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We bought a house in 1971 for $59,000. The property taxes were $2,700 a year. We lived there until 2018. We sold the house for a little over $500,000. In 2026 that property is assessed at $483,000 and the taxes are $15,000 a year. The average annual increase in property taxes is about 3.17%.
Over the same period (1971 to 2026), the average annual U.S. inflation rate (measured by the Consumer Price Index, or CPI) was approximately 3.92% per year.
Over 35 years tax increases did not outpace inflation.
A similar pattern of property tax changes will continue in the future. For sure we know they will increase. If we had stayed in that house in retirement, the tax bill would not be an afterthought. My retirement would have to consider that expense and the likely increases.
That scenario applies to anyone with a house who retires. People routinely factor inflation in retirement planning. Certainly property taxes are significant in that planning. There are no surprises here.
They had $X income before retirement and paid their bills including taxes. They have $X income after retiring and still must pay their bills. There is no shifting insurance premiums, or car payments or any other bills to younger families. Why should property taxes be different? Upon retirement adequate income is necessary or lifestyle adjustments must be made. That is applicable at virtually any income level.
The other argument goes that survivors (typically widows) have a harder time paying the taxes because of reduced income. If we learn anything from participating on HD, it’s about planning for the vicissitudes of life, survivor income is part of that planning – I hope. I know many on HD delay SS for that reason, more income for a surviving spouse.
The current popular focus on property taxes is a red herring, it’s popular to rant against any taxes – without considering the consequences to the local community and beyond.
Unfortunately, the anti-tax argument greatly overstates the amount of taxes involved in most parts of the country and also the number of foreclosures that result in anyone losing their property – which is less than 1% and it is even rarer that a persons personal residence is involved.
That is not harsh, its reality.
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Since we bought a house in 1996, tax increases per year were capped whereas both general inflation and home prices increased (except for a few years) without any limit. Two of the largest public increases have been health insurance and busing costs in the public schools. This has caused deficits of more than $20M per year in the school district and has required cutting programs, teachers, and services. Besides being bad for kids, it’s only a matter of time before this hurts property values and general quality of life. Yet people complain about the taxes even though the rate of property taxes is almost half of when we bought 30 years ago.
What I think is wrong with property taxes is they can be very regressive. They are a wealth tax that hits working and middle classes much harder than the rich.
Say someone is paying property taxes of 1% on an assessed house value of $600K. They just started out, so have only $20K equity in the house, and maybe $80k other net worth.
So they are paying a 6% wealth tax — $6K
on $100K net worth.
No multi-billionaire pays even close to a 6% wealth tax.
At this time, income taxes are regressive. Wealthy people take far too many deductions. The top rate is too low. And Social Security taxes shouldn’t be capped below $1M.
Alaska has the lowest tax burden of any state at 4.92% of personal income. The total includes property taxes, income taxes and sales/excise taxes. New Jersey, where I live is number eight at 9.52%. I am not moving to Aleska to save a few thousand dollars per year. Anyone reading this who wants to move to Alaska, to save tax dollars, be my guest.
Me neither, besides they probably never heard of Taylor Ham.
Dick, did your average increase per year ( 3.17%) just include the increase in the millage rate or was it the total average increase based on assessed value increases PLUS millage rate changes? If your total property tax bill only went up 3.17% per year, I would agree that is reasonable. I would agree on your general comments but it has to rankle you just a bit when your property tax is supporting a public employee pension that has a 80-90% replacement ratio.
Show me more than 1 example. It is an easy target to complain about “public employees”, for some reason. All that I know of work for that pension at less than market pay for all the years of employment. The pension is the only thing keeping that workforce steady, an institutional memory of how to get the job done. It’s a tradeoff for the public. Or would you rather have a market-driven workforce without the profit motive for management to guide it?
It was the increase in the property tax bill, the dollar amount of the tax bill, which was the result of the combined increases in the tax rate and assessed value of the house.
I understand what you say about pensions. I sat on two governors task forces to review the benefits of state workers. The pensions were way beyond what any private sector might have. Generally, public employees do contribute to their pension. However, for comparison, a typical pension can be funded at about 8% of payroll, the state pension we reviewed cost 15% of payroll.
This would be a great article on a website named “DogmaticDollar”.
Perhaps more information would help us understand what your point of view is on this subject. Exactly what you have read here is wrong in your opinion?
For me, this issue is less about whether we should have property taxes than it is about spending responsibly. There are countless posts here about the need for people to plan responsibly for retirement and to live within their means throughout their lives. I agree with that.
I’m also fine with paying property taxes. They fund necessary public services. That said, I think the people and institutions spending those tax dollars have an obligation to exercise the same kind of fiscal discipline we expect from individuals.
Take my county’s schools. Enrollment has been declining modestly, yet school spending continues to increase substantially—a roughly 5% increase was just approved for FY2027, following a 4.7% increase the year before.
That doesn’t mean those increases are unjustified. But taxpayers are entitled to ask whether staffing and programs are producing results commensurate with their cost, whether every requested increase is necessary, and whether enough effort is being made to find efficiencies before asking taxpayers for more.
So why don’t we exhort those managing public money to live within reasonable means with the same vigor that we exhort individuals of all ages to do so?
Fiscal responsibility shouldn’t apply only to the people paying the bills. It should apply to the people spending the money as well.
John, too often when school taxes are under discussion I find that loaded word “results” to be a tool for hiding multiple red herrings in the interest of opposing public education in general. The question of how to assess “results” disappears in debates over math and reading scores, dropout rates, graduation percentages and college enrollment rates, where too often a red number is leveraged as justification for voting against any property tax increases for schools.
