There’s a concerted effort under way to brew up another property tax revolt in Arizona.
The state felt the aftershocks of California’s Proposition 13 in 1978. A similar cap on property values and taxation began to circulate in Arizona.
The Legislature successfully headed it off by holding a special election in 1980 to enact the spending and property tax limits that still generally govern public finance in Arizona today.
The results of the 1980 reforms in holding the line on spending and property taxes have been mixed, at best.
According to the Arizona Tax Research Association, per capita state and local tax collections in Arizona, adjusted for inflation, increased by nearly 52 percent from 1980 to 2000. Per capita property taxes increased less rapidly, but still exceeded inflation by 35 percent.
More recently, the state Legislature has enacted significant property tax relief. Those reductions, however, have been more than offset by increases by local governments.
The most steam for a new property tax revolt appears to be coming from Marc Goldstone and his Arizona Tax Revolt group. They are circulating two initiatives.
The first addresses the infuriating practice of local government officials pocketing higher property tax collections caused by rising property values, and then claiming fiscal virtue for having held the line on property tax rates.
The Goldstone initiative would roll back property values for tax purposes to their 2003 level and then cap increases at 2 percent a year. New improvements would be given the value they would have had in 2003.
Unlike California’s Proposition 13, values for tax purposes wouldn’t be bumped up to the purchase price upon the sale of a property. The property would have the same limited value for property tax purposes regardless of who owns it or when it was acquired.
That avoids some of the problems with Proposition 13, which has created gross discrepancies in tax bills for similar property.
The second Goldstone initiative gets to the heart of the matter by sharply limiting property tax collections by state and local governments. Property tax collection growth would be limited to 2 percent plus what- ever rate that yields applied to new construction.
Most taxing jurisdictions are already subject to such a limit, but various items, such as voter-approved bonds, are exempt. Under the Goldstone initiative, only items approved by two-thirds of voters would be exempt from the 2 percent limit. That certainly raises the ante, particularly for bond elections.
The second group, Proposition 13 Arizona, seems to have less momentum. Which is just as well, because its ideas are inferior.
Proposition 13 Arizona is also contemplating two initiatives, the first being a California clone on valuation. Property values for tax purposes would be rolled back to 2001 levels. After that, they could increase by 2 percent a year.
However, upon sale, the purchase price becomes the value for tax purposes, recreating California’s gross discrepancies in tax liability and constraint on the real estate market.
This group’s second initiative would cause a huge shift in liability to business taxpayers. As part of the 1980 reforms, property taxes on residential property are limited to 1 percent of the property’s market value. Voter-OK’d bonds and other specified assessments are exempt from the limit. This measure would end the exemptions.
Currently, the residential limit has been reached in only a handful of places in Arizona. If this initiative were to pass, most places would bump up against it, with businesses having to make up the difference.
Arizona already has some of the highest business property taxes in the country, and this would exacerbate one of the state’s biggest tax problems.
Neither group, at this point, has the financial backing to pay for circulators to actually get their ideas on the ballot.
So the discussion is largely academic. Nevertheless, property tax discontent is percolating.
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Robert Robb is a columnist for The Arizona Republic.
