Homeowners in several states are watching their property-tax bills hold steady or rise even as the market value of their homes flattens or falls. The disconnect has grown sharp enough that South Dakota is preparing to let voters decide whether to abolish property taxes altogether through a 2026 constitutional amendment. Attorney General Marty Jackley has released the final ballot explanation for that measure, and the state’s election machinery is already processing the filing, turning an abstract complaint into a concrete political test.
How assessment lag widens the gap between bills and home prices
Property taxes are supposed to track what a home is worth. In practice, the bill a homeowner receives depends on two separate decisions that rarely move in sync: how often a jurisdiction reassesses property values, and how local taxing units set their levy rates each year. Research summarized by the economic researchers at the National Bureau of Economic Research examined how assessed values adjust to market values and found that tax rates and assessment practices can break the expected one-to-one link between home prices and tax bills. When assessments rely on multi-year cycles, the gap between what a home could sell for and the value that drives its tax bill can widen for years before a reassessment corrects it, sometimes overshooting in the other direction.
States that reset levies annually tend to keep that gap narrower, but the correction is not automatic. Local taxing units, from school districts to fire-protection authorities, set rates based on their own budget needs. Even when a state comptroller or revenue department publishes updated taxable values, the levy a district adopts can push the final bill higher than the underlying property value would suggest. Illinois and Texas both illustrate this pattern. The Illinois Department of Revenue publishes tables showing taxes extended, equalized assessed valuation, and rates by property class, and those tables reveal that current taxes extended can rise in several property classes while equalized assessed valuations lag behind. The Texas Comptroller of Public Accounts publishes statewide lists of taxing-unit tax rates and calculated levies that show how local units adjust rates independently of market shifts.
South Dakota’s 2026 ballot measure to end property taxes
South Dakota has taken the frustration a step further. Rather than tinker with assessment cycles or rate caps, backers of an initiated constitutional amendment want to scrap property taxes entirely and replace them with a different revenue source. The Attorney General’s explanation describes the proposal and outlines its potential effects, a formal step that locks in the language voters will see. The explanation is part of a broader election process in which the Secretary of State reviews filings, assigns ballot numbers, and prepares voter information for the 2026 cycle.
The proposal is politically significant because it would remove one of the oldest and most stable sources of local government revenue. Schools, counties, and municipalities in South Dakota depend on property-tax collections to fund day-to-day operations, from classroom staffing to road maintenance and law enforcement. Eliminating that stream would force the state to identify and authorize a replacement tax large enough to cover the shortfall, a question the ballot explanation raises but that voters will ultimately weigh against their own rising bills and concerns about service cuts.
Unanswered questions about replacement revenue and rate-setting
Several pieces of the plan remain unresolved, and those gaps will shape the campaign leading up to 2026. The first is what would actually replace property-tax revenue. The Attorney General’s summary notes that the amendment would require the state to provide an alternative funding mechanism, but it does not specify whether that would come from higher sales taxes, new income-based levies, or some other statewide charge. Each option would shift the tax burden differently across households and businesses, and opponents are likely to argue that any substitute could prove less predictable than the property-tax base it displaces.
A second question is who would control the new revenue stream. Property taxes today are set locally, giving school boards, county commissions, and municipal councils direct responsibility for the rates they impose. A statewide replacement tax could centralize that power in Pierre, leaving local officials dependent on appropriations from the legislature. That shift would alter not only how money flows but also how citizens hold decision-makers accountable for budget choices in their communities.
There is also uncertainty about how the change would interact with existing constitutional and statutory limits. South Dakota’s current framework includes caps and procedures designed to balance taxpayer protections with the need to fund core services. Rewriting that framework to remove property taxes could require a complex transition period, during which local governments might face temporary shortfalls or legal disputes over their authority to collect other fees and charges.
The state’s institutional landscape underscores what is at stake. The official South Dakota directory of criminal-justice agencies, for example, lists sheriffs, state’s attorneys, and other local offices whose budgets are closely tied to county tax bases. Any disruption to that funding would have practical consequences for public safety and court operations, adding another layer of scrutiny to the amendment’s fiscal promises.
Supporters of the 2026 measure are betting that frustration with rising bills and opaque assessment practices will outweigh fears about fiscal upheaval. Opponents are expected to frame property taxes as a necessary, if imperfect, tool for keeping local services stable and locally controlled. As homeowners compare their tax statements with softening real-estate listings, South Dakota’s experiment will test whether anger over the assessment gap is strong enough to persuade voters to dismantle a cornerstone of American local finance.
