Voters in several states will soon weigh in on proposed property tax reforms—changes that would, in most cases, significantly reduce the revenue that cities, counties, and school districts can collect from homeowners.
The property tax is the single largest source of local tax revenue for most local governments, which use those funds to pay for schools, public safety, and other municipal services. In 2024, property taxes accounted for an average of 28.4 percent of local funding nationally, but reliance on the tax varies—comprising more than half of local revenue in New Hampshire, Connecticut, New Jersey, and Maine, but less than 15 percent in Arkansas, Alabama, and Nevada.
Municipal budgets include other funding sources, like state and federal aid, local sales taxes, and charges or fees. But unlike state and federal aid, which sometimes comes with strings attached or restrictions on how it can be spent, “revenue that you’re generating locally gives you the ability to get things done the way you want them to be done, the way your residents want them to be done,” said Adam Chapdelaine, former town manager of Arlington, Massachusetts, in an interview with the Lincoln Institute of Land Policy.
This fall, ballot initiatives across the country, from Florida to Wyoming, propose to reduce the revenue communities can collect, using strategies ranging from tax exemptions to constitutional limits. These proposals come on the heels of major property tax reforms that have already passed since 2023 in more than a dozen states, including Georgia, Texas, Wyoming, and Iowa.
What does all that mean? Below we’ll explain the mechanics and vocabulary of the property tax and look at the potential impacts of the current property tax revolt.
Property Tax Basics
The mechanics of the property tax differ from place to place, but here’s how the property tax generally works in simple terms.
All properties in a community are appraised and assigned an assessed value, based on the estimated market value of both the land itself and any buildings (“improvements”) on the lot.
The community taxes its properties according to a millage rate, or mill rate—so called because it’s billed per $1,000 of assessed value. The millage rate can, and should, fluctuate annually in response to changes in home values and the community’s budget needs.
So if a town’s millage rate is $10, for example, a homeowner will owe $10 for every $1,000 of their home’s assessed value. For a property assessed at $300,000, that comes out to $10 x 300, or $3,000, in annual property taxes. The owner of a $750,000 home taxed at that rate would owe $10 x 750, or $7,500.
Mill rates and assessment practices vary greatly across the country, and communities often make further adjustments to this basic model by assigning different assessment ratios or tax rates to different classes of property, or by offering tax relief to certain property owners, such as primary homeowners or seniors.
Many communities impose a higher effective tax rate on commercial properties than residences, and offer a partial exemption for a homeowner’s primary residence. This shifts some of the tax burden away from owner-occupants—who are more likely to vote in local elections—and onto business owners, second-home owners, and renters.
The property tax is a unique source of local revenue, for several reasons:
It’s stable and stationary. Compared to revenues raised by income and sales taxes, which fluctuate based on economic conditions (falling drastically during recessions, along with incomes and consumer spending), property taxes remain more consistent through downturns. And since the property tax is based on a physical, immovable plot of land, it’s less impacted by competition from neighboring communities; a shopper may drive across the county or state line to pay lower sales taxes, but you can’t relocate your house quite so easily.
It’s economically efficient. A well-designed tax system raises revenue while minimizing impacts on economic activity. While other types of taxes influence consumer decisions—sometimes this is even the intent, as with taxing tobacco products to dissuade smoking—the supply of land can’t be increased or reduced in response to a tax. That means the property tax, at least the part levied on unimproved land, doesn’t distort behavior. Taxing buildings is less efficient than land alone, but a combined property tax on land and buildings is still more efficient than the sales or income tax.
It’s highly visible to homeowners. Unlike a sales tax, which is obscured in countless small transactions over the course of a year, or income tax, which is often withheld from the paycheck an employee sees, property taxes are billed in large installments that are hard for homeowners to ignore. And the services the property tax pays for—from schools to parks to public safety—touch people’s everyday lives. That awareness and engagement help create accountability and transparency in local governance: When voters are aware of the taxes they pay and the services they receive, governments tend to respond with better fiscal decisions.
That enhanced visibility, though, also means the property tax often faces scrutiny. Which leads to moments of reconsideration like the one we’re in now.
