Prop 117: Limiting property valuation increases for taxes

Yuma Sun
Monday, October 8, 2012
Howard Fisher-Capitol Media Services

PHOENIX — Kevin McCarthy and Lynne Weaver agree on pretty much only one thing about Proposition 117: There is nothing in the constitutional language that forces down property taxes.

In fact, there's nothing there that precludes tax hikes — again, legally.

But McCarthy, president of the business-oriented Arizona Tax Research Association, said it will do that, if for no other reason than politics: Elected officials are afraid of angering voters.

Weaver, who is trying to get an actual property tax cap enacted, disagrees.

Central to the fight is the state's complex property tax system.

All property is supposed to be assessed at its market value. That starts with the selling price of the new home or business.

And every year it gets reassessed for its “full-cash value,'' again, supposedly the market value.

But here's the thing: All property also gets a “limited value'' that can increase only 10 percent a year. But during a real estate boom, it can be reset every three years by 25 percent of the difference between the two values.

That limited value applies to most property taxes levied by governments. The full-cash value, however, is applicable to voter-approved measures, ranging from bonding to special districts for fire protection and lighting.

Complicated? That's what McCarthy says.

The ballot measure would return to a single assessed value, the way it was before 1980. That value could go up no more than 5 percent a year.

McCarthy said that should protect homeowners from sharply higher taxes, especially when the value of their house goes up but they're still living there.

“Baloney,'' Weaver said.

She pointed out that the tax anyone pays is the computation of two factors.

One is the assessed value of the property. But the other is the tax rate.

And nothing keeps those who set the rate from boosting it sharply if they want more revenues but the city, county or district's assessed valuation remains stable.

Weaver is instead pushing something like California's Proposition 13. It would roll back home values to what they were before the real estate boom.

And, more to the point, appraisals could go up no more than 2 percent a year. But it precludes the kind of shifting Weaver fears with a provision limiting total taxes on any home to no more than one-half of 1 percent of value.

Weaver acknowledged she has had trouble getting the signatures for the measure, twice now, which is why it's not on the November ballot.

But she is trying again for 2014. And she sees Prop 117 as an effort to confuse voters into believing that they really have done something to cap taxes.

McCarthy said the measure will protect homeowners.

He said when home values spiked last decade, about 150 cities, counties and other taxing jurisdictions never bothered to lower the tax rates. The result was a windfall for them and higher taxes for property owners.

That big jump, he said, could not occur if Prop 117 is in the Arizona Constitution.

McCarthy said he isn't worried that rates will increase in times of property value deflation, even if that's legally possible.

As proof, he pointed out that most taxing jurisdictions lost taxable valuation as assessors went back and lowered the limited and full-cash value on homes. Yet 11 of the 15 counties held their tax rate the same or actually reduced it.

“They were sensitive to increasing the tax rate,'' McCarthy said.

Weaver said McCarthy is being a bit of a revisionist.

She came across testimony McCarthy presented a dozen years ago where he was telling a legislative panel why a cap on growth in value does not work — and, more specifically, why local officials do not try to kill such plans.

“They couldn't care less,'' McCarthy testified. “If you don't do anything to limit their tax on revenue, they'll just adjust the tax rate.''

And McCarthy said it's a “misnomer'' to say local officials are “spooked about raising the tax rate.''

McCarthy, a dozen years older, now says he has a different view. “There is a political grounding associated with that,'' he said.

“The benefit from it on the (real estate values) upswing. They're reluctant to make changes on the downstroke.''

Weaver makes no secret that she believes government has too much money and can get by with less.

“They just squander it,'' she said.

“The only way we're going to get taxes and spending under control is to limit how much the government can take from us and then have the government operate as we do in our own household,'' Weaver said. That means setting priorities, spending on the important things “and then if there's anything left over, we'll do the things that aren't necessities.''

McCarthy said that, if nothing else, approval of Proposition 117 will lead to better understanding of the tax system once there are no longer two different values and different rules about when they can go up.

Read more: http://www.yumasun.com/articles/value-82288-tax-mccarthy.html#ixzz2BUHac1pZ