Dramatic fluctuations in the
real-estate market in recent years have caused considerable
unrest among property taxpayers across Arizona.
Beginning in 2005, the Arizona real-estate market skyrocketed,
particularly in the residential-housing market. As they are
constitutionally required, county assessors responded to the
market by increasing property valuations for property-tax
purposes. In Maricopa County, residential properties increased
60 percent in most cases.
When those increases from county assessors hit taxpayers'
mailboxes in early 2006, they created shockwaves across the
state. The unprecedented valuation increases prompted my
organization, the Arizona Tax Research Association (ATRA), to
recommend to state lawmakers a series of reforms that focused on
reducing property-tax rates to offset the valuation growth.
To their credit, state policymakers adopted most of those
recommendations by reducing state tax rates and referring
Proposition 101 to the general-election ballot in 2006.
Proposition 101 ensured that the constitutional limitations on
the primary levies (levies for operating budgets) of counties,
community colleges and cities were updated and forced those
entities to reduce tax rates this year.
The success of those measures is reflected in the reduction in
the state's average property-tax rate from tax years 2006 and
2007. That rate has fallen from $11.56 in 2005 to $10.04 in
2007, a 13 percent decrease.
Despite these positive steps on the part of state policymakers
to respond to the property-tax crisis, two groups are
circulating major property-tax initiatives for the November 2008
general-election ballot. Before lending support to these
initiatives, Arizona citizens should know how significantly they
would affect not just our property-tax system but our entire
public-finance system in the state.
The first measure, dubbed Proposition 13 Arizona, would roll
back property valuations on existing property and cap future
growth at 2 percent. More importantly, it would also cap taxes
on residential property at one-half of 1 percent of value and
business property taxes at 1 percent. New properties would be
brought on the tax roll at their sale price.
The second initiative, called Arizona Tax Revolt, would also
roll back values to 2003 and cap annual growth at 2 percent.
This effort would also roll back 2009 property taxes (excluding
levies for bonds) of most jurisdictions to 2005 levels and apply
levy limits beginning in 2010.
In addition to fundamentally changing our property-tax system,
these initiatives would force dramatic reductions in current
property taxes. Proposition 13 Arizona is estimated to reduce
state and local property collections by almost 50 percent or
$2.6 billion statewide. Faced with prior initiatives mandating
increased funding for K-12 schools and health care, lawmakers
would be forced into significant tax increases in other areas.
ATRA's opposition to both of these initiatives is not evidence
that we think the property-tax system is perfect. In fact, we
continue our efforts at the state Capitol to pass a series of
reforms to secondary property taxes (mostly voter-approved
bonds, overrides and special districts) that will protect
taxpayers against major increases when property values rise.
If you are concerned about your property taxes, I encourage you
to communicate that message to your state legislators and to
Gov. Janet Napolitano. Responsible leadership at the state level
will not only solve this problem, it could convince Arizonans
not to pull the trigger on initiatives that could do more harm
than good.
