After five years on the books, Utah's "truth in taxation" law is as difficult to read as ever for the average taxpayer, according to a University of Utah public finance specialist.
"It is ironic that something called `truth in taxation' is so complex that probably no more than a dozen people in Utah - all tax specialists - understand it thoroughly," said Janice L. Miller, an analyst for the University of Utah's Center for Public Policy and Administration.In a study titled, "Truth in Taxation: Five Years Later," Miller said the law creates more confusion than truth. But repealing it now, she added, would lead to even more confusion and misunderstanding.
However, Miller said that despite all of its faults, the 1986 law has succeeded in holding down taxes and preventing local governments from reaping windfalls from increasing property values. In those respects, the legislative intent has been realized, she said.
The law requires taxing entities to notify taxpayers whenever their proposed budgets reflect higher tax collections than the previous year. The entities must advertise the tax collection increase as a tax increase and hold a public hearing even if the tax rate charged to homeowners remains the same or decreases.
Miller said the confusion arises when the total adjusted valuation of an area increases. The higher value means higher tax collections at a lower tax rate. Under that scenario, if a local government charges the same rate as it did in its previous budget, it would reap more revenues without increasing the tax bill.
When concerned homeowners attend the advertised public hearing and discover that their taxes are not rising, they become irritated with public officials for causing unnecessary alarm, Miller said.
On the other hand, if property values are falling, the certified tax rate automatically rises to maintain revenues at the prior year's level. By levying the same tax rate, local officials in effect raise taxes. But since there is no actual increase in tax collections, those officials are not required to notify taxpay-ers.
Miller said that between 1986 and 1989, total valuation declined in 11 counties. Seven of them raised taxes - some by as much as 62 percent - without advertising the fact, she said. The most notable example was in the Uintah Basin, where tax collections declined severely due to a drop in the value of oil properties.
One way to alleviate some of the confusion is to require that the tax advertisement indicate whether the dollar amount of the tax charged on an average-valued home is going up or down, Miller suggested.
After five years of the bewildering truth-in-taxation process, many taxpayers have begun to think that politicians are being deliberately confusing in order to keep them in the dark about taxes, she said.
"Local officials say the law makes them look either crooked or stupid," she added.
Those officials complain that the law requires them to apply an estimated certified tax rate to the budgetary process, which binds them to estimation errors. Miller recommends that the tax rate be based on actual collections to minimize errors.
Despite all of the problems with law, Miller says it has its good points.
"It does require the property tax notice going to taxpayers to give information about tax and revenue trends. Consequently, truth in taxation has given taxpayers more information and a better understanding of property taxation than taxpayers had prior to its implementation."