July 31, 2007 The rest of the tax story…
I was intrigued when I grabbed the Deseret News this morning and saw the headline “Tax rates are jumping” and I admit I was pretty surprised to see that residents of Kanarraville would be paying $172.70 more in property taxes. So I did a little research and it appears to me that the property tax jump isn’t quite what Lee Davidson describes.
First of all the first five cities mentioned by Davidson are also some of the cities with the lowest property tax rates in the state (bottom 10%). In addition in this analysis the Des News assumes a $200,000 home value to apply the rate to…this assumption is pretty high for at least 3 of the top 5 cities. For example, home values in Kanarraville (the lead city of the story) are closer to $100,000. And according to the latest census only 8 homes (which is also around 8%) in Kanarraville are valued at over $200,000. So what does this mean? It means the jump is closer to $50 or $60 annual increase for 92% of the city, not quite $172.
So in defense of Kanarraville and many of the other cities mentioned, their property taxes comparatively were already very low and the tax increase isn’t impacting most of their residents to the degree claimed in this article. Also, the city portion is still a minor percentage of the total tax bill.
To me this article does raise an interesting issue though…why are these government entities raising taxes? I think some of it has to do with the continuing discussion that while growth stimulates the economy it also comes at a cost (more infrastructure, more schools, more people to serve, etc).
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The City Café 
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Obi wan liberali
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Here is my understanding. Under truth in taxation, entities that receive property taxes cannot receive a windfall from an increase in property values though they do get additional revenues through new growth.
Truth in taxation imposes discipline in the budgetary process on cities, counties and other entities in that in order to increase the revenues from property taxes, they must go through a public hearing process as defined by state law.
The one problem with truth in taxation is that with no adjustment in the budget for inflation, counties, cities and other entities find themselves trying to provide the same services this year with last year’s money. The result is that they begin imposing alot of fees. However, eventually, they end up having to raise taxes, and sometimes the increase can be significant if they haven’t kept up through other means.
Another thing that happens, and this is something that fuels growth, is impact fee addiction. To make up for budget problems, impact fees assessed on new developments are used to fund ongoing programs. Since the impact fee is a one time revenue, it means in order to get the impact fees, you need to keep having new developments.
Anyway, that’s my take.
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State and local government “flourishing”? « The City Café
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[…] and statistics.” There is no question that numbers can be used to manipulate the truth and Lee Davidson’s article on October 23 “State and Local Governments are Flourishing” fits into […]