property taxes are continuing their upward trend

New Jersey homeowners pay the highest property taxes in the country, according to the Tax Foundation, an evaluation based on the latest available Census Bureau figures from 2002. But you don't have to live there to have suffered a big boost in property taxes.

(Click here for the five top and bottom property tax states.)

Nationwide, property tax collections rose 7 percent in 2004, to more than $324 billion. Over the past five years, they've climbed 36.6 percent, about 6.4 percent a year.

Property tax rises are a dark side of the housing bubble.

"Unlike income, or even sales taxes, property taxes are not accurate indicators of your cash at hand," says Ahern. They can go up faster than income.

They can have especially heavy impact on seniors. Many retirees bought homes decades ago when assessed valuations were modest and taxes manageable. After home prices soared, homeowners may have larger net worths, but no more spending money to pay higher taxes on their more valuable homes.

For many wealthy California towns, a small percentage of tax on multi-million dollar homes can raise a lot of money, keeping taxes for many individuals reasonable. But for poorer communities, these limits leave local governments strapped for cash. Result: California has some of the country's lowest spending school districts, which may have contributed to a decline in education.

According to the San Jose Mercury News, California now ranks 35th in expenditures per student among the 50 states, 50th out of 51(including the District of Columbia) in computer access, and last in librarians. The test scores of fourth grade students came in 47th.

For a story about the most tax-friendly states, click here.

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