The New Property Tax Revolt
The 1970s and 1980s saw a major tax revolt that spawned significant and lasting tax reforms in several states. Successful ballot initiatives during that era included California’s Proposition 13 and Massachusetts’ Proposition 2½, which enacted limits on property taxation that remain in place today. Like that earlier wave of property tax reform, the current widespread inclination to rethink the property tax is at least partly rooted in concern among homeowners over fast-rising property values.
Home prices have skyrocketed more than 50 percent since January 2020, far higher than the rate of inflation. While property taxes don’t increase at the same rate as property values, homeowners often think they do, so surges in the market create surges in concern. In fact, property taxes nationwide have increased only slightly more than overall inflation since 2020.
Ideally, a well functioning government adjusts its property tax rate yearly. This allows it to make changes in response to rising or falling home values and in consideration of current budget needs, and it should mean that tax bills don’t rise too much or too quickly.
If a county’s home values rise an average of 10 percent in a year, for example, but the municipal budget increases by only 1 percent, the town should lower its millage rate accordingly so it is collecting only the revenue it needs. If it fails to do so, simply leaving rates where they are, the result is a silent tax increase.
Proposed Property Tax Changes
In Florida, Amendment 3 would increase the exemption for non-school property taxes for primary residences (“homesteads”) to $250,000 by 2028; that means the owner-occupant of a $275,000 home, for example, would owe city or county property tax on only $25,000 of the home’s value. (Their school district property tax would be unaffected.) Amendment 3 would also lower the current cap on assessment increases for nonhomestead properties, from 10 percent to 5 percent, and restrict how counties and municipalities can spend their property tax revenue.
Amendment 3 also tasks the legislature with increasing the homestead exemption to full assessed value, and Florida’s Republican governor, Ron DeSantis, has proposed eliminating property taxes altogether. Jared Walczak, senior fellow at the Tax Foundation, estimated that replacing more than $42 billion in lost property tax revenue under such a scenario would require more than doubling state and local sales taxes, from the current average of 7.02 percent to 15.34 percent. (And that’s before accounting for a drop in sales activity as consumers respond to the higher tax rates.)
In Ohio, a proposed constitutional amendment to abolish the property tax fell short of making the ballot this November, though its proponents intend to try again next year. In a recent Lincoln Institute working paper, Walczak estimated that, to make up for the $21 billion in lost property tax revenues after such an amendment, Ohio would have to more than double its state sales tax, from 5.75 percent to 13.36 percent, or triple its flat-rate income tax, from 2.75 percent to 8.24 percent, on top of existing local sales and income taxes.
In North Carolina, a proposed constitutional amendment requires state lawmakers to “enact general laws limiting the amount by which the levy of taxes on property may increase, which may include exceptions.” Many states have such levy limits, which cap the growth in total property taxes a community can collect from year to year. For example, Massachusetts limits tax levy increases to no more than 2.5 percent annually but allows communities to vote for an override if voters wish to raise more revenue. The North Carolina amendment includes no specifics, however, leaving details to be negotiated by legislators.
Wyoming’s Initiative 1 would exempt half of a homestead’s assessed value from property taxes statewide. In contrast to Florida, where the governor has been a vocal proponent of efforts to reform or abolish the property tax, Wyoming’s outgoing governor—a Republican and former state treasurer—took to the op-ed circuit to warn that the initiative would have an “immediate and devastating effect” on local public services and represents “the first step in what could be a further call to completely dismantle a system of taxation Wyoming has relied upon since before statehood.”
The Distortionary Effect of Assessment Limits
Of the various methods used to curb property tax increases, one of the most problematic is an assessment limit. Florida has capped assessment increases on homestead properties to the lesser of 3 percent or inflation since 1995. This means if a primary residence was assessed at $100,000 one year, it could not be assessed for more than $103,000 the following year if its owner still lived there, even if its market value had increased to $120,000 or more. Amendment 3 would lower the assessment limit on all other properties from 10 percent to 5 percent.
The most infamous example of an assessment limit is California’s Proposition 13, which since the 1970s has capped how much a home’s assessed value can increase per year at the lesser of 2 percent or the rate of inflation, until the home changes hands. (About a dozen other states also limit how much a property’s assessed value can increase each year.)
Assessment limits create conditions where two identical homes can have wildly different tax bills, depending on when each home was purchased.
For example, picture two homes on a Los Angeles street, each one valued at the 2025 median sale price of $947,000. One family, who moved in 14 years ago, pays $5,212 a year in property taxes, while their new neighbors, who just purchased their home, will pay more than double that, $11,172. In Miami, a new homebuyer’s tax bill is more than three times that of a longtime resident’s bill.
