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Property taxes rising nationwide

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While fuel prices may be starting to skid, there's another expense closer to home that is upsetting many Americans: rising property taxes.

From Madison, Wis., to Bucks County, Pa., the local tax assessor is dipping deeper into homeowners' pockets as real estate prices rise and states share less of their tax revenue with local governments.

With people starting to receive their 2005 tax bills, the levies are squeezing the middle class and senior citizens - leaving them less to spend on everything from restaurants to roof repair. There is also concern the taxes could particularly hurt the home-buying chances of the young or civil servants such as firefighters. States such as New Jersey now have grass-roots efforts - verging on revolts - for reform.

"There is a property tax crisis," says Myron Orfield, a property tax expert at the University of Minnesota in Minneapolis. "It's especially bad in states like New Jersey, Ohio, Connecticut, and Illinois, which are property-tax dependent."

Part of the problem lies in demographics and the rapid growth of exurban communities. Young couples who can't afford suburban homes have moved to "edge" communities further from the cities. Those are filled with children, and to educate them the communities have to jack up property taxes to build new schools and hire teachers.

"The property tax system accelerates the sprawl," Mr. Orfield says, "and communities are competing for the few [taxable] businesses."

The changing demographics have combined with an unusual economic phenomenon: home prices climbing at double-digit rates in some areas. This would make homeowners happy, except that an increasing number of communities are now assessing property values every year.

Factor in changes in state budgets where many governors are still grappling with ways to close budget gaps. One way for them to cut expenses: Reduce funding to local governments.

Madison, Wis., is an example of how some of these changes are affecting both the town and some of its residents. Assessments climbed 9 to 10 percent for several years in a row as housing prices have risen, reflecting the city's buoyant economy. This is happening once more, so even though the city is actually reducing the mill rate (the multiple of property value used to determine residential taxes) from 8 mills to 7.8, property taxes are going up 5.5 percent.

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