Nellie Hughes, 88, opened up her Luzerne County, Pa., home in June as a backdrop for Pennsylvania Gov. Edward G. Rendell (D) to sign a measure that slashes her property tax bill next year to $48 from $350 this year.
Just hours later, Rendell's Republican challenger in this fall's gubernatorial election, Lynn Swann, denounced the targeted tax cut as "an election-year bill that leaves 80 percent of Pennsylvania's property taxpayers without a nickel of relief."
Pennsylvania is one of a several states this year to aid homeowners whose property tax bills have skyrocketed in recent years because of rising real-estate values. Property tax relief can come in various forms. Pennsylvania gave larger rebates to seniors, while Rhode Island lowered the cap on annual increases for local property taxes and school budgets. New Jersey this month ended a six-day government shutdown by increasing its sales tax by 1 cent and dedicating half of the money to property tax relief. (See sidebar.)
With coffers fuller now than in recent years, states can afford to send back money to taxpayers - just as many state politicians are running for re-election. In New York, for example, property tax relief enacted in the final hours of the 2006 legislative session could land rebate checks in New Yorkers' mailboxes within weeks of the Nov. 7 election.
"It doesn't matter how liberal or conservative the state is, it's the issue that carries favor with voters," said Sam Batkins a spokesman for the National Taxpayers Union, an organization that promotes limited government and low taxes .
Tax reformer Grover Norquist, whose Americans for Tax Reform group promotes smaller government and fewer taxes, predicts "taxes will be big in many states" this election year. "Politicians say, 'We have a property tax problem.' No. You have a tax problem. The property tax is the one that pinches."
Even though the property tax is largely a local tax, state law provides the power to impose it. Property taxes pay for a range of local services, including fire and police protection, but especially schools.
"The property tax has always been one of the most visible, but also the least popular tax," said Gerald T. Prante, an economist at the Tax Foundation, which tracks state-by-state tax burdens. Prante pointed to the foundation's 2006 survey of Americans' attitudes about taxes that found 40 percent named the property tax "the worst tax."
Local governments rely more heavily on property taxes than states and feel the squeeze the most when the taxes are cut.
Property taxes make up nearly 22 percent of combined state and local revenue, but they provide 46 percent of revenue for local governments and less than 2 percent of state revenue, according to Census Bureau data for the 2003-2004 fiscal year cited by Liz McNichol, a senior fellow for the Center on Budget and Policy Priorities, a group that advocates policies to protect the poor . (Those figures exclude intergovernmental transfers from the federal or state government.) Permanent sweeping cuts in property taxes could mean cuts in services or higher local taxes, she said.
Bert L. Waisanen, a tax expert at the National Conference of State Legislatures, said that the property tax has been an issue for several years and that states continue to look for ways to provide relief. "It's on the radar screen on a number of states."
Property tax cuts are poised to play a major role in Montana elections this fall, but not in a way some might think. Montana Gov. Brian Schweitzer (D), who doesn't face re-election this year, is using a property tax rebate proposal to fight a "Stop Over Spending" initiative that anti-tax proponents are trying to get on the state ballot this fall.
The ballot initiative is modeled after Colorado's Taxpayers Bill of Rights, commonly known as TABOR, the country's strictest state spending cap. Colorado voters last year put TABOR on hold temporarily until the state can rebound from an economic downturn, but Colorado's change of heart hasn't stopped anti-tax advocates from trying to get TABOR-like laws enacted elsewhere.
Schweitzer's proposal would give about $400 to every Montana resident homeowner, a move that would be illegal if Montana passed a TABOR-like initiative. "By giving voters a concrete example of how TABOR would actually hurt their own pocketbooks, Schweitzer is changing the tone of the debate," said Matt Singer, a spokesman for the Progressive States Network, an organization that describes itself as trying to "fight the conservative machine" and enact progressive legislation at the state level.
Singer said he hopes progressives in other states where spending cap measures may be on the ballot will take a page from Schweitzer's playbook. Spending limits are already on the 2006 ballots in Maine and Oklahoma. In addition to Montana, anti-tax proponents still are gathering signatures or awaiting verification to put spending limits on the ballots in Michigan, Missouri, Nebraska, Nevada and Oregon.
While New Jersey doesn't have statehouse or gubernatorial elections this year, the recent budget deal that ended a six-day government shutdown will put property-tax relief before voters, possibly in November 2007, when state lawmakers are up for re-election. As part of the budget deal that raised New Jersey's state sales tax by a penny to 7 cents, voters will be asked if they want to dedicate half the $1.1 billion raised by a sales-tax increase to property-tax relief. "They [state politicians] hope next year homeowners will see a check for a few hundred dollars in extra property-tax rebates from this proposal and they will be less likely to vote for someone else," said Batkins of the National Taxpayers Union.
New Jersey Gov. Jon Corzine (D) plans to address lawmakers July 28 during a special session devoted to property taxes in which more details of the tax referendum are decided.