Property taxes were a hot topic in Utah in 2022 as residential property taxpayers faced a perfect storm that resulted in higher property tax bills for most residents. Three factors combined to form that storm. First, as we highlighted in the summer, over 90 taxing entities held Truth in Taxation hearings to raise taxes. That was far more than the typical 60 or so in a normal year. Some residents had as many as five separate entities raising their taxes. Second, the statewide basic levy still had a frozen tax rate for the fifth and final year. As residential property values saw another year of sharply higher increases, homeowners saw an additional increase from that levy. Finally, with the sharply higher residential values and flat-to-declining commercial property values, residential property owners took the brunt of the tax shift that is created when this scenario occurs. All three of those factors led to a high level of frustration for residential property owners.
That level of frustration was heard by state lawmakers and discussions took place over the interim about how to best address the situation. Unfortunately, one result of the discussion was a committee bill from the Interim Revenue and Taxation Committee that would lead Utah down the wrong path.
SJR1 (McCay – R – District 18) proposes to amend the Utah Constitution to make the 45% residential exemption on property taxes the minimum (it is currently the ceiling) and allow the legislature to raise that percentage in the future.
A brief review of history shows how dangerous and damaging that would be.
In November of 1982, voters passed Proposition 1 on the ballot, which allowed for a 25% exemption from property taxes on homes along with allowing the legislature to raise the exemption up to the maximum of 45%. At the time, property taxpayers in Utah had seen large increases in taxes over the preceding years and frustrations were high (sound familiar?). The proposition had support from then Democrat Governor Matheson and Republican leadership.
Once they were given the ability to give in to the temptation to hand out candy to the voters who elect them (homeowners) and shift the tax burden to those that don’t vote (businesses), legislators could not resist. In just a few short years the legislature had raised the exemption amount bit by bit all the way to the maximum 45% by 1994. The disastrous shifts of property tax burdens to businesses in Utah were ignored.
In addition to this history, there are now many damaging side effects that would occur if the exemption amount was raised. Those include: massive property tax shifts to commercial properties, gutting city and school district budgets in bedroom communities, incentivizing businesses to consolidate in centralized urban areas, and many other problems.
The Utah Taxpayers Association has reviewed this history and the various consequences with the bill sponsor, Senator Dan McCay. Thankfully, Senator McCay has astutely listened to and considered all of it and has agreed to not move SJR1 forward during the 2023 session. The Association will continue to actively engage in dialogue on property taxes in Utah and ensure that history does not repeat itself.