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If the people were asked directly about property taxes, we're willing to bet that they'd tell their representatives to limit increases by law, just as California did in 1978 with Proposition 13.
Plenty of Utah homeowners experienced "sticker shock" last year when they opened their property assessments or tax bills. Their reaction has just as much to do with philosophical questions of fairness and government power as they do about dollars. California's Proposition 13 required that "the maximum amount of any ad valorem tax on real property shall not exceed 1 percent of the full cash value of such property." Its passage resulted in a cap on property tax rates in the state, reducing them by an average of 57 percent. In addition to lowering property taxes, the initiative also contained language requiring a two-thirds majority in both legislative houses for future increases in all state tax rates or amounts of revenue collected, including income tax rates. The measure received an enormous amount of publicity throughout the United States, and its passage presaged a "taxpayer revolt" that contributed to the election of Ronald Reagan in 1980. Thirteen similar measures passed that year alone. Behind Proposition 13 was the sentiment that older people should not be priced out of their homes through ever-rising taxes. It has been called a "third rail" (meaning untouchable) in California politics, and it is politically risky for any politician to attempt to change it. We wonder whether Utahns would support a similar measure. Our guess is that they would in large numbers. Utah, for all the rapid changes of recent years, cherishes its frontier spirit. People moved out here, whether on a wagon in 1847 or in an SUV in 2007, to control their own destinies. But no person can do much about many of the factors that affect the value of his home, or the resulting tax penalty imposed by government. A home is an investment, the largest that most people will ever make. Yet, unlike virtually any other investment -- whether gold or euros or securities or stocks -- the government can tax your property higher year after year based on an alleged "market value" that is influenced by commercial real estate professionals. Never mind that the real estate industry benefits by increasing values. With other investments, you pay taxes after a transaction. You can hold the investment without tax until the day you sell. You don't pay more because somebody says it's "worth more" while you're holding it, just because you were wise enough to buy when the price was low. When you make a profit on your investment, then you pay tax. And that is fair. But ongoing property taxes are fundamentally unfair in this respect. They go up even though no transaction has taken place. It was different in past centuries. Property owners were the wealthy, and property tax was a way of generating revenue in a mainly agricultural economy. Today, it's hard to make a case that most homeowners are wealthy. If anything, a home is a money pit. The last thing most of us need is a mid-stream tax hike. Most taxes are based on a transaction. Not so with a house you bought 20 years ago and raised your family in. You pay the government more money just because. You pay just because you made an investment and the government wants a piece of it. You pay just because you were wise enough to look to your retirement future. If you sell your home for a big profit, it's fair that the investment income be taxed. But under the current system, the government wants your money in advance. And if your income doesn't rise with rising taxes, you can literally be taxed out of your home. Some suggest that if sales tax arrived in annual bills, to be paid in lump sums, property tax would quickly slide to third place on the list of detested burdens. But this makes our point: Each instance of tax is based on a specific transaction, and everybody can do the math. There's no dispute about the value of a sales transaction. By contrast, an increase in property tax is based on nothing but opinion. It's like paying sales tax based on what the government thinks you might spend on goods and services, or like laying a tax on the stock certificates in your bank's safety deposit box. In this view, sales taxes are intrinsically fair. Property tax is intrinsically unfair -- an increasing burden placed upon people for no other reason than the fact that they hold an investment over time. Some Utah lawmakers are working up bills to cut property tax or ease its impact. Sen. Wayne Niederhouser, R-Sandy, has proposed that government must hold an election to authorize any tax increase over the rate of inflation. Rep. Wayne Harper, R-West Jordan, has proposed that assessors in the 10 most populous counties use a computer-assisted mass-appraisal system to update values. But these proposals do not address the fundamental fact that a home is no different from any other long-term investment. They would maintain the property tax just because that's what we've done for decades, not because it's logical. The Citizens' Coalition for Tax Fairness advocates a system based on purchase price in a transaction, not some amorphous market value. The group, made up of several Utah grass-roots organizations, would put the brakes on assessment increases. We think it's time for a new look at property taxes. Perhaps they are an outmoded concept. The state Legislature should refer this matter to the people for advice. It doesn't hurt to ask, does it? |