Legislators shouldn’t punish Taxpayers for Government’s Bad Behavior
A proposal making its way through the state capitol aims to give some taxpayers relief while placing a greater burden on others.
The proposal, sponsored by Rep. Jill Koford, R-Ogden, would increase the Primary Residential Exemption in the state from 45 percent to either 50 or 55 percent, depending on the will of the Legislature. This means your home would be taxed on only $50,000 or $45,000 for every $100,000 of assessed value. In other words, if your home is valued at $500,000, you would be taxed based on $250,000 or $225,000. The measure would need to be passed by the Legislature and then approved by voters statewide in November, as it would require a change to the state constitution.
While homeowners may welcome the additional reduction in their property tax bills, the other side of this proposal is that all other types of property in the state would absorb the cost and ultimately pay more. This would not be a tax cut, but rather a tax shift. Homes that are not primary residences (cabins, second homes, vacation homes, etc.), as well as commercial, industrial, agricultural, and centrally assessed properties (pipelines, railroads, transmission lines, mines, and others), would see tax increases. The total increase on these properties could be as much as $250 million.
The motivation behind the proposal is that legislators are hearing from constituents who feel property taxes have become too high. What qualifies as “too high” varies by taxpayer, as every situation is different. However, our own How Utah Compares report shows that Utah’s property tax burden ranks 35th highest in the nation. Additionally, the national Tax Foundation finds that when comparing effective property tax rates among states, Utah ranks 46th. Our point is not that property taxes are not a burden on Utahns, but rather that the state has generally done a good job of keeping that burden lower than in most other states.
What is really happening is that cities, counties, school districts, and special service districts are experiencing rising costs and identifying additional programs they want to fund with taxpayer dollars. As a result, many of these entities have held truth-in-taxation hearings and increased the amount they collect from taxpayers. While Utahns have seen costs rise across nearly every aspect of life, many who have attended truth-in-taxation hearings feel their concerns have not been adequately heard. To address this frustration, some at the capitol believe the solution is to place the burden on taxpayers who do not own a primary residence.
This is not sound tax policy, and Utah can do better. First, it violates a fundamental principle of tax policy by picking winners and losers. By advancing this proposal, the government is effectively telling businesses and other non-homeowner property owners that they should bear a greater tax burden. These taxpayers have done nothing to deserve this. They do not consume more government services than homeowners, nor have they acted in bad faith. The real distinction is that these taxpayers do not have the same voting power. Just as a business cannot truly “pay” a tax, people ultimately bear that cost, a business also cannot vote. As a result, businesses and other non-primary-residence property owners become convenient targets for providing temporary tax relief to homeowners.
The Legislature would be better served by focusing on local governments, which are responsible for most property tax increases, and working with them to reduce the overall tax burden on Utahns. Greater pressure should be placed on school districts, counties, cities, and special service districts to stretch their dollars further, avoid nonessential spending, slow the growth of staff and services, and reduce the demand for additional revenue.
Several proposals are being drafted that aim to accomplish these goals. These approaches are fairer to all taxpayers and focus on restraining government growth rather than punishing a specific segment of taxpayers.
We recognize that this is a difficult issue for the Legislature, especially in an election year when taxes are always a hot topic. However, this is a moment that calls for leadership—not a rush toward what appears to be an easy fix but ultimately carries significant negative consequences for the state. We look forward to working with lawmakers to pursue solutions that reduce tax burdens responsibly, rather than penalizing Utah’s hardworking businesses in the upcoming legislative session.