It’s not very often that a bad tax system actually benefits taxpayers — but that’s the case with Nevada’s property tax.
Both policy experts and local governments have repeatedly called for reform to the state’s convoluted property tax structure — albeit for entirely different reasons.
Many policy experts dislike the current system because it’s unnecessarily complex, and it often results in a widely varied tax burdens among neighbors and communities.
Governments, however, dislike the status quo for an entirely different reason: It inhibits their ability to squeeze cash out of homeowners.
As numerous government lobbyists pointed out during the 2017 legislative session, property tax revenues still haven’t returned to pre-recession levels. And of course, local governments, as always, are salivating for higher revenue — despite repeated tax increases in recent years.
Prior to the legislative session, Clark County School District leaders “pledged” to make property tax hikes a priority in 2017 — a sentiment duly echoed, early on, by legislative leadership.
It was just the latest in government-suggested “reforms” which are, in reality, little more than the knee-jerk reflex to plunder taxpayers’ pockets.
Government lobbyists, after all, weren’t interested in protecting the interests of taxpayers — they were interested in getting more dough into state and local coffers. The “problem” they were “identifying” was that government budgets have not been expanding as quickly as they would like.
In recent years, home values have been slowly clawing their way back from the depths of the Great Recession. It’s been a little breathing room for homeowners, small-business owners and investors in a still anemic road to full recovery — thanks to a state law capping the amount homeowners’ property taxes can rise annually.
Regardless of how quickly property values might increase, says the law, homeowners’ property taxes cannot jump more than 3 percent over the previous year. And, thanks to other caps tied to inflation and average assessments, most face far smaller increases.
This taxpayer protection was the “problem” governments wanted to fix. While property owners and policy experts have reason to dislike the convoluted tax assessment process currently in place, few probably object to being able to keep more of their own money.
Despite the complexity of the state’s tax assessment process, this limit on how quickly tax burdens can rise is valuable. It ensures property owners will not be forced off their land, if and when values return to pre-recession levels.
After all, property values increasing should be good news for taxpayers. Unfortunately, climbing values are not always synonymous with climbing wages — and often, without caps, the taxes that accompany quickly appreciating properties burden struggling middle class and low income families and businesses.
Often when tax bills grow along with the appreciation of property, it acts like an ever-rising rent payment for families and businesses.
Nevada’s cap system protects against this kind of unintended consequence during times of recovery and growth.
It’s a protection, however, that is apparently seen as a big problem for local governments that feel entitled to people’s wealth.
Grabby government officials in 2017 suggested replacing this tax cap with a minimum rate of growth — in the hopes that, year after year, property owners could be forced to pay increasingly higher taxes regardless of how quickly or slowly property values climb.
Assembly Bill 43 would have mandated that property taxes grow a minimum of 3 percent per year. In addition to the absurd floor on tax growth, the bill did little to streamline the existing inefficiencies and complexities of the current tax structure.
In other words, the promise of “reform” was merely an attempt to hike taxes on an exhausted public that recognizes the current structure is needlessly complex. The end result, however, would have hardly be what most property owners consider a fix to their problems.
Thankfully, AB43 died. But the discussion over “reform” in 2017 revealed the perverse way in which many public officials view the wealth of private citizens. The good fortune of property owners — many of whom are still struggling to recapture losses from the recession — were seen merely as a bottomless well from which local governments should be able to draw unlimited funds.
It’s a lesson that taxpayers should take to heart: When governments are adamant about lobbying for “reform,” it’s likely not going to be in taxpayers’ favor.
Michael Schaus is communications director for the Nevada Policy Research Institute.