Sunday, July 20, 2008

Utah Republicans and Prop 13

There have been rumblings about some of our less than enlightened Republican legislators flirting with a Prop 13 sort of proposal, where properties are assessed based upon their acquisition cost. For the record, I am amazed that Utah's highly dysfunctional and one-partied state managed to produce something that I actually feel works rather well. It is called "truth in taxation." This provision in Utah law makes it so state and local government cannot reap a windfall from rising property values. This is something Utahns should be proud of. It makes the property tax much more fair than it otherwise would be. Utah's legislature has also instituted "circuit breaker" tax relief for those who risk losing their home due to property tax liabilities.

In many ways, Utah's response to the rising property values of the 1970's was enlightened by comparison to California's politically charged response. The one thing I would have changed, is to create the ability of the various entities to base their tax rates upon certain inflationary factors. The lack of such a provision has resulted in most state and local jurisdictions to rely upon fees that have had a tendency to be regressive.

Basing the property tax on acquisition cost creates inherent inequities. People with like properties will be assessed differently, based upon whether they bought their house during a time of residential inflation, or deflation. The property tax was designed to tax people equitably based upon the current value of their property, not based upon whether they moved here when the housing prices were high, or weak.

Democrats, need to be engaged in this process of defining policy options. My option, that I believe should be considered, is to base the residential exemption upon 45% of the median primary residential property in each county. This way, if new growth coming from starter McMansions drive up the value of Grandma Baker's house, it also increases the residential exemption available to counter it. You could also use the mean, but at this point, I would propose the median.

Democrats need to point out, that an acquisition cost property tax, will stifle companies moving their employees to this state, where they, with recent acquisitions, will shoulder the tax burden for those who have been here longer. It will also facilitate complex leasing arrangements rather than sales, and I haven't yet digested what that will mean to Utah's realtors.

My suggestion is this. We don't have a property tax problem that is not solveable. An acquisition cost system only worsens inequities, and potentially stifles economic growth here in Utah. This is my warning on the record, that this is a bad idea, proposed by people who haven't thought through the consequences, and are unlikely to stop because of them.


Anonymous said...

Thanks for sharing that. I was not aware of those rumblings, but I agree with you and will be fighting against any such change. The current system seems much better than the one being proposed.

Reach Upward said...

Promoting a Prop 13 lookalike is a knee-jerk reaction to real estate inflation through the late 1990s and early 2000s. It benefits long-term residents while hurting newer and short-term residents. So you can see who would be inclined to favor it.

A rise in property taxes due to a rise in property value does not mean that our current system is broken. As you note, it is actually quite equitable. Let's avoid making matters worse simply because we didn't like our last property tax statement.

WL said...

Promoting a Prop 13 is not a knee jerk reaction to inflation - it is a protective measure against politicians buying votes from tax - eaters like illegals by plundering long time residents via property taxes. In California, the Legislature has largely been taken over by the illegal alien lobby, and they would happily tax the Gringos out of their homes to pay for freebies (welfare, free schooling and in state college tuition, and the free room and board at the prisons @ $40000 per year per person) for the illegals. Prop 13 is the California protection shield for homeowners - I trust that if the illegal alien lobby takes over Utah that you will have a Prop 13to protect you from the tax raisers. See for more details.

Obi wan liberali said...

"the illegal alien lobby?" What koolaid have you been drinking to think they have a lobby and it has anything to do with property valuation? Let me be frank and honest. The property values of starter mansions in Eagle Mountain and upper Farmington have nothing to do with illegals bidding up their price.

My read over the weekend is being confirmed, "How Stupid Are We." Well, without soumding elitist, "pretty damned stupid." I'm losing faith in Americans. Thanks for confirming that faith.

Scott said...

Government must function and operate within a budget and under the current Utah property tax there is no limit. Something like Prop 13 seems the only way to control a government out of control. Budgets so high! That tax payers no longer can pay the bill.