In general, property taxes are less sensitive to the ups and downs of the business cycle than income taxes, so they provide a more stable source of revenue. However, property taxes that are tied closely to property values, as is the case in many states, would be a very erratic source of revenue in the face of an expanding housing bubble that is now collapsing.
That is why it is peculiar that the NYT asserts that California's budget has been harmed in this downturn because it is more dependent on income taxes than property taxes. The state's restrictions on property tax, stemming from Proposition 13, limited the extent to which taxes increased during the housing bubble. As a result, property tax revenue is falling less rapidly in the crash than would otherwise have been the case.
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