Property taxes rising nationwide

While fuel prices may be starting to skid, there's another expense closer to home that is upsetting many Americans: rising property taxes.

From Madison, Wis., to Bucks County, Pa., the local tax assessor is dipping deeper into homeowners' pockets as real estate prices rise and states share less of their tax revenue with local governments.

With people starting to receive their 2005 tax bills, the levies are squeezing the middle class and senior citizens - leaving them less to spend on everything from restaurants to roof repair. There is also concern the taxes could particularly hurt the home-buying chances of the young or civil servants such as firefighters. States such as New Jersey now have grass-roots efforts - verging on revolts - for reform.

"There is a property tax crisis," says Myron Orfield, a property tax expert at the University of Minnesota in Minneapolis. "It's especially bad in states like New Jersey, Ohio, Connecticut, and Illinois, which are property-tax dependent."

Part of the problem lies in demographics and the rapid growth of exurban communities. Young couples who can't afford suburban homes have moved to "edge" communities further from the cities. Those are filled with children, and to educate them the communities have to jack up property taxes to build new schools and hire teachers.

"The property tax system accelerates the sprawl," Mr. Orfield says, "and communities are competing for the few [taxable] businesses."

The changing demographics have combined with an unusual economic phenomenon: home prices climbing at double-digit rates in some areas. This would make homeowners happy, except that an increasing number of communities are now assessing property values every year.

Factor in changes in state budgets where many governors are still grappling with ways to close budget gaps. One way for them to cut expenses: Reduce funding to local governments.

Madison, Wis., is an example of how some of these changes are affecting both the town and some of its residents. Assessments climbed 9 to 10 percent for several years in a row as housing prices have risen, reflecting the city's buoyant economy. This is happening once more, so even though the city is actually reducing the mill rate (the multiple of property value used to determine residential taxes) from 8 mills to 7.8, property taxes are going up 5.5 percent.

The city's rising property taxes are squeezing retirees Diane and Donald Brockman, who have lived in the same house for over 40 years. Now, the retirees estimate it takes them two full months of their fixed income to pay their property taxes.

"We don't go out to eat, we don't go to theaters, we don't travel a lot," says Mrs. Brockman, who worked as a operating-room nurse for 40 years. "You have to give up your pleasures that you have worked all your life to do," she says, suggesting that it might be appropriate for the community to give some kind of tax credit to them for all the years they have faithfully paid their taxes.

Mayor Dave Cieslewicz, an unabashed liberal, is sympathetic to their plight. "We've moved away from progressive forms of taxation to more regressive," he says. "This is of great concern to me that the tax structure is less fair."

In many states, the tax bite is finally causing taxpayers to bite back. For example, in New Jersey, a grass-roots group, Citizens for Property Tax Reform, says it has 500,000 participants after 15 months of existence. The group's mission is to force a property tax reform "convention."

"For 30 years the New Jersey legislatures tried but they couldn't come up with a ... solution, so we thought we should take the process out of Trenton," says Cy Thannikary, a retiree and revolt founder. "We want fundamental reform of the way to fund schools and municipal services."

New Jerseyites are far from alone in their frustration. Other states struggling with the issue include Iowa, Indiana, Pennsylvania, South Carolina, Maine, and Vermont, and Wisconsin.

Some states are looking at the California model of capping property taxes so they rise only 2 percent a year. Others, such as Pennsylvania, are hoping to substitute the revenue from slot machines to hold down property taxes.

Some are looking at the Michigan model: It sends all property taxes to the state, which redistributes money from rich communities to needy ones.

Many citizens, especially those on a modest fixed income, clamor for relief. In Schwenksville, Pa., retiree Arthur Fairclough watched his property taxes rise 9.8 percent last year. "It will eventually eat up my total Social Security. We have enough income to cover it now but I'm worried about the future."