Future of Property Taxes Is on Ballots in Many States This Fall

By Mark Lieberman
Education Week, Bethesda, Md.
(TNS)

Aug. 30—Kamala Harris versus Donald Trump is the marquee contest for this November’s upcoming election—but homeowners versus property taxes will also be hotly contested in many states.

Politicians and lawmakers in roughly a half-dozen states are prioritizing property tax reform to address consternation from residents over skyrocketing home values and growing bills. Some have gone as far as pitching the elimination of property taxes altogether, and that could happen in at least one state this year if voters go along with it.

Property taxes are one of the biggest sources of funding for K-12 schools. Nationwide, they make up the overwhelming bulk of local education dollars. Some districts depend on them for the majority of their annual budgets, while others in lower-wealth areas lean on state aid as their primary revenue source.

Efforts to cut property taxes, depending on how the laws are worded, could deepen funding challenges in areas that already have low home values.

Critics of property taxes are a diverse coalition. Some conservative Republicans target them in an effort to curry favor with wealthy homeowners, a highly influential voting bloc. Libertarians and anti-tax groups like the idea of a smaller government footprint in individuals’ lives.

Scholars like Andrew Kahrl, meanwhile, argue that the structure of America’s property tax system is irredeemably discriminatory, placing a disproportionate burden on homeowners of color that ought to be lifted in favor of systems that help close wealth disparities.

Eight states have already passed laws that cut property taxes this year, according to an analysis by the Center on Budget and Policy Properties, a left-leaning think tank. Several more have such proposals under consideration or in the works.

Major reforms to property tax laws could affect how much money schools get, where they get their money from, and how their money is allocated. Here’s a look at what’s in store for property taxes this fall and beyond.

Some states seek to put limits on future property tax growth

In Georgia, voters this fall will vote on a constitutional amendment that would limit annual property tax increases to that year’s rate of inflation. If a simple majority approves the constitutional amendment, which already earned favor from more than two-thirds of state lawmakers in each house, individual school districts would have from Jan. 1 to March 1 of next year to opt out by soliciting community feedback and passing a resolution.

A similar choice was set to appear before Colorado voters until this week, when state lawmakers reached an agreement to lower property tax collections for the second time in less than a year.

In return, advocacy groups for lower taxes will withdraw two initiatives from the November ballot that would have asked Colorado voters whether to cap property tax increases, including for money that goes to school districts, and to lower property tax assessment rates for both residential and commercial properties.

The latter would have had the effect of lowering the amount of property taxes collected to pay for schools and other public services.

Setting the stage for dramatic decreases

Nebraska Gov. Jim Pillen, a Republican, lobbied hard this summer for lawmakers to approve replacing all local property tax revenue with increased sales tax collections and fewer exemptions from imposing sales taxes. But state lawmakers from both parties balked at various aspects of the plan, including the timing of the rollout and the sales tax increases that would be necessary to help the state cover its new obligation to fund school budgets.

Some school district leaders told Pillen they were concerned about being at the mercy of shifting political winds in the state legislature year after year.

For now, lawmakers have agreed on, and Pillen has signed, a compromise legislative package that limits property tax growth to the rate of inflation and makes it easier for people to collect tax credits that offset taxes that go to schools.

Pillen has vowed to continue the fight for property tax reform next year. “I think it’s fundamental that we work to make sure the state is funding K-12 education and not property taxpayers,” he told the Nebraska Examiner.

Meanwhile, in Montana earlier this month, Republican and Democrat candidates for governor introduced competing proposals to reform property taxes in the state.

Gov. Greg Gianforte, a Republican, laid out a suite of possible reforms, including a homestead exemption that would lower tax rates for homeowners and business owners while increasing them for large commercial properties and second homes.

Ryan Busse, Gianforte’s Democratic challenger, instead proposed reducing the property tax rate for all residential properties, to offer faster relief to citizens.

The exact ramifications of each policy proposal remain to be seen, though proposals to cut property taxes generally contribute to lower revenue for public schools.

Some state proposals would get rid of property taxes altogether

Voters in North Dakota will get the chance to decide the future of property taxes on Nov. 5. An anti-tax group led by Rick Becker, a former Republican state lawmaker, successfully secured space on the ballot for an initiative that asks voters whether they want to maintain the existing property tax scheme or eliminate it altogether.

If the initiative passes with a simple majority, North Dakota would become the first state in the nation’s history to abandon property taxes. The state will have to either force school districts and local governments to cut spending, or come up with an alternative source for more than $1 billion in revenue.

It’s hardly a guarantee that the plan will come to pass, though—the same proposal in 2012 drew “no” votes from more than three-quarters of North Dakota voters.

Advocates for a similar proposal in Michigan failed last month to collect enough signatures to qualify for the November ballot.

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