The good news for retirees Tom and Beverly McAdam is that the value of their two-bedroom home in suburban Denver has risen 45 percent since they bought it more than six years ago.
It’s also bad news: It costs them thousands of dollars more in property taxes and leaves them with less money for discretionary spending.
“Paying higher property taxes means we’ll have to pull more money out of our investments when it comes time to pay big bills,” Beverly McAdam said.
She supports a ballot proposal in Colorado that could limit the growth of property tax revenue. It’s one of several measures states have taken this year to limit, reduce or offset increases in property taxes in response to complaints.
Over the past five years, single-family home prices have risen about 54% nationwide, according to S&P Dow Jones Indices.
This means higher tax bills for homeowners when governments don’t offset higher property values by lowering tax rates. And with office vacancies rising as people continue to work from home in the wake of the coronavirus pandemic, some commercial property values are falling, putting even more pressure on residential properties to generate income.
“As assessed values have skyrocketed over the past few years,” said Jared Walczak, vice president of government projects for the nonprofit tax organization, “homeowners are clamoring for help, and state policymakers are increasingly exploring ways to provide it.”
Colorado, like Alabama and Wyoming, also has a new law that will limit increases in homeowners’ tax values. Property tax breaks will be part of special legislative session starts June 18 in Kansas, while Nebraska could also host special session reduce property taxes.
Georgia voters will decide in November whether to allow new law limiting increases in assessed value of homes for tax purposes to the rate of inflation unless local governments or school boards waive it.
Five years ago, Lanell Griffith and her husband paid just under $2,700 in property taxes on their home in Topeka, Kansas, in a historic neighborhood with tree-lined brick streets. Their bill last year was more than $3,700.
“The government should not be able to arbitrarily increase the amount of debt it says you owe without any restrictions,” Griffith said.
Kansas lawmakers passed three measures this year that would reduce state property taxes for public schools. But everyone was vetoed by Democratic Gov. Laura Kelly due to concerns about income tax cuts in other sections. The special session will be the fourth attempt to reach consensus.
In Vermont, Republican Gov. Phil Scott has vowed to veto a bill that raise property taxes by an average of nearly 14% to provide more money to public schools. Scott said people “simply cannot afford historic double-digit property tax increases.”
In many states, property taxes are primarily a function of local governments, such as counties, cities, school boards, and special districts for libraries, fire departments, and water systems. Each entity sets its own property tax rate, which is added to the others to create a total tax bill for property owners.
State legislatures can intervene in a variety of ways. They could set statewide limits on how much assessed property values can rise, create partial tax breaks for all homeowners or provide income tax breaks to help offset property taxes for certain people, such as people 65 and older.
But any relief comes with consequences. Limits on the growth of assessed property values can greatly benefit the wealthy. The exemption for homes used as a primary residence could shift more of the tax burden to rental properties and businesses.
“If you do this too often, you can now start to tie the hands of your local government and make it impossible for them to collect revenue,” said Richard Auxier, chief fellow at the nonprofit Tax Policy Center.
When signing several property tax relief laws This year, Wyoming Republican Gov. Mark Gordon vetoed a bill that would have exempted 25 percent of a home’s value from property taxes. He said it would “jeopardize the financial stability of the state and counties.”
In 1982, voters in Muskogee County, Georgia, approved a local ordinance to freeze property values on homes used as primary residences. The result: Longtime homeowners pay very little, first-time homeowners pay more and businesses face some of the highest property tax rates in the state, said Suzanne Wiedenhouse, the county’s chief assessor.
Last year, two identical homes costing about $330,000 had completely different tax bills. One of them, whose assessed value was frozen in the 1980s, owed less than $8. The other, whose appraised value was frozen when it was purchased about five years ago, owes $3,236, Widenhouse said.
“Every time you provide an exemption, you create inequality,” she said.
A Ballot measure in Georgia will amend the constitution to limit the increase in the assessed value of real estate to the rate of inflation. But this will not cancel past increases.
In the eight years since Rob Romijn bought a ranch-style home on 10 acres (4 hectares) southeast of Atlanta, Rockdale County raised the assessed value of his property from $127,000 to $230,000, which also increased his bill. property taxes, he said.
As a permanent Dutch immigrant, Romaine cannot vote in Conyers elections, but he was so unhappy with the increase in votes that he hung a sign urging people to vote out the Rockdale commissioners and protested in front of county offices in April.
Colorado has also found itself at the center of the property tax debate. The state has seen an increase in new residents for decades, leading to increased demand for housing. Meanwhile, it struggles to find a balance between providing tax breaks for homeowners and adequately funding local governments.
A 1982 constitutional amendment limited residential property to 45% of Colorado’s total tax base and also established a flat tax rate for commercial properties. To keep things in balance as home values rose, home tax assessments were cut, leaving people with less income. essential services such as fire districts.
Colorado voters repealed this constitutional provision in 2020. Since then, the assessed value of homes has risen rapidly, and the General Assembly has responded. The latest legislation, signed in May, is projected to reduce future property tax revenues by more than $1 billion annually by lowering tax rates and imposing caps on growth.
But that’s not enough to satisfy some residents. The conservative group Advance Colorado backed a citizens’ initiative that asked voters in November to cap property tax revenue growth at 4% annually and is collecting signatures for another ballot initiative to cut property taxes.
“People say it’s too much growth; the government doesn’t need that much money,” Advance Colorado President Michael Fields said. “People are genuinely afraid of losing their homes.”