think tank also noted that could understate the shortfall as taxpayers’ behaviors change.
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Texas
Republican Gov. Greg Abbott is seeking to eliminate school property taxes following the enactment of several measures aimed at easing property tax burdens in recent years, such as rate compression and homestead exemptions.
Abbott has proposed using surplus funds from the state’s budget to buy down school property taxes for a period of time until they’re eliminated. However, lawmakers are still debating a long-term solution for replacing lost education funding.
Indiana
Indiana’s HB 1288 would abolish taxes on tangible property after Dec. 31, 2026, while also eliminating property taxes entirely in 2027.
The proposal would look to recoup lost tax revenue by expanding Indiana’s sales and use taxes to cover most services, and the proceeds of that move would be redistributed through a local government sharing fund.
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