Property Tax and Justice

"Let justice roll down like a mighty stream," say the lines from the prophet Amos (lines often quoted by Martin Luther King, Jr.). But when you're talking about property tax justice, that's just a little too florid. "Let property tax justice roll down like a mighty stream"--who's going to get behind that? What could be more pedestrian than property tax?

Anyway, here goes the start of a multi-part posting.

Property tax is a tax on wealth. The more wealth you have, the more property tax you pay. That seems fair, doesn't it?

Usually it is fair. Problems arise, though, when the housing market in your area heats up, and then the county assessor decides that you are more wealthy and should pay more tax. Assuming the assessor assesses fairly, he/she is right: you do become more wealthy when the real estate market booms in your neighborhood. But the problem is, it's not the kind of wealth you can cash out and use to pay your property tax bill. In other words, if your assessed valuation goes up 10% every reassessment period, but your income only goes up 2% for the same periods, then, over a number of years, paying your property tax bill is going to become more and more difficult.

In still other words, just because your property wealth increases, that doesn't mean that your income--what you'll use to pay your property tax bill--increases at the same rate. And that's when things start to seem unjust. Property taxes can get so high (based on higher assessments, not on higher rates) that people can be priced out of their homes by their property tax bill.

So how do we set tax policy to address this problem? The Hancock Amendment was one serious attempt to deal with it. But as you can see from my earlier postings, it provides protection to taxpayers on average: in any given reassessment year, about half the taxpayers will pay lower tax, the same tax, or a barely increased tax (increased at the rate of the Consumer Price Index or lower). The other half of the taxpayers will pay a higher tax bill, one that could be raised at a significantly higher rate than the Consumer Price Index. The people in this second half clearly won't feel very protected by the Hancock Amendment.

What to do? I'll have to write about it in the next part(s) of this post. And though I don't claim to have the answers, I think it'll become clear that many of the simple solutions floating around in Jeff City are totally inadequate.