Yet another article stating that rising property values are driving the stiff property tax increases that are squeezing homeowners. I agree with the conclusion (i.e., the stiff increases are occurring, and are painful), but not the premise. Rising property values don't drive taxation, rising spending and budgets drive taxation.
Suppose a municipality has a hot real-estate market, where prices go up 12% per year 3 years in a row--a 40% total increase in valuation. Let's assume taxes are assessed based on market value. Let's also assume, for the sake of simplicity, that the town is completely full--there is no new construction. Therefore no new sewer lines, no new schools to be built, no new roads. So you would expect the town budget to be essentially flat--it should go up at about the rate of inflation, but no more.
However, since real estate values increased by 40%, if no adjustment is made to the property tax rate, then property tax revenues will increase by 40%, overflowing the town's coffers. The town would have three choices. One, find a way to spend all that extra money. Two, save the money for the future. Three, find a way to bring the real level of taxation in line with budgetary requirements and expectations.
The key is to change the rate. There are two levers, working together, which set the real level of property taxes: the valuation and the rate. So if the valuation goes up sharply and unexpectedly (what might be called a windfall profit, if it happened to a corporation!), then the compensating adjustment would be to decrease the rate, so that the overall level of taxation remains constant, and in line with the budgetary requirements.
Another way to look at the problem would be a scenario involving declining valuations. Assume valuation in a town decline uniformly by 10%. However, nothing changed in the town's spending needs. Would you expect to see the real property taxes decline by 10%? No, what would happen is that the rate would be increased to compensate for the decline in valuations (or more likely in that scenario, a combination of partially-compensating rate increase, combined with emergency budget reductions).
It is nauseating to hear the specious, self-serving arguments, so frequently advanced by officeholders, that the heavy increases in real taxation are not in fact tax increases, but are merely the obvious and unavoidable by-product of the hot real-estate market.
The exception to this argument would be the case where increases are spread unevenly within a taxation jurisdiction. For instance, if a subway is being built, and prices skyrocket for homes in the vicinity of the planned stops. Or the few remaning extraordinaly large land parcels (1), zoned for residential use, are experiencing a disproportionately heavy hit. In those cases, the pain is localized, and can truly be explained primarily by rising valuations. But I think it is pretty clear that those scenarios are very much the exceptions, not the rule.
In fact, the second scenario is where the article begins , but it moves rapidly away from that, and without doing a good job explaining why it is a special case.
(1) E.g., a single family house on 30 acres in a typical suburb, where lots are 1/3 acre of less; since the land component of the total price is rising dispropoprtinately, it will have a very heavy impact on a taxpayer whose residence is disproportiantely composed of land, rather than dwelling/improvements.
8:41:13 AM 
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