In November, voters in seven states considered property tax ballot measures that could dramatically impact revenue in those states. After a year in which several legislatures worked on property tax reform, these efforts, which put important questions directly to voters, reveal growing impatience for tax cuts in some parts of the country.
The most important and complex bill to pass was in Georgia.
The First Amendment, approved by nearly 63% of the vote, would use the 2025 valuation as a “base year” and limit subsequent annual increases in value to the previous year’s inflation rate, regardless of real estate trends. changes the way the state evaluates housing. Only if you sell your home will the appraised value be reset to market value. As a result, the new owner will pay taxes on a significantly higher value; dramatic tax disparity. The change also means that government investments in services and community amenities, which tend to be positive for property values, will not directly result in increased tax revenue.
Additionally, some tax experts, including Andrei Yushov and Joseph Johns of the conservative Tax Foundation, believe that the measure will discourage homeowners from selling and reduce the supply of available housing, especially for new construction. They are concerned that this could lead to a “harmful property tax structure” that limits the amount of property tax. People planning to purchase a home.
Georgia amendment Counties, local governments, and school systems are permitted to opt out of the exemption, but only if: pass a resolution Local governments that do not opt out can implement a 1% local sales tax increase to make up for lost property tax revenue. But critics warn that this offset may not be enough. fully replace lost revenue And local governments may have to rely on it. Increased fines and fees As happened in California after the state passed a similar bill, Proposition 13, in 1978 to close the gap.
Florida voters also approved an inflation-aligned property tax relief package, but it was more limited than Georgia’s changes. Fifth Amendment Revises the state’s homestead exemption (which applies to all taxes except those supporting school districts) from its current fixed amount of $25,000 to an amount adjusted for inflation starting January 1, 2025.
Still, the measure would force local governments to “either cut programs and services or raise taxes to make up for lost assets,” according to the left-leaning think tank Florida Policy Institute (FPI). , the fiscal impact will be even greater. It’s tax revenue. ” With this measure, FPIs Local government costs within the state More than $400 million in the first five years and more than $140 million each year thereafter.
In other areas, successful property tax ballot measures provided intensive relief. Voters approved it in Arizona. suggestion 13This allows residents to claim an annual property tax refund to cover the costs incurred if a municipality fails to address a public nuisance on their property. And voters in three states— colorado, new mexicoand virginia– New Mexico voters passed a constitutional amendment while approving expanded eligibility for property tax exemptions for disabled veterans. Increase property tax exemption amount for veterans From $4,000 to $10,000, adjusted annually for inflation.
‘Chaos’ averted in North Dakota
The only measure that did not pass on the statewide housing property tax ballot is also perhaps the most controversial bill in the nation. north dakota Measures initiated 4 It would have abolished property taxes, placed debt limits on local governments, and required states to compensate local governments for lost property tax revenue. Amount equivalent to 40% Of North Dakota’s $6 billion biennial General Fund budget.
Supporters argued that the state could pay for measures such as: redirect funds or eliminate certain business tax benefits;But opponents argued it would require significant spending cuts. For example, state Rep. Mike Naate (R) warned that Medicaid expansion and funding for nursing homes, hospitals and education programs would be threatened. “It would be a complete disruption to Congress and the appropriations process, something we have never seen before,” Naate told The Associated Press.
Property tax refund
The North Dakota bill’s failure reflects a growing political desire to limit or even eliminate property taxes. A similar ballot measure in North Dakota in 2012 was opposed by 76.5% of voters. Although the margin was still large in November, the gap narrowed. 63.5% against, 36.5% in favor.
Movements toward abolishing property taxes are also beginning to appear in other states. This year, michigan A group called AxMiTax was unable to gather enough signatures to repeal the property tax, but has already said it will try again. and, nebraskaa proposal to replace all taxes with sales taxes also did not make it to the vote, but its supporters said they were considering future efforts.
Jared Walczak, vice president of national projects at the Tax Foundation, said the conversation about repealing property taxes has traditionally been on the fringes, but the tide appears to be turning. “It’s one thing for this low noise to continue; it’s another thing to start it. bubbles to the surface. That seems to be where we’re headed right now,” he told MarketWatch.
Anti-property tax efforts this year also prompted legislative action. In Colorado, conservative groups supporting two property tax initiatives scheduled for the November ballot have negotiated with lawmakers to withdraw the measures in exchange for more legislation on property tax relief. At the end of August, Congress already passed the bill. Fixed asset tax reform Pass the bill during the 2024 regular session and reconvene for a special session to enact additional cuts and caps. Growth in fixed asset tax revenue.
final thoughts
Voters rejected the most extreme property tax proposals, but the turnout and relative success of the 2024 property tax reform measure suggest demand for meaningful relief is unlikely to disappear. be done. With home prices rising in much of the country, states are likely to face continued pressure to reduce or significantly reduce property taxes while ensuring adequate funding for government services. .
Riley Judd works on the Pew Charitable Trusts’ 50 Year Project.
