Homeowners and locally assessed businesses could actually end up paying more in taxes next year if supporters of the People's Tax and Spending Limitation Amendment - one of three proposed tax limitations initiatives - are correct in their assumptions, according to the Utah County assessor's office.
The initiative would limit annual property taxes to 0.75 percent of the fair market value of residential property and 1 percent of market value of all other property.County Assessor Ron Smith said a major difference between the State Tax Commission's figures and those prepared by the Utah Taxpayers Association, which supports the property tax limitation, is the definition of fair market value.
Fair market value, according to the tax commission and the Utah Code, includes a 20 percent reduction for intangible assets from the full value of homes and small businesses.
If the tax spending limitation amendment passes, for example, the tax on the property for a small business would be limited to 1 percent of 80 percent of the property's full value, while tax on residential property would be limited to 0.75 percent of 80 percent of full value.
"The UTA definition does not recognize this 20 percent reduction in market value," Smith said in a report to Commission Chairman Malcolm Beck, who asked for the report.
"This means the tax reduction would be much smaller for homes and small businesses than for mines, utilities, railroads and transportation companies," which are currently assessed at 100 percent, he said. "A UTA spokesman has indicated that the shift in tax burden to homeowners was not the intent of the asssociation.
"The tax burden would shift from mines, utilities and railroads to residential and locally assessed small businesses," Smith said. "My personal opinion is that they (Utah Taxpayers Association) didn't read the law carefully before they drafted the initiatives."
If the initiative passes, based on the UTA's assumptions, property tax actually could increase in Springville, Spanish Fork and Payson, according to Smith's report. In addition, under UTA's assumptions, property tax reductions for homeowners and local businesses in other cities would be much less than under the Tax Commission's assumptions, should the initiative pass.
Based on 1987 values, if the initiative fails, taxes on a $100,000 home in Provo would be $904. If the initiative passes, based on the Tax Commission's figures, taxes would be reduced to $690. Based on UTA assumptions, however, that reduction would be only to $863.
In Orem, the reduction on a $100,000 home would be from $838 to $661, according to Tax Commission figures. The reduction would be from $838 to $826, under UTA assumptions.
In American Fork, the reduction on a $100,000 home would be from $873 to $667, according to Tax Commission figures, compared to $873 to $834, according to the UTA. In the Alpine School District unincorporated area, taxes would drop from $768 to $602, compared to a drop of $768 to $752.
"All of the cities from the south end of the county probably would have an increase in taxes, from what we can tell," if the initiative were to pass and if the UTA assumptions were correct, said County Commission Chairman Malcolm Beck. "That's why there's a fallacy in the deal."
Beck agreed that government entities, as a whole, probably could do a better job trimming waste and tightening budgets. "But you don't take a meat ax approach to cutting the fat," he said in reference to the initiatives.>
Impact of initiatives varies
Projected revenue losses from property tax limitation
$4.1 million - Utah County, including service districts
$4.4 million - Alpine School District
$1.8 million - Provo School District
$1.4 million - Nebo School District
$590,257 - Central Utah Water Conservancy District
$629,898 - Provo
no loss - American Fork, Orem, Springville, Spanish Fork, Payson
Source: State Tax Commission