In cases such as yours, you may find that the rising tax spending despite declining enrollment may be for school infrastructure — the construction and repair costs for maintaining school buildings have absolutely exploded — or for upgrading technology enabling students to meet rapidly changing tech demands in the job market, or the rising costs of maintaining extracurricular activities vital to creating a “whole” person ready to face the world, whether it’s sports or music or art or literature. The raw number of students is not a major factor in those costs.
Personally, I always vote for school bonds and property tax increases for schools — not because I’ve ever had kids in the schools, but because I’m selfish. When I’m gone, I want my widow to be able to sell our house for more.
Multiple studies have shown that school spending increases local property values. A 2020 study by the Harvard Kennedy School found that a 1 percent increase in school spending increases local house prices by 0.95 percent. An earlier study found that for every $1 increase in per pupil school expenditure, per pupil housing values increase by about $20.
And when school bonds or taxes are voted down, house hunters who want quality public education for their kids may steer away from the community towards one that does support school funding. Home prices can actually drop.
As enrollments drop the fixed costs of the school facilities must be considered and perhaps the shuttering of some and consolidation between neighboring towns is in order. If it were run as a business this most certainly would be taken into account.
I suspect to a great extent there is not a direct relationship between enrollment and fixed costs. Although at some point fewer teachers would be needed. On the other hand, it is likely the basic costs of operating the schools always goes up. Good questions to ask your board of education.
I believe if you pay your property taxes 30 years that is long enough. You have done your bit. It is ridiculous that after 30 years you still don’t technically own your home.
Even in year 31 and beyond, don’t we all still continue to benefit from the services that property taxes fund? Schools, firefighters, police, road repairs, and other local services need to be funded somehow. If not through property taxes, how else should we do it?
You absolutely own your home. I doubt you could obtain a reverse mortgage, or a HELOC or sell the property if there was any doubt who owned the property.
Also, who keeps all services funded by taxes after 30 years, younger people still paying a mortgage and trying to save for their future?
Of course I agree that property taxes or any other significant expense should be factored into your plan. I’m not sure how the emphasis on the politics of taxes furthers the goals of financial planning and retirement advice. I don’t think on a forum like this we are going to change the amount of property taxes or how they are structured to meet political goals. I think there are many other places to express your opinions on property taxes.
Where do you see politics mentioned here in this post? We are talking about people, their views and their finances. Taxes of all kinds are a financial matter.
Opinions on the legitimacy of taxes don’t provide any helpful information forward retirement planning or finances. And opinions on what taxes should be and who should pay them is of course a political discussion as it involves voting and government to impose them. So yes you are initiating a political discussion.
We talk about IRMAA, about SS in various ways, about MAGI, Medicare, QCDs, RMDs, Roth conversion and all have a political attachment under tax and other laws.
“I’m not sure how the emphasis on the politics of taxes furthers the goals of financial planning…. I think there are many other places to express your opinions on property taxes.”
Philip, I completely agree, and the sentiment of your comment applies to many topics.
How to manage one’s taxes, how to consider tax impact when choosing where to live or whether to rent or own, what kind of healthcare coverage to get and how to pay for it, when to take social social security and why – these are important personal finance topics.
On the flip side, whether taxes of whatever kind are too high or not, how much waste and abuse there may be in the system, whether there should be broader health coverage, how to fix social security – these are political questions.
Personally I’d like to see less of the latter on HD.
So you don’t want to see a post about changes to Medigap insurance that would greatly increase out of pocket costs in retirement? Too political? I don’t see a problem that impacts individuals finances or retirement spending but which may involve federal law as too political.
There are numerous HD posts that don’t relate or only slightly relate to money matters that are still informative and interesting.
Agree – there seems to be a lot of discussion about what changes we need to make in our tax policies, healthcare or other social welfare programs in the U.S. I much prefer the practical information from other contributors that actually provide information that can be used to improve retirement outcomes and mitigate the various risks. We can all watch the news or go on X to debate politics.
On the surface, the argument against property taxes is that no one should lose their home because of them. In limited circumstances I have some sympathy for that argument. But just below the surface, at least from those I have talked with, is the criticism that the taxes are somehow a form of welfare. In other words, people with less valuable homes don’t pay their fair share.
I asked one proponent of eliminating PT how schools and services should be funded, and he answered “increasing the sales tax”. I inquired further about how much he paid in PT each year. To my surprise, he didn’t know. Checking the county website, his PT is $3K per year, equal to about 2% of his salary, certainly not a budget busting sum. I’ll also mention that this is a childless couple, so I wonder if that affects his thinking as well.
As I mentioned, it is very rare anyone loses their home. The small percentage of actual foreclosures mostly involve rental, commercial and undeveloped properties.
Interesting that when someone with a less valuable house pays less than someone with a more valuable house is considered not paying their fair share. I’d say the opposite.
Other tax alternatives such as sales or income taxes would have the same results I would think.
R, spot on as usual. I read the local on-line forums in my community and I consistently see people complain bitterly about property taxes, as if fire / police services, decent roads, parks and libraries etc. are supposed to fall magically from heaven free of charge. And it’s those things that support the value of their home. And then they complain about the school portion of the property taxes as if they didn’t get a partial “free ride’ from taxpayers when they had kids in school, or if having no kids, they see no value to society from having educated citizens. Without fail, they then demand that politicians excuse them from the tax burden of living in a “free” society. These are the people that insist there is no right principle of action but self- interest.
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