Remarks were made as a follow-up to a briefing given by two BYU PhD professor economists. Their briefing was made for some National symposium. The presenter questioned whether tax capitalization (when property is held on which low taxes are collected it increases the value of the property, hence the term “Tax Capitalization”) would occur if property taxes were lowered. Another, a professor a Doctor Corean, made remarks saying “homeowners are wealthy or well off.” Both remarks got me steamed. So I made the following comments before the Commission:
I am D-Bell from the Ogden Valley. On the subject of taxation and tax capitalization I’ve done extensive reading and research over the last five months. Michigan, which went to acquisition value many years ago for example, experienced a situation where it was an unexpected benefit. In that properties do increase. Their values did increase, and the realtors like that. And tax collectors and assessors like that too because more property taxes are gained. So it (tax capitalization) is not a downside, it is actually a hidden benefit. But only if property taxes are competitive or considered “fair”, which they are not at this time.
Now I would like to comment and point out a couple of things. And I totally support Representative Dougall and Representative Harper and how they have shown incredible thinking out of the box in their work. And I totally agree with what they are trying to do here. This is a shift from the property tax only. (Remove school district taxes from property tax bills in exchange for 1.61% increase in non food sales taxes.) Now “why”?
This is “relief” we are talking about and not “reform”. Ron sat here and talked about property tax “reform” (our coalition partner Ron Mortensen and Bert Hulet briefed an acquisition value proposal earlier). And we definitely need to take a go slow approach, and we need to form, and I think you need to support, what I called for on the 19th of September; a Blue Ribbon Study Commission. A study that lasts a year through the next interim session at minimum.
I called for a very credible study done by people at the top of their fields to recommend the best practices of what is available on a nationwide scale.
(Senator Hillyard made a comment earlier about being “just a dumb country lawyer” and Representative Dougall remarked “Yeah, sure, there are lots of dumb country farm boys in this room.”)
I am just a “dumb country farm boy” too, I guess. But you need to know that we are hurting out there. I know you have heard this before. But I do not think you quite realize just HOW MUCH we are hurting. How much we need both “relief” AND “property tax reform”.
And this “relief” is available immediately thanks to the good Representatives here (Wayne Harper and John Dougall) and hopefully with your support it will become law. It will reduce our tax bill in real dollars by between fifty-five (55). And, is Kris Poulson (Utah County assessor) here? I understand he is paying eighty (80) percent. It is a significant “relief”.
Now, it is true that the hydraulic principle applies here…you push in on a balloon and your finger goes into it on one side and the balloon bulges on the other side. It is the same with economics and tax collections. You do collect it from other means.
But the key issue here I think and I haven’t heard the word mentioned or thrown around very much. It’s a four letter word. I like four letter words. I can understand them. It’s called “fair” OK?
We residents need a tax reduction on property tax, a “relief” on property tax that is immediately available. We need it desperately in this State, in my opinion. And it is NOT just where I am from but from all across this State…”the little people”. We need tax “relief”, immediate relief in real dollars. Not some local Commissioner making ridiculous claims about how they stayed within pumped up budgets without raising taxes (referring to the idiocy of some Commissioners who use TNT and tax rates to make such bogus claims.)
Without tax relief - I don’t mean to sound strident, I don’t mean to sound threatening, I don’t want to try to intimidate. That is not my intent. You will see an uprising. You will see a property tax revolt without “relief”. I am not sure any of you are in-touch with reality, with just how serious an issue this is.
I personally have helped people in my little Town who are trying to struggle by on less than twenty thousand dollars a year. And their property is suddenly reassessed up to a half million dollars. It is ridiculous.
This current market value SCHEME, and that is what it is. Where everybody gains but the taxpayer, is just that. Another scheme. It is time for it to go away. Going back to acquisition value or baseline value or some other “reform” measure. And I know I am mixing “relief” and “reform” together and I am probably confusing you. I apologize for that.
(The esteemed economics professors and Commission chairman questioned previously whether sales taxes would actually increase if property taxes were lowered due to family debt loads.) Now, on the issue of a property tax that goes down and sales (tax revenue) going up concern. That is exactly what happens. If you cut my property taxes, in my case fifteen hundred dollars if this measure were passed. I am going to take that fifteen hundred dollars and I am going to go out and buy something with it. So there is your answer, Sir. No mystery here. It is a good, not a bad thing.
So there is another positive benefit to Representative Harper and Dougall’s proposal, which I think is a really good proposal, that can stave off significant economic harm to this State.
Let’s talk about volatility. The volatility of sales taxes versus property taxes. The truth is they are both very stable historically. So to suggest that sales taxes fluctuate too much (or volatile) and property taxes are “stable” is a myth. Over the past twenty-five years both curves are almost identical and within three tenths of one percent of eachother.
But, I ask what is going to happen when the word goes out through the AARP crowd that Utah is bad for retirees? Nobody moves here. What happens to the "stability" of property taxes then?
Think about this. The Center for Public Policy and Administration, University of Utah, published a paper “An Evaluation of Utah’s Tax System and a Comparison of Eight Intermountain Western States, 28 Nov. 2007”.
The last paragraph of the summary says surrounding States have a niche if you will…
Wyoming’s niche is about 50% of their total State revenue comes from natural resource extraction and federal government revenue. And in terms of property tax fairness, Wyoming ranks as a top performer in the Intermountain West. And Wyoming has the lowest combined state and local sales tax rates in the study at 5.39%.
Wyoming: no income tax, lowest combined state and local sales tax and “competitive” or fair property taxes.
While in Nevada selective sales taxes are significant reflecting the importance of the gambling industry as a source of state revenue. Nevada and Colorado have the least regressive sales tax policies. Homeowner protection using modified acquisition value via 3% cap on annual assessments increases and an average assessment of a set number of prior years is called a “best practices” by the study.
Nevada: no income tax, and the least regressive sales taxes, acquisition value property taxes with 3% cap and rollback provisions.
Utah: In the case of Utah, state tax revenue accounts for less than 50%, on average, of state direct expenditures, the lowest of the states in the study. Federal revenue in Utah is a significant source of funds. Tax revenue overall funds 50% or less of direct state government expenditures.
Utah: income tax, sales tax, property tax to fund less than half state expenditures.
Where does half the revenue for this State come from? The Federal Government. We are so good and forgive me for this, but “for sucking the public tit” from the National Government in federal grant money and in federal payrolls…
So what we are really talking about here is the three and a half billion dollars. We are seemingly always talking about ways to optimize all taxes, continuously, at my expense and my friends' expense. It’s at the expense of "us little people", the poor dumb country boys' and girls' expenses, to finance only HALF of what the State needs to operate for the next year or thirty years, are whatever. We Utahans are ranked sixth as the highest taxed citizens in this Country to fund only half the State budget. We are paying every tax there is. We are taxed to death ladies and gentlemen. We are being taxed to the max. OK? And I appeal to you to just understand that.
That we are up to here (head held at eye level) with taxes. And what Representative Dougall and Representative Wayne Harper have proposed is “RELIEF” that we desperately need. Sales taxes which broaden the public school tax burden and make it a more "fair" tax for everyone. I am begging you to hear me.
I know you are not the decision makers. I know that this is a commission. A review Commission. But you can have a positive influence on this proposal and I ask you for that.