Commentary - April 2005

The Property Tax Dilemma

Time for a Revolution?

by Lyle Brennan

Chances are by the time you read this, the Legislature will still be mulling over what to do about property taxes. It gave itself a March 31 deadline, figuring if it didn’t come to some decision by then, counties wouldn’t have time to get out the first batch of tax bills, and – yikes! – they’d be late sending us our bills. Couldn’t do that – wouldn’t want to stop the never-ending flow of money from our pockets to theirs. So they have a powerful incentive to come to a decision; however, things are turning out to be more complicated and time-consuming than they anticipated, so who knows when a solution will be reached.

This year’s Legislature is trying to hammer out a compromise they hope will fend off a Proposition 13-type tax revolt. But maybe that’s just what we need, despite all the "doom and gloom" predictions about what will happen to county budgets if their tax income is not allowed to increase unchecked.

One good thing that has come out of this is that it’s caused people to take a look at their property tax rates and see exactly how much of their money goes to these taxes and where they end up. For the average homeowner paying a mortgage every month, property taxes are part of the "PITI" payment, and after awhile, it becomes automatic to write the check without thinking of its component parts. On the other hand, when you reach retirement age and your mortgage has been paid off, you get a big fat tax bill every year that needs to be paid in quarterly installments. Then you have to figure out how to come up with the cash out of your Social Security money, and it becomes all too real. If more of us had to pay this way, there would have been an outcry a lot sooner.

Ever wonder how much of your property tax goes to support services you need and/or want? Here’s the breakdown for Clark County’s rate of $3.14 per $100 valuation: 75 cents goes for county schools, 55 cents goes to pay interest on school bonds, 17 cents goes to the state, and the remaining $1.67 goes into the county’s coffers. In Washoe County, the base rate is $2.70, with 91 cents going to general county operations, 75 cents going to schools, 7 cents to school debt, and the remainder for services ranging from the county agricultural extension office to the county jail. Let’s assume the assessed value of your property goes up 30 percent this year, which it easily could. That means each of these funds gets a 30 percent budget increase. What have these programs done to justify giving them 30 percent more money? The state budget office estimates Nevada’s surplus will be at least $470 million by the end of the fiscal year, and this number will probably be revised upward when the Economic Forum meets in May. So the state doesn’t need 30 percent more of your money. But the county and the state will be happy to take it anyway.

The statewide average property tax rate rose from $1.77 per $100 in assessed valuation in 1982 to $3.11 in 2003. That’s a 176 percent increase in the percentage we pay for government services, which means we would still be paying almost double the 1982 rate even if property values had remained the same. Each legislative session seems to pass little increases here and there and they’re not really noticeable, until we have a big jump in assessed valuation like we’ve had over the past year. Then people really sit up and take notice.

One of the goofier ideas proposed this year was a plan to put a freeze on tax rates for a year. I never could figure out what that would accomplish, except to shut up protesters for a while. Maybe we’d get busy with other things and just forget about it by the time the next legislative session started? Guy Hobbs testified before the Assembly Committee in February that he thought the increase in property valuations was "an aberration," so a temporary fix was all that was needed. In other words, by next year property values would go down 30 or 40 percent to what they were in 2004? All the real estate experts I’ve heard are predicting land prices and home prices rising in double digits by the end of 2005 in urban areas in both areas of the state.

There’s no logical reason to suppose land prices or home prices will go down, for a very simple reason: you can’t legislate the law of supply and demand. More people are moving into the state and demanding places to live, and supplies of available land are being rapidly used up. It’s simple economics. Land prices are going to keep increasing.

That means the property tax problem isn’t going to go away this legislative session, or anytime soon. We need a permanent fix, and the sooner the better. Legislators need to remember it was taxes that led to the Boston Tea Party, and Nevada taxpayers just may have a tea party of their own if they don’t get property tax relief.

Lyle Brennan Publisher
COMMENTS? email: lyle@nbj.com