America’s New Tax Changes

If you are an American homeowner, you know you're in trouble when the Communist Chinese are making more sense on taxes than your own state officials. In China, stocks have been bouncing up and down on rumors that the government will soon introduce a U.S.-style property tax. Whatever the wisdom of such a tax, Chinese officials at least appreciate that the effect would be to dampen their property market, which they fear is turning into a bubble.

Here in America, by contrast, most states and towns are dealing with depressed home prices and large budget gaps. Yet few are rethinking their property taxes. Two exceptions are Indiana and New Jersey, and if the candidates for governor are to be believed New York.

In Indiana, Republican Gov. Mitch Daniels has succeeded in lowering property taxes on homes to 1% of assessed value. In New Jersey, another Republican, Gov. Chris Christie, has introduced a reform package that would cap property tax increases to 2.5% each year. And in New York, Democrat Andrew Cuomo has just announced his candidacy for governor with a call for a 2% cap on property tax increases lower than the caps proposed by two of the state's leading candidates for the GOP nomination.

California has taxed corporations using a formula based on employment, property and sales in the state. When the new formula takes effect in 2011, it would allow a corporation to calculate its tax based on actual sales in the state, a move favored by California technology companies. The tax breaks are expected to cost the state $2 billion next year.

The New Jersey state has a projected $767 million shortfall over the next 13 months, raising the potential for even deeper budget cuts, according to new figures to be released. It’s not immediately clear why the income tax projections were off by so much whether the increased millionaire’s tax of 2009 did not bring in the desired amount of money, whether wealthy residents created a strategy to avoid paying the increase in that year, or whether it was just a worse year than expected for the average New Jersey resident.