So what's the deal with property taxes?

Posted by Sir Four at 12:09pm Aug 7 '06
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Of all taxes, property tax confuses me the most. Maybe someone can help me understand. It seems reasonable to suggest that taxes are levied against the population to pay for things the government maintains, such as schools, roads, welfare, police force, etc. If the government can't afford to pay for these things, it might raise taxes. If it has a surplus, it may lower taxes. The peculiar tax, though, is property tax which is not raised or lowered due to any need. Rather, it fluctuates based on the value of your home.

I don't understand this. If housing prices are going up in a particular area, the property taxes are also going up. There's no need for them to go up, but they do because they are tied to the value of the home. So what happens to this extra money? Shouldn't many state and local governments have more money than they need? What about house marking bubble communities where home values have shot up 50% or more? Shouldn't the government be awash in property tax revenue?

My own state of New Jersey is a bubble state where house prices have climbed dramatically. Indeed we have the highest property taxes in the country. Yet our state suffers from repeated budget deficit problems, recently causing our governor to raise the sales tax. How can this be? Where the hell does all the money go?