Many people along the Wasatch Front are suffering shock these days as they open property-tax notices to discover the assessed values of their homes and, consequently, their tax bills, have jumped dramatically.
No one should be surprised. This year's tax dilemma, the result of a strong real-estate market statewide and an outdated five-year reassessment policy in Salt Lake County, was well-publicized and anticipated.But the knowledge that it was coming is hardly soothing to the people affected, especially considering lawmakers passed a $146 million property-tax relief bill this year in an effort to blunt the impact.
No wonder legislators have started considering a constitutional change that would allow governments to exempt homeowners from paying taxes on up to 60 percent of the value of their property, compared to the current limit of 45 percent. The measure, which the Property Tax Task Force passed on to the Revenue and Taxation Committee this week, comes on the heels of legislative action that raised the exemption from 32 percent to 45 percent earlier this year.
It's a proposal worth serious study. A recent poll by the U.S. Advisory Commission on Intergovernmental Relations confirmed what many already knew. Local property taxes are the most hated of all taxes - despised even more than federal income taxes. Certainly, property taxes are unfair for the elderly and others on fixed incomes. They also are unfair for financially strapped families who buy a house they can afford, only to find their tax bills rising along with the value of their homes.
A state "truth in taxation" law prohibits local governments from reaping cash windfalls whenever property values rise. It's designed to protect property owners. Under its provisions, governments must operate under the same budgets each year unless they call for a tax increase. Meanwhile, tax rates decline as the values increase, and homeowners, at least in theory, are supposed to be unaffected by real-estate appreciation.
But the law doesn't account for the fact that homes in some neighborhoods appreciate faster than in others. Booming real-estate markets inevitably lead to large tax increases for some.
The argument over whether to raise the exemption level may seem complicated. Simply put, it is a debate over whether homeowners or businesses should bear the biggest tax burden.
Opponents argue higher exemptions would be bad for economic development. Businesses, which already receive no tax exemptions, would have to carry a bigger share of the burden. That could affect the number of people they hire, and it could raise consumer prices. It also might harm the state's business-friendly atmosphere and end the stream of corporations looking to locate here.
But that argument ignores the fact that low homeowner property taxes can be a lure for economic development, as well. They likely also would be good for the economy. People have a choice as to which goods and services they wish to purchase. They don't have a choice as to whether to pay their tax bills. Given the option of picking between mandatory and discretionary spending, most people would choose the latter, and people with more discretionary income tend to fuel strong economies.
This year likely is an anomaly, at least in Salt Lake County where real-estate values climbed dramatically while county assessors fell behind in their five-year reappraisal schedule. When newly elected County Assessor Lee Gardner decided to reassess the entire county at once this year, many property owners took a large hit - particularly those whose homes were being taxed according to their 1988 values.
Gardner was right. A countywide correction was needed. From now on, everyone's values will be recalculated yearly, making for a system that is more fair.
That isn't likely to satisfy most homeowners. The ultimate solution may be to find an appropriate substitute for property taxes, abolishing them as some states already have. Short of that, lawmakers are right to reconsider whether homeowners or businesses should bear the brunt of the burden.