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We hate property taxes

By Kay Bell · Bankrate.com
Tuesday, July 13, 2010
Posted: 11 am ET

Back in April, the American Enterprise Institute, or AEI, released a compilation of data from various public opinion surveys that revealed, ta-da!, we hate paying taxes.

But what tax did the conservative-leaning think tank find topping the list of most-hated?

No, not the federal income tax. We are most opposed to our property taxes.

Even though this is one of the biggest tax breaks homeowners can claim, either by itemizing or as an add-on to the standard deduction, that's not enough to keep it off the most detested tax tally.

The survey responses could, of course, be affected by the real estate troubles of the last few years. When folks find they owe more on their mortgage than their home is worth, the prospect of getting a property tax bill that might have been based on a higher home value assessed earlier does not make for happy taxpayers.

Property tax cap in N.J.: I'm not sure that New Jersey lawmakers read the AEI Public Opinion on Taxes report, but the state assembly's recent property tax action fits right in with apparent taxpayer sentiment.

On Monday, the New Jersey General Assembly approved a measure to cap property tax increases at 2 percent per year. This cuts the Garden State's existing property tax cap in half.

Republican Gov. Chris Christie, who won election in November based in large part on promises to cut taxes, is expected to sign the bill today.

The property tax cap move is significant, but not all-inclusive.

Since counties and other taxing jurisdictions actually assess and collect property taxes, the new law provides them some exceptions for certain kinds of expenses. Increases of more than 2 percent are allowed if the money is needed to pay for health care, pensions, debt service, states of emergency and increased school enrollment.

Also, voters in each town or school district can decide to exceed the limit and tax themselves more.

So the property tax rate in some New Jersey locales might not change much.

Still it's a symbolic and, of course, a political tax victory.

Sales tax hikes more definitive: Elsewhere in the United States, some more specific tax changes took effect on July 1. That date is, for most states, the  beginning of a new fiscal year so new laws kick in then.

ArizonaKansas and New Mexico residents now are paying a few cents more for many products they purchase.

Arizona's sales tax is now 6.6 percent. Kansas' sales tax is now 6.3 percent. And New Mexico's state's gross receipts tax, which is what most of us call sales tax, went up to 5.125 percent.

FYI, the American Enterprise Institute report found most folks think that sales taxes are among the most fair taxes.

That perception likely comes from the viewpoint that we all have a choice when buying stuff, at least discretionary purchases such as clothing or electronics and the like. Don't buy anything, don't pay sales taxes.

In reality, though, sales taxes are regressive. That is, such taxes are more costly to lower-income individuals since the tax, even at a relatively low rate, eats into the spending power of a $15,000-a-year earner more than it does into that of someone who makes $150,000 a year.

More specifically, poor people typically spend most of their money on everyday necessities. Wealthier individuals, on the other hand, usually spend smaller percentages of their income on taxable goods.

To counter this effect, most (but not all) states exempt some basic items from sales tax, such as food and medicine. This helps ease the effect of the tax (or tax increase) on poorer residents. But it also gives the same break to the more affluent.

Did the AEI report get it right? Which tax do you hate paying the most? Which tax do you think is the most fair?

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2 Comments
cpp
July 15, 2010 at 3:22 pm

The AEI got it right but not for the reasons you list. People hate property taxes becasue they are wealth taxes. You are taxed based on what you own. Most have come to accept taxes on earnings and on spending but property taxes are taxes on savings. What would you think of the govt taxing your certificate of deposit both on the interest and on the principle, property taxes are on the principle of an asett.