“Holding the Rate” is Raising Taxes

As locally elected officials begin another busy year of Truth in Taxation hearings and often make various claims about their proposed tax rate or budget, the Utah Taxpayers Association would, once again, like to make one thing abundantly clear:

Holding the rate is raising taxes.

Keeping the same rate as last year is raising taxes.

“Keeping your tax rate year over year flat” is raising taxes.

Any claims that holding the rate is anything but a tax hike is entirely false.

Truth in Taxation is comprised of three elements: budgets, tax rates, and taxes paid. Understanding the relationship between these three elements is crucial in discerning rhetoric surrounding this simple process.

A taxing entity’s certified tax rate is the rate needed to generate the same revenue as the previous year, plus new growth. Since property values and the total taxable value of a city, school or special district or county generally increase, the certified rate usually decreases. There is an inverse relationship between total taxable value and the certified tax rate. Tax rates should be dynamic and respond to the constant changes in property values.

However, a taxing entity can propose a different, higher tax rate if they set a higher budget than the previous year and wish to generate more revenue. This higher rate may be the same as the previous year, but now generates more revenue for the entity, and costs taxpayers more. This is because holding the rate, not allowing it to respond to changes in property values and the total taxable value, is a tax hike.

The taxes you pay are based on the tax rate and the change in the value of your property relative to the rest of the city, county or district. Consider the scenarios below:

No change to entity budget	Scenario	1	2	3	4	5
	Entity Budget	Same	Same	Same	Same	Same
	Value of Properties in my Area	Increases	Increases	Increases	Decreases	Decreases
	Value of my Property	Increases more than average	Increases exactly average	Increases less than average	Increases (is above average)	Decreases more than average
	Rate	Floats down	Floats down	Floats down	Floats up	Floats up
	Property Tax I Pay	Increases	Exactly the same	Decreases	Increases	May decrease

Increase in entity budget	Scenario	6	7	8	9	10
	Entity Budget	Increases	Increases	Increases	Increases	Increases
	Value of Properties in my Area	Increases	Increases	Increases	Decreases	Decreases
	Value of my Property	Increases more than average	Increases exactly average	Increases less than average	Increases (is above average)	Decreases more than average
	TRUTH IN TAXATION HEARINGS TRIGGERED
	Rate	Floats down, but entity increases it	Floats down, but entity increases it	Floats down, but entity increases it	Floats up, and entity increases it	Floats up, and entity increases it
	Property Tax I Pay	Increases	Increases	Increases	Increases	May decrease (likely will increase)

To determine whether a proposed tax rate represents a tax hike, taxpayers should not rely on a comparison to the previous year’s rate. Instead, taxpayers should consider the difference between the certified tax rate and the proposed tax rate. Any proposal higher than the certified tax rate represents a tax hike.