With home prices rising more than 50%, some states try to rein in property taxes

For retirees Tom and Beverly McAdam, the good news is that the value of their two-bedroom home in suburban Denver has increased by 45 percent since they bought it more than six years ago.

That’s also the bad news, as it costs them thousands of dollars more in property taxes and leaves less for discretionary spending.

“Paying higher property taxes just means we have to take more money out of our investments when it comes time to pay the big bills,” said Beverly McAdam.

She supports a ballot proposal in Colorado that could limit property tax revenue growth. It’s one of several measures in states this year to limit, cut or offset increases in property taxes in response to complaints.

Over the past five years, single-family home prices have increased by about 54% nationally, according to S&P Dow Jones Indices.

This means higher taxes for homeowners when governments don’t compensate for higher property values ​​by reducing tax rates. And with offices seeing more vacancies as people still work from home in the wake of the coronavirus pandemic, the value of some commercial properties is falling, putting even more pressure on residential properties to generate revenue.

“With assessed values ​​skyrocketing in recent years,” said Jared Walczak, vice president of state projects at the nonprofit Tax Foundation, “homeowners are crying out for help and state lawmakers are increasingly exploring ways to provide it.” ”.

Colorado, like Alabama and Wyoming, also has a new law that will limit the growth in tax values ​​for homeowners. IPTU exemption will be part of special legislative session starting June 18 in Kansas, while Nebraska could also hold a special session to reduce property taxes.

Georgia voters will decide in November whether to authorize a new law limiting increases in assessed home values ​​for tax purposes to the rate of inflation unless local governments or school boards opt out.

Five years ago, Lanell Griffith and her husband paid just under $2,700 in property taxes on their Topeka, Kansas, home in a historic neighborhood of tree-lined brick streets. Their bill last year was more than $3,700.

“The government shouldn’t be able to just arbitrarily increase what they say you owe them without any kind of protection around it,” Griffith said.

Kansas lawmakers this year approved three measures that would have reduced the state’s property tax on public schools. But each one was vetoed by Democratic Governor Laura Kelly due to concerns about other sections to reduce income tax. The special session will mark a fourth attempt at consensus.

In Vermont, Republican Governor Phil Scott promised to veto a bill that would increase property taxes by an average of nearly 14% to provide more money for public schools. Scott said people “simply cannot afford a historic double-digit property tax increase.”

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 arrive at an overall tax bill for property owners.

State legislatures can intervene in several ways. They can set state limits on how much assessed property values ​​can increase, create partial tax breaks for all homeowners, or provide income tax credits to help offset property taxes for certain people, such as those age 65 or more.

But any relief has consequences. Limits on the growth of assessed real estate values ​​could provide a greater benefit to the wealthy. Exemptions for homes used as primary residences can shift a greater tax burden to rental properties and businesses.

“If you do this too much, you can start to tie the hands of local government and prevent them from collecting revenue,” said Richard Auxier, chief policy associate at the Tax Policy Center, a nonprofit organization.

When subscribing to several property tax reduction laws This year, Wyoming’s Republican governor, Mark Gordon, vetoed a bill that would have exempted 25% of a home’s value from property taxes. He said this “put the financial stability of the state and counties at risk.”

In 1982, voters in Muscogee County, Georgia, approved a local law that froze assessed property values ​​for homes used as primary residences. The result: Longtime homeowners pay too little, newcomers pay more and businesses face some of the highest property tax rates in the state, said Suzanne Widenhouse, the county’s chief assessor.

Last year, two similar homes valued at about $330,000 had dramatically different tax bills. One, whose assessed value was frozen in the 1980s, owed less than $8. The other, whose assessed value was frozen when purchased about five years ago, owed $3,236, Widenhouse said.

“Any time you give an exemption, you create inequality,” she said.

A Georgia ballot measure would amend the constitution to allow increases in assessed property values ​​to be limited to the rate of inflation. But that wouldn’t undo the previous increases.

In the eight years since Rob Romeijn bought a ranch-style home on 10 acres southeast of Atlanta, Rockdale County has increased the assessed value of his property from $127,000 to $230,000, also increasing his bill. property tax bill, he said.

As a Dutch immigrant with permanent residency, Romeijn was unable to vote in elections in Conyers, but he was so unhappy with the increase that he made a sign urging people to vote against the Rockdale commissioners and protested outside county offices in April.

Colorado has also been at the center of the property tax debate. The state has experienced growth in new residents for decades, increasing demand for housing. However, it has struggled to find a balance between providing tax benefits to property owners and sufficient funding for local governments.

A 1982 constitutional amendment limited residential properties to 45% of Colorado’s total property tax base while establishing a flat assessment rate for commercial properties. To keep the ratio balanced as home values ​​increased, residential tax assessments were reduced, leaving less revenue for essential services, such as firefighters.

Colorado voters repealed this constitutional provision in 2020. Since then, assessed home values ​​have risen rapidly and the General Assembly has responded. The latest law, signed in May, is expected to reduce more than a billion dollars annually from future property tax revenues by reducing tax rates and imposing growth limits.

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 all property tax revenue growth at 4% annually and is collecting signatures for yet another ballot initiative to lower property taxes. .

“People are saying this is too much growth; the government doesn’t need that much money,” said Advance Colorado President Michael Fields. “People are genuinely scared of losing their homes.”

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Associated Press writers Jeff Amy, John Hanna and Lisa Rathke contributed to this report.