Property taxes are rising across the nation despite the steepest decline in home values since the Great Depression.

According to the S&P/Case Shiller Home Price Index, home values have dropped 17% in the third quarter of 2008, compared with the same period in 2007.  At the same time, property tax collections across the USA rose 3.1%, according to the U.S. Bureau of Economic Analysis. 

State and local governments are on track to collect more than $400 billion in property taxes this year, the most ever. One reason: Laws in most states that prevent big tax hikes when property values soar also block big tax drops when values sink.

The housing market collapse has caused a recession that's hurt sales and income tax collections.

But property taxes — collected mostly for public schools — have escaped serious damage.  As a result, public education is one of the few sectors of the economy still adding jobs.

Property tax limits is responsible in keeping property taxes up while home prices fall.  Most states cap how fast taxes rise in boom times.  In bad times, the same laws keep taxes from falling and even permit modest increases on most homes.

Arizona, California, Florida and Nevada — the four states hit hardest when overheated real estate markets crashed and triggered waves of foreclosures — all have tax laws that work this way.