Assessment limits can also discourage longtime homeowners from moving or downsizing, further locking up an already constrained housing market, because they don’t want to lose their favorable tax treatment.
More Effective Ways to Offer Property Tax Relief
There are many ways to offer residents property tax relief, targeted or broad, that don’t sacrifice a local government’s autonomy or ability to raise revenues. Many states already use these policies and could consider expanding them instead of taking more drastic measures.
More than a dozen states offer some form of property tax circuit breaker, a type of tax relief extended to homeowners paying a high proportion of their income in property taxes. This might include seniors, low-income homeowners in high-value or gentrifying neighborhoods, or homeowners facing sudden job loss or disability.
A circuit breaker creates a tax-to-income threshold above which a homeowner owes less or even no property tax. For example, at a 5 percent threshold, a qualifying household would pay no more than 5 percent of their income in property taxes in any given year. So a homeowner with $10,000 in income and a property tax bill of $2,000 would pay $500 in property taxes (5 percent of income) and receive a credit for the remaining $1,500.
Some states offer circuit breakers only to seniors, while others make them available to all low-income homeowners, or at graduated income thresholds. Experts recommend requiring some kind of copayment, even a modest one, to encourage homeowners to remain engaged in local spending decisions.
Many states also offer property tax deferrals, which allow income-poor but housing-rich homeowners (most commonly seniors) to delay paying their property taxes until the property is sold or inherited, at which point the municipality recovers the unpaid balance plus interest. This can help seniors who have built up home equity stay in their homes even when their fixed incomes don’t keep pace with higher property taxes, and ultimately does not put a cost burden on other taxpayers in the community.
Homestead exemptions are the broadest and most common type of property tax relief. More than 30 states nationwide have some form of broad-based homestead exemption—albeit in smaller doses than what’s proposed in Florida’s Amendment 3. (The Sunshine State’s current homestead exemption tops out at $50,000.)
A homestead exemption generally applies to owner-occupants of primary residences, and provides either a partial exemption from the property tax or a partial credit against the bill.
In this way, it shifts more of the tax burden onto businesses, renters, and owners of second homes, but a flat-dollar homestead exemption can also help make the property tax more progressive for homeowners. For example, imagine three homes in a fictional community: the owner-occupants of a $100,000 home, the owner-occupants of a $500,000 home, and the owner of a $500,000 vacation home. A flat $50,000 homestead exemption will cut the first family’s property tax bill in half, while reducing the second family’s bill by a more modest 10 percent. The vacation homeowner, meanwhile, receives no discount at all.
Homestead exemptions can have very different impacts on different types of communities based on property values and the share of nonhomestead properties. As a result, experts recommend that generous homestead exemptions should either be state-funded—where the state reimburses localities for their revenue loss from the exemption—or available as a local option that communities can choose to adopt or not. Absent state funding, “It’s best to keep statewide homestead exemptions to more modest levels,” says Adam Langley, associate director of tax policy at the Lincoln Institute of Land Policy. “The $20,000 to $40,000 range is about right.”
The amendment proposed in Florida is unique in mandating a very high exemption statewide without any state reimbursement. In Miami, where the median home price is $650,000, a $250,000 homestead exemption would offer tax relief to residents in lower-value homes while still allowing the city to generate tax revenue from owners of average-priced homes and pricey beachfront condos, not to mention vacation homes, office buildings, and shopping centers. But in smaller cities and agricultural towns, with lower-value homes and few commercial properties, such a mandate would leave communities almost no way to generate property tax revenue.
Finally, “truth in taxation” laws, which have been implemented in 20 states, require local governments to disclose any increase in projected tax revenues—whether due to higher millage rates or just rising property values. Truth in taxation measures prevent “silent” tax increases and can help keep a check on property taxes by improving transparency and accountability—without jeopardizing a community’s fiscal health.
To learn more about the property tax, visit the Efficient and Equitable Tax Systems section of the Lincoln Institute website.
Jon Gorey is a staff writer at the Lincoln Institute of Land Policy.
Lead image: City of Perry, Florida, fire truck with ‘Your tax dollars at work’ inscribed on the door. Credit: Pete Titmuss/Alamy
