An overview of major property tax relief measures.

• Author: Melnik, Steven V.

Every state employs some form of property tax relief program for the purpose of reducing the local property tax bill for taxpayers (National Conference of State Legislatures, A Guide to Property Taxes: Property Tax Relief 6 (November 2002)). A property tax relief program modifies the basic property tax model in an attempt to produce a smaller tax bill for at least some taxpayers. A relief program can target specific types of property or specific types of individuals for tax relief, or it may have a broad application.

Although no two states have identical relief systems, there are several common forms of property tax relief programs used by states throughout the nation. The first form is a "homestead exemption." A homestead exemption program reduces the property tax on qualifying properties, usually a principal residence, by excluding a portion of those properties' value from taxation.

A second form of relief program is called a "circuit breaker." Circuit breaker programs target certain types of taxpayers for property tax relief. A circuit breaker contrasts with a traditional homestead exemption in that the amount of relief generally depends on a variable, such as household income, property value, or the property tax bill (e.g., MD Code Ann., Real Prop. [section] 9-104). Generally, circuit breaker programs are "threshold" programs that provide property tax credits to an eligible person whose property tax exceeds a certain percentage of his or her income or overall wealth (e.g., ME Rev. Star. Ann. tit. 36, [section] 6207 (2007); OK Stat. Ann. tit. 68, [section] 2802(9) (2007); MD Code Ann., Real Prop. [section] [section] 9-104(g), (i)).

A third common form of property tax relief is a limit placed on the amount that either the tax rate or the assessed value, or both, can increase in a given year.

Finally, a fourth form of tax relief is an expenditure limit. Expenditure limits place a ceiling on the amount of revenue local government can generate and therefore the total amount of expenditures a state can make.

Consequences of Property Tax Relief Measures

All relief programs share the common goal of reducing the property tax by altering the basic tax model. Taxpayers expect a decrease in their property tax upon the implementation of any of these programs based on the mathematical formula.

Whether a tax relief program will in fact reduce the property tax burden may vary from taxpayer to taxpayer and may depend on the mechanics of each specific...