Latest / Wages and Prices with Fexingo: Cost of Living, Pay Raises, and Workers' Purchasing Power / Why Your Raise Is Finally Beating Property Tax Hikes
Transcript
- Lucas: If walking through the economy with us has made something click — like finally understanding why your property tax bill kept jumping — there's a quiet way to keep this show ad-free and independent. Luna: Yeah, it's just buy me a coffee dot com slash fexingo. No subscription, no hard sell — just a small way to say this kind of deep dive matters to you. Lucas: Exactly. And honestly, that support is what lets us keep drilling into specific numbers like the ones we're about to hit today. Speaking of which — property taxes. For years, homeowners felt like their tax bill was on a treadmill they couldn't step off. Luna: Right, and now we're seeing a shift. The latest employment cost index for wages hit 177.5 in Q1 2026, up from 176.23. That's about 0.7 percent in one quarter — annualized, that's nearly 3 percent wage growth. Lucas: Meanwhile, average hourly earnings in May were $37.50, up from $37.41 in April. Small bumps, but they compound. And here's the key: property tax increases are actually slowing in a lot of places. After pandemic-era reassessments that sent bills soaring 10, 15, even 20 percent in some counties, we're seeing more normal 3 to 5 percent hikes. Luna: So for the first time in a while, wage growth is outpacing property tax growth. That's a big deal for household budgets — especially since housing costs are the single biggest expense for most families. Lucas: Let's zoom in on a concrete example. Take Maricopa County, Arizona — one of the fastest-growing in the country. In 2024, the median property tax bill jumped about 12 percent. But this year? Preliminary data suggests a 4.5 percent increase. Meanwhile, median earnings in Phoenix metro area rose about 5.5 percent over the same period. Luna: That's a net positive of about one percentage point. Not huge, but the direction matters. Lucas: And it's not just Maricopa. We're seeing similar patterns in Cook County, Illinois; Harris County, Texas; and parts of Florida. The common thread? Home value appreciation has cooled from those crazy 2021-2023 levels. Tax assessments are based on lagging data — usually two to three years behind — so the slowdown in home prices is only now filtering into tax bills. Luna: But there's a catch. The core inflation reading came in at 3.4 percent in May, the highest since October 2023. That means local governments are facing higher costs for everything from road salt to employee health insurance. They're going to need revenue. Lucas: That's the tension. Wage growth is helping households absorb moderate tax increases, but if inflation stays sticky, municipalities will keep pushing rates up. The question is whether the pace of tax hikes will stay below wage growth. Luna: And there's a big geographic divide. In states with strict property tax caps — like California's Proposition 13 or Texas's 10 percent assessment cap — homeowners are more insulated. In states like Illinois or New Jersey, where caps are looser, tax bills can still climb faster than wages. Lucas: Let's put some numbers on that. In Cook County, effective property tax rates are around 2.1 percent of home value. In Los Angeles County, it's more like 0.7 percent. So even a 5 percent wage increase goes a lot further in LA than in Chicago. Luna: But LA homeowners also face much higher home prices. So the absolute dollar amount of tax could still be larger — it's the rate that's lower. Lucas: Exactly. And that's why we focus on the ratio of tax to income. Nationally, property taxes as a share of personal income peaked at about 3.2 percent in 2023. That's now eased to around 3.0 percent — still elevated, but moving in the right direction. Luna: And that improvement is entirely because wages are rising faster than taxes. If inflation reignites and pushes local costs up, that ratio could reverse. Lucas: The Fed's preferred inflation gauge — core PCE — hit 130.1 in May, up from 129.67. That's a 0.3 percent monthly increase. If that persists, local governments will feel the pinch. Luna: But for now, the data is clear: your raise is finally beating property tax hikes. And that's a welcome change after years of feeling like you were running in place. Lucas: One more thing to watch: the 10-year breakeven inflation rate dipped to 2.20 percent on June 26, down from 2.21. That suggests bond investors expect inflation to moderate — which would ease pressure on local budgets and keep property tax growth in check. Luna: So the outlook is cautiously optimistic. But homeowners should still check their county assessment — sometimes errors can lead to overcharges. Lucas: Great point. And if you appeal, you might get a reduction that compounds with your wage gains. That's real money back in your pocket. Luna: Alright, Lucas. Next time we'll look at another cost that's finally falling behind wages. Lucas: Looking forward to it. For now, if today's breakdown was useful, you know where to find us — buy me a coffee dot com slash fexingo.