by Howard Stephenson
by Howard Stephenson
We discussed the theory and mechanics behind Utah’s property tax Truth-in-Taxation law last week. Now we’ll talk about the impact of this law in controlling property taxes since it was enacted in the mid 1980s.
Property tax revenue growth before and after Truth-in-Taxation
In the twenty years since Truth-in-Taxation, property tax revenues have grown at a 5.4% rate, equal to the combined inflation and population growth rate of 5.4%.
During that time period, there were three property tax cuts unrelated to Truth-in-Taxation – two reductions to the statewide basic levy for education and a reduction in county property taxes in exchange for a sales tax increase. All of these reductions occurred prior to 2000 so comparing property tax growth since 2000 would provide a more accurate impact of Truth-in-Taxation. Since 2000, property tax revenues have grown at about 5.9% annually, and combined inflation and population growth has been slightly lower at 5.5%. Relative to inflation and population growth, property taxes have grown at a much slower rate since Truth-in-Taxation’s enactment than before.
Utah’s property tax burdens compared to other states
– Individual income taxes: Utah ranks 16th highest at 2.94% of total personal income (TPI) compared 2.41% for the U.S.
– General sales taxes: Utah ranks 13th highest at 3.33% of TPI compared to 2.63% for the U.S.
– Motor fuel taxes: Utah ranks 10th highest at 0.54% of TPI compared to 0.36% for the U.S.
– Property taxes: Utah ranks 36th highest at 2.73% of TPI compared to 3.36% for the U.S.
Is Truth-in-Taxation harmful to local governments?
As explained before, property tax revenue growth since TNT’s enactment has been nearly identical with inflation and population growth. When property tax reductions unrelated to TNT are accounted for — two legislative reductions in the statewide basic levy for education and a reduction in county property taxes in exchange for county authority to impose a 0.25% sales tax — property tax revenues have increased slightly faster than inflation and population growth.
Property tax revenues would be even higher (or property tax rates for everyone would be lower while local governments would be getting the same amount of revenue they are currently receiving) if cities would stop using Redevelopment agencies to subsidize locally-driven retail, recreation, and entertainment. Subsidizing economic activity that would occur on its own somewhere in Utah without a subsidy is poor fiscal policy. Hopefully, recent RDA reform will change this.
Should voter-approval be required for property tax increases?