Assessing a Hot Button
Some of the problems with property taxes could be solved on the management end.
Some words are so joined at the hip that you barely hear one without the other. Forest fires are always raging, gas prices are skyrocketing and infrastructure, sad to say, does few things better than crumble.
Then there's the property tax. When newspaper reporters get their hands on these two words, they add a third, "rebellion." And they're not far from the mark. Florida, which has been in a tumult over this issue for years, started to whittle away at property taxes in 2007, and citizens will vote on a deeper cut in November. Homeowners in several states and dozens of localities are hot under the collar about this particular stream of revenue.
In fact, there's a lot less property tax than there used to be. It accounted for 21.9 percent of general state and local revenue in 1977 but only 16.6 percent in 2005. Nonetheless, the rebellions continue because there are a lot of problems that irk citizens -- sudden changes in assessments, perplexity over differences in taxes levied on similar homes, frustration at the appeals process. Curiously, some irritants are the result of policy solutions that went askew. Efforts to stem pain for some homeowners -- through Florida's 1992 Save Our Homes constitutional amendment, for instance -- create more pain for others.
At least some of the problems with property taxes could be solved on the management end. That is, having state and local tax collectors concentrate on the nitty-gritty details of how property taxes are administered could dissipate some of the heat.
One solution is to make the tax clearer and more comprehensible through taxpayer education. "The big problem with the property tax is its opacity," Nancy Augustine of The George Washington University tells us. With sales taxes, for instance, it's easy to calculate exactly what you'll be paying if you just know the rate and the value of the purchase. Nothing is so easy with property taxes. "At the risk of sounding immodest," Augustine says, "even though I've done extensive research on property tax systems, I cannot possibly discern how my tax bill stacks up against those of my neighbors."
Guy Griscom, president of the International Association of Assessment Officers, suggests that localities should emphasize "truth in taxation" to help property owners understand what they pay. That might also help local leaders better understand that the pain of rising values could be mitigated by falling rates.
There are annoyances that stem from the way property tax bills are delivered. For someone who has a mortgage, the visibility of the property tax may be masked because the tax is spread out in mortgage payments. But for people who have paid off their mortgage -- often those who have retired and may be on a fixed income -- the bills may come once a year in one distressingly large chunk. Also, in many jurisdictions, timing is unfortunate. The bill comes just when residents are doing their Christmas shopping.
Inconsistencies abound and infuriate taxpayers. In Marion County, Indiana, the 2006 assessment sparked outrage among residential taxpayers who felt commercial taxpayers got off lightly. The governor threw out that assessment in 2007, but it is being followed by a new one that is likely to be greeted with considerable outrage from businesses since it shows a 30 percent increase in commercial and industrial values.
Greg Bowes, the Marion County assessor, is gearing up for the appeals, which are bound to start coming in when bills are delivered in several weeks. "The biggest legitimate complaint that taxpayers have had in Marion County," he says, "is sticker shock based on the four-year gap in revising the assessments. The lesson is that this should be done more frequently."
British Columbia has been held up as something of a model of property tax management. Back in the 1970s, it shifted to annual assessments and replaced 140 separate property assessment entities with the British Columbia Assessment Authority, which insists on professional training of assessors and the skillful use of technology. Many states also have oversight bodies to ensure that local jurisdictions use compatible software, have standards for appraiser training and experience, set up appraisal districts (as opposed to multiple local appraisers) and establish truth-in-taxation laws.
When it comes to property taxes, fixing the management boondoggles should be first on state and municipal lists. This is a lot less painful than cutting funding for education and other services in order to carve out new property tax exemptions. Although property tax rebellions may be raging -- particularly when citizens are strained by skyrocketing gas prices and concerned about crumbling infrastructure -- improved management and clarity may well be of enormous help.