Property tax relief has become a rallying cry for state policymakers across the country. Frustration over rising home values and the cost of living has driven lawmakers in states including Indiana, Ohio, and Wyoming to enact sweeping property tax cuts in recent sessions. But while these measures may look attractive on the campaign trail, they are already putting real strain on local governments that depend on property taxes to fund schools, public safety, and other essential services.
An article in the publication Governing titled “State Property Tax Relief Pushes Local Budgets to the Brink” highlights this emerging dynamic. Lawmakers in several states have pursued homeowner tax credits, rate caps, or other limitations without fully compensating counties, cities, and school districts for the revenue they lose. The result? Significant budget shortfalls, belt-tightening by local governments, and even more political pressure from local leaders to revisit state legislation cutting their revenue.
These developments matter to Missouri because they illustrate the unintended consequences of well-meaning tax cuts. As my colleague David Stokes has written in testimony before the Missouri Legislature, Missouri depends on property taxes to fund local services efficiently, and ill-designed state interventions can do more harm than good. Stokes emphasized that “Missouri’s property assessment and tax system needs reforms, but efforts to reduce it dramatically or eliminate it entirely go too far,” and that the state should not trade one revenue problem for another by hollowing out the tax base localities rely on.
What’s happening outside of Missouri mirrors Stokes’ concerns. In Indiana, a roughly $1.2 billion homeowner tax relief package enacted in 2025 will cost local governments an estimated $1.5 billion over three years, forcing many towns and counties to cut services or revise budgets mid-cycle. Wyoming’s 25 percent cut on assessed home value for tax purposes similarly leaves schools—which receive roughly 70 percent of property tax revenue—scrambling to balance their books.
Stokes has warned that limiting property tax growth without careful policy design reduces the property tax base, shifting the burden to other, more distortionary taxes. He argues that property taxes—particularly on land and real estate—are among the least harmful taxes to economic growth compared with income or sales taxes. Wholesale caps or freezes discourage local fiscal responsibility.
Missouri’s recent property tax changes—including the creation of “zero percent” and “five percent” counties where valuations can’t drive tax increases without voter approval—reflect a similar temptation to cut taxes without addressing the broader revenue implications. Stokes has noted that such approaches may do little to improve fairness while shrinking the tax base that supports schools and local services.
If policymakers in the Show-Me State pay attention to the experience of other states, they’ll proceed with caution. Cutting property taxes without sustainable alternate revenue exacerbates budget stress for counties and schools and shifts costs to taxes that are more damaging to growth, such as income or sales taxes. Ensuring that relief targets those most in need—as opposed to broad caps that change how local governments fund core services—preserves local autonomy and avoids the fiscal cliff other states are now confronting.
Missouri’s leaders should focus on reforms that improve fairness and economic efficiency—not simply reducing bills at the expense of services Missourians value.
