Maybe now is not the right time to point out that Utahns’ property tax burden is the seventh lowest in the nation. It certainly doesn’t feel that way when 66 entities are proposing tax hikes this year and residents’ property tax bills get higher every year as a result of rising home values. But it’s true: Utah ranks 43rd of the 50 states in property taxes.
Truth in Taxation
Our gold-standard, model legislation Truth in Taxation laws help encourage low property taxes in two main ways. First, taxing entities are entitled only to the previous year’s revenue (plus new growth). So far, the Legislature has resisted numerous requests to provide automatic inflationary increases to the Certified Tax Rate. Second, in order to raise taxes, taxing entities must properly notice taxpayers, hold a public hearing, justify the proposed tax hike, hear public comment on the proposal, and publicly vote on it. Both of these aspects put a check on property taxes by making their increase both deliberate and transparent.
The Problems
Property taxes, by virtue of being so visible, are some of the most painful and controversial taxes paid. Some of the main problems include:
· When the value of a property increases, so too does the property tax owed despite the fact it’s an unrealized gain. This is particularly damaging to those on fixed incomes.
· A home that is worth twice as much as another and therefore pays twice as much property tax does not necessarily use double the community resources; in this way, property tax is not a user fee
· Although property taxes have some limitations per state statute, there are few recourses for taxpayers to oppose the tax hike short of a referendum (which is a tough hurdle to clear).
The Benefits
The benefit of property tax is obvious: the revenue stays local and, in this way, generally benefits those who pay the tax. Local governments are – justifiably – closely scrutinized for their property tax rates, and often held accountable at the ballot box. It’s hard to shift the blame for high property taxes.
The real benefit of property taxes is that it provides the third leg of our three-legged stool, providing stability to our tax system. Income tax in Utah almost exclusively funds public education. Sales tax has both state and local uses but can also be seen as a regressive tax. Each tax has its issues, but a healthy combination of the three can provide predictability and equity in taxes.