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Utahns have a love-hate relationship with Truth-in-Taxation

Ronald Mortensen, Ph.D.

November 4, 2019

Utah’s Truth-in-Taxation system has a solid track record of keeping property taxes under control. Despite that, both the general public and elected officials have a love-hate relationship with Truth-in-Taxation.

Elected officials who rely on the property tax love the Truth-in-Taxation system during times of economic downturn because it guarantees them a stable source of revenue—as property values decline, the property tax rate automatically adjusts upward to ensure that home and other property owners pay the same amount in property taxes as during the previous year regardless of the value of their property or their personal financial situations. Property owners who don’t understand Truth-in-Taxation hate it during these times since their tax payments do not go down even though the value of their property does.

On the other hand, politicians hate Truth-in-Taxation during strong economic times because it guarantees that property owners will continue to pay the same amount in property taxes as their home values increase, their income goes up and inflation increases. Conversely, property owners love Truth-in-Taxation during this same period of time.

The most common complaint expressed by local government officials is that under Truth-in-Taxation, property tax revenues don’t increase automatically by the same amount as inflation. They really hate the fact that they have to go through the Truth-in-Taxation process in order to collect additional revenue in order to offset inflation.

If these elected officials had their way, the legislature would amend the Truth-in-Taxation law to require that property taxes automatically ratchet up each year by the rate of inflation. That way they would get more money from each property owner without having to go through the dreaded Truth-in-Taxation process and they could blame the legislature for the annual tax increase.

While that may be great for local politicians and for local government growth, it is not so great for the average worker, small business owner or retired person. After all, with limited exceptions, wages, small business profits and pensions are not guaranteed to automatically increase with inflation.

Actually, there is a straight forward, honest solution to the Truth-in-Taxation quandary faced by politicians. That is for them to effectively manage budgets and spending rather than to be constantly looking for new ways to spend other people’s money. Then, if additional property tax revenue is truly needed to offset inflation, they can put on their big-boy pants, hold a Truth-in-Taxation hearing and convince their constituents that it is in their interest to pay more.

The problem is that politicians rarely take the straight forward, honest path. And that is why they dream about automatic property tax increases. That way they can blame the system for the increases and focus on what they do best—spending other people’s money.

One final thought. If Utah’s politicians were to weaken or abolish Truth-in-Taxation, they could end up facing something similar to California’s Proposition 13 which bases a property’s value on acquisition cost and puts additional limitations on the ability of state and local governments to raise taxes.

Under Proposition 13, there are no annual property assessments so the property’s value remains frozen until the property changes ownership. In addition, property taxes cannot exceed a certain percentage of the value of the property, a two-thirds vote of the legislature is required to raise state revenues, taxes raised by local governments for a designated or special purpose must be approved by two-thirds of the voters and state lawmakers are given the responsibility for allocating property tax revenues among local jurisdictions.

So, if Utah’s Truth-in-Taxation system was abandoned and if a Proposition 13 were passed by the citizens, elected officials may eventually regret it.  After all, “Don't it always seem to go that you don't know what you've got till it's gone.”

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