Arizona has one of the most complex and confusing property-tax systems in the country. We are also subject to rapidly changing property values, which can cause dramatic tax increases for taxpayers and instability in tax revenue for local governments.
Proposition 117 gives Arizona's voters a chance to clean up our property-tax system, making it more fair for taxpayers and more predictable for local governments.
The confusing nature of our property-tax system is best demonstrated by the fact that Arizona is the only state that computes your taxes based on two separate values on real property. Most taxpayers struggle to understand why separate values are needed and how those values are established. Proposition 117 creates one easily understood property value that is then used to calculate the tax.
Arizona's growth and speculation in the real-estate market have made all taxpayers vulnerable to crazy increases in taxable property values. When property values rise so quickly, higher property-tax bills usually follow. This creates an unfair increase for taxpayers who have done nothing but continue to live in the same house on the same street. Proposition 117 places a 5 percent cap on increases in property-tax valuation, minimizing the unfair consequence to taxpayers of a booming real-estate market.
As we've seen in recent years, skyrocketing property values are often followed by rapid decreases. These wild swings in taxable property values and the related tax revenue make it difficult for local governments who rely on property-tax receipts to pay for necessary public services. A property-tax system should be designed to avoid these swings in taxes that adversely affect both taxpayers and local governments.
As mayor of Mesa, I have made economic development and job growth top priorities. Business owners and managers rely on a variety of factors in their decision to locate or invest in Arizona. A competitive tax structure is one critical factor, but so is the long-term stability and predictability of tax obligations. By creating a more stable and predictable tax system, Proposition 117 will encourage investment and job growth in Arizona businesses looking to locate or expand operations in our great state.
Finally, Proposition 117 will have a positive impact on the budgeting process in local governments.
Governments have long taken advantage of rising property values to implement hidden tax increases. In addition to being responsible stewards of tax dollars, leaders should also be transparent in the budgeting process. With Proposition 117, government leaders proposing property-tax increases beyond the 5 percent rise in property values will need to do so using an open, transparent, public budgeting process. Homeowners and businesses alike will benefit from that increased transparency.
Proposition 117 is good for Arizona and Arizonans. Please join me in voting yes on Proposition 117.
Scott Smith is mayor of Mesa.