The property tax shuffle: some states have made major changes in their property taxes while others have zeroed in on special cuts for poor and elderly homeowners.

• Author: Waisanen, Bert

Property taxes are issues No. 1, 2 and 3 for the residents of this state, says New Jersey Assemblyman John McKeon.

That sentiment has echoed across the country the past two years as rising assessments and higher tax bills have caught up with rapidly accelerating home prices.

Home values, up 55 percent over the past five years, boosted personal wealth for home-owners, many of whom took advantage of the growth in equity. Sales of vacation homes and investment properties pumped up real estate values in coastal and resort areas. At the same time, homeowners on fixed incomes or with stagnant paychecks faced new financial pressures as property taxes soared. In popular parts of the country, working-class people can no longer afford houses in their hometowns and cities. The imbalance between housing economics and pocketbook economics has taxpayers demanding relief.

At least 21 states are working on property tax cuts this year and many others enacted property tax relief in 2006, using a variety of tools. This year in New Jersey, where homeowners facing the highest property taxes in the country were discussing a constitutional convention, legislators turned to homestead credits and tax limits.

The New Jersey Legislature last year created four joint legislative committees to review ideas for property tax reform including alternatives for funding schools and the possibilities of consolidating local governments. Next they secured voter approval to increase the sales tax by a half cent in exchange for property tax relief. The four committees reported recommendations in November 2006, and legislators entered 2007 still in special session to work on delivering property tax reform. The final package signed into law in April reduces property taxes by 20 percent for homeowners with incomes up to $100,000 and phases down to 10 percent for homeowners with incomes up to $250,000. The plan trims the average homeowner's property tax bill by $1,000. It also requires doubling the renters' rebate for 800,000 tenants.

The package restricts annual property tax increases to 4 percent for school districts and local governments, down from a recent average of nearly 7 percent, and requires voter approval to exceed the limit.

The proposed state budget calls for increased state aid so local governments can continue to reduce their reliance on property taxes. And a commission has been created to study how to consolidate New Jersey's myriad local governments, which include 567 municipalities, a third with fewer than 5,000 residents.

Assembly Speaker Joseph J. Roberts Jr. says the package "provides historic levels of property tax savings, cutting property taxes for the overwhelming majority of New Jerseyans."

GOING WITH THE SWAP

Other states recently swapped one tax for another. Texas lawmakers cut property taxes as part of a school finance reform package. The revenues were partially replaced with a combination of a $1 per-pack cigarette tax increase and a business margins tax, which broadens the business taxpayer base. Both Idaho and South Carolina have eliminated school maintenance and operations taxes by increasing the general state sales tax by 1 percent.

South Carolina's reforms include a sales tax increase tied to the elimination of school taxes plus a cap on property taxes. It limits assessment increases to 15 percent over the next five years, averaging 3 percent a year, but only for...