Property Tax Hikes Part of National Trend

MILWAUKEE, Wis. – Nearly three decades after California became the first state to cap property taxes, many states are still struggling with the hot-button political issue.

In Wisconsin, where property taxes are expected to rise an average 6 percent in 2005, the eighth consecutive annual increase, the debate has become especially taxing.

"My tax bill went up approximately $600," said Milwaukee homeowner Greg Herker. "Now, they're getting to the point of being crushing."

Herker's 17 percent increase topped the statewide average, but it reflects a national trend.

"Over the past three years, state and local property tax collections have grown by more than 20 percent. That's the fastest-growing tax at the state and local level," said Pete Sepp, vice president for communications at the National Taxpayers Union (search).

Property taxes are used to fund local services like public works, police, firehouses and education. But many localities aren't generating enough income these days to cover the costs.

NTU and other tax watchdog groups blame wasteful spending and state revenue cuts.

"When a state government runs a deficit, it often passes the buck to local governments by cutting their aid, and local governments in turn pass the buck to taxpayers," Sepp said.

Many of those taxpayers are forming grassroots organizations to urge reform.

"This country is founded on the basis of taxation with representation, and right now, taxpayers feel they are not being represented according to their numbers," said Chris Kliesmet, spokesman for the Milwaukee-based Citizens for Responsible Government Network (search).

But Bert Waisanen, a tax policy specialist at the National Conference of State Legislatures (search), said local governments have few options when times are tight.

"If you reduce reliance on the property tax, how do you replace the revenues that you need to finance schools, police and fire? It's really a difficult challenge in a time of limited budgets."

In recent years, shortfalls have been offset by the housing boom. Since increased property values translate into higher home assessments, homeowners are paying higher taxes.

To prevent urban exodus, several states, including Wisconsin, have introduced legislation to cap property taxes. Nevertheless, tax reform watchdogs remain skeptical, arguing that governments will find a way to sidestep caps and tax property owners one way or another.

Click in the box near the top of the story to watch a report by FOX News' Jeff Goldblatt.