Property tax initiative promises a real mess
BY IAN MYLCHREEST
BUSINESS PRESS
February 27, 2006
Proposition 13 has become almost legendary for its people power rebellion against escalating property taxes. So it's no wonder that the property tax restraint initiative that aims at limiting taxes to small increments from last year's values is calling itself Nevada's Proposition 13.
The initiative would amend the state constitution and abandon the current system of taxing all property equally with a scheme that would freeze all real estate at its 2003-2004 values and allow only incremental increases until the land is sold or developed.
If you're a current home owner with a modicum of faith in Las Vegas' future, you can't help but vote for this because values will rise but you won't get hit with any more than inflation or 1 percent (whichever is the greater) rise on your tax bill. It's a victory for the little guy. But it only looks that way. The greatest tax benefits will go, according to Applied Analysis, a local economic research firm, to large developers that already own tracts of undeveloped land.
This constitutional amendment will abandon the current rule that all property should be taxed equally with a scheme that over time will create enormous disparities.
And the longer it is in force,those disparities will be. But that won't matter: the people who voted for it will get the tax break, and the newcomers and new homebuyers will get the bill.
My parents don't live in Las Vegas, so I won't be able to take advantage of the provision that allows children to inherit property, but my daughters might still own a house in 80 or 90 years that the assessor will have to value at 2003 prices.
That seems fair, doesn't it?
In reality, this scheme smacks of former Sen. Russell Long's maxim, now almost a cliché, about taxes: "Don't tax thee, don't tax me; tax that fellow behind the tree."
There are lots of new residents behind those metaphorical trees who can bear the heavier tax burden this measure will impose.
The success of any Proposition 13 law depends, however, on whether you believe two things: Firstly, that the state constitution should limit sources of revenue and, secondly, that local government spending can and should be cut by limiting those sources of revenue. It's easy to agree with the first. Why shouldn't we set limits on what the government can tax?
The real question is whether property tax restraint will work on its own.
Not even its proponents think it will. Among the frequently asked questions on the initiative's Web site, www.wethepeoplenevada.org, is the following:
Q: How do we keep government from raising taxes in other areas just like they did in California because of Prop 13?
A: Prop 13 did not cause tax increases in other areas; the removal of the spending limitation in 1990 is what caused government to overspend without restraint. The TASC 4 Nevada is the government limitation petition that must also be passed to reign (sic) in unlimited spending and taxation in other areas.
Even the organizers believe that it will only work if the Tax and Spending Control initiative is also passed.
Or else we can assume spending will be moved from local property taxes to state taxes.
That's why the Las Vegas Chamber of Commerce opposes the plan. It has little confidence that the constitution alone can restrain public spending. It fears the state will make up the lost revenue with business taxes.
Much of our infrastructure like roads and schools has been financed with bonds. That will be much harder to do without a clear stream of tax revenue -- either from property taxes or, the business community should fear, some version of a business receipts tax if property taxes are capped.
And if you think I'm making it up, look at what's happened in the Washoe County School District in the wake of last year's 3 percent cap. Just last month, administrators up north shelved plans for a $95 million technical high school and the expansion of several existing schools until the full impact of the current cap can be measured. And it's quite possible that we could end up with the property tax cap and no Tax and Spending Initiative.
Seniors from age-restricted communities across the valley have seen very dramatic increases in property values. They were campaigning most loudly for caps in 2004 and again are backing the property tax initiative.
But those same homeowners are equally vigorous in their opposition to TASC.
They cite Colorado's TABOR flip-flop to show that kind of law can't work. The state's voters imposed severe caps on spending and then repealed their own law in 2005 because the limits proved unworkable.
But, and here we get to Long's adage, many supporters of property tax caps really do want to ensure that the state can spend enough on health and other senior services, and particularly on Medicare, to fund nursing homes so that spouses and children will not lose their ancestral home to pay for long-term care.
In other words, let's pass the tax burden to anyone but me.
The Supreme Court said 14 years ago that Proposition 13 was not very equal but it didn't breach the Constitution's Equal Protection Clause. As Justice Antonin Scalia noted back then, "It's close enough for government work."
That kind of judgment almost guarantees, though, that these amendments will create serious but very unintended consequences
If you are planning to relocate in the Las Vegas area, contact us for a prompt response to any questions you have about the Las Vegas real estate market. We invite you to visit our website to view updated daily listings of Las Vegas homes at Free Las Vegas Homes MLS Search
