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Property tax payback
Bulging state treasuries are leading to money back for property owners.
November 27, 2005: 11:16 AM EST
By Les Christie, CNNMoney.com staff writer
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NEW YORK (CNNMoney.com) - Fed up with years of rapidly rising property taxes, homeowners are finally getting something back.

The reason: State and local government coffers are overflowing. Revenues are up 7.2 percent so far this year, according to Bureau of Economic Analysis, the most in 15 years.

One of the reasons, of course, has been the real-estate boom. According to BEA statistics, property taxes leapt 34.2 percent over the past five years. They have grown three times faster than inflation and about 50 percent faster than sales-tax revenues.

Now homeowners are crying for relief, and many states and towns are responding.

Money back

New York City has rebated a flat $400 back to property owners each of the past two years.

New Mexico is giving money back to homeowners in the form of energy rebates on their income taxes, a maximum of $289 per household.

North Dakota is considering legislation that would cap local property taxes; the state would make up the difference by sharing revenue with localities.

New Jersey, at $1,907.50 has the highest per capita property taxes in the nation, according to statistics compiled by the National Conference of State Legislatures. It partially offsets the property tax burden with rebates to the elderly and less affluent.

Pennsylvania intends to use the proceeds from slot machines to help fund local-school districts and ultimately reduce local-property taxes.

Kate Philips, spokeswoman for Governor Edward Rendell, says the state has already raised its share of local school budgets to 44 percent from 30 percent a few years ago. "The governor wants that to be more than 50 percent," she said. If the program takes hold, it is estimated, property taxes would fall an average of 23 percent state-wide.

Rejecting help

Help from the state doesn't always have the intended impact.

When slot machines were first legalized in Pennsylvania in 2004, local governments were invited to participate in sharing gaming receipts. The state gave local tax districts a choice: freeze taxes and receive gaming revenues or preserve the right to raise taxes and not receive slot machine money. Some 400 of 501 local districts to decide not to freeze taxes.

Pennsylvania is currently looking for a way to make accepting free money more palatable to local tax districts.

In Maine, the property tax burden is especially onerous, with residents paying the highest taxes relative to income.

Maine has a program in which homeowners earning up to $99,500 annually may qualify for rebates, which can amount to as much as $2,000. In addition, the state legislature has increased the percentage of the local school costs that the state pays, to 55 percent.

The plan was for the towns to pass the savings on to property owners, according to Rebecca White, spokeswoman for Maine's governor, John Baldacci,

However, the legislature made local property tax relief voluntary and many local governments have chosen not to pass on the savings to property owners. Instead, they often used the funds to expand school programs.

"The next time we do it we have to make it a requirement," says White.

Texas tried to pass similar legislation this fall; it had a bill before its State House that promised $7 billion in local rebates so towns could lower property taxes. But the legislation failed. Now, Governor Rick Perry has appointed a Texas Reform Commission to hold hearings and make recommendations on how to lower property taxes in the state, said spokeswoman Kathy Walt.

Meanwhile, Perry is at least trying to limit property tax increases. The state currently caps them at 10 percent a year. "The governor thinks that's too high," says Walt. "He wants to limit it to a maximum of 3 percent a year."

The good news for homeowners is that even if the surpluses don't produce the give-backs homeowners crave, at least they make it less likely that tax rates will be raised in the future. And with home prices stabilizing (read Outlook sours for real estate), it looks like homeowners won't get hit with higher taxes due to jumps in valuations for a while.

See, the end of the boom does have its good side.

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For a story on how to fight unfair tax assessments, click here.

To see where your state ranks, click here.

As adjustable rate mortgages come up for adjustment, many homeowners will face big jumps in bills. Click here for more.

For six tips to save on this year's taxes, click here.  Top of page

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