Oklahoma Election 2012: No on State Question 758

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There are six state questions on the November 6, 2012, general election ballot in Oklahoma. All of them are constitutional amendments, requiring a vote of the people, and all of them are legislative referenda -- questions initiated by the legislature, rather than by initiative petition.

The state election board has the language that will appear on the ballot, but to look at the actual language that will go into the Oklahoma Constitution, you have to go to the Oklahoma Secretary of State's website. There's a special page for proposed questions, with PDFs of the relevant legislation and the verbatim proposed changes to the state constitution. (Unlike amendments to the U. S. Constitution which are tacked on at the end, Oklahoma constitutional amendments directly add to, delete from, and modify the text of the constitution.) The links on each state question name will take you directly to the Secretary of State's PDF for that question, so you can read the whole thing for yourself.

A quick summary of how I plan to vote:

SQ 758: NO
SQ 759: YES
SQ 762: NO
SQ 764: NO
SQ 765: YES
SQ 766: YES

SQ 758 takes the existing 5% cap on annual increase in taxable property value and reduces it to 3% for residential homestead and agricultural property. I'm persuaded by Tulsa County Assessor Ken Yazel's argument that this measure would shift some of the tax burden from property owners in rapidly appreciating areas to property owners where values are relatively stable. Putting a cap on valuation doesn't put a cap on tax rates.

Property taxes come in two flavors. There are straight millages that support schools, county government, the library, the health department, the community college, the vo-tech school. As taxable value increases, the amount of property tax increases by the same proportion. For these taxes, a limit on the increase in taxable value also limits the increase in taxes.

Then there are millages that vary to cover bond issues and court judgments and settlements for cities and school districts. A little more than a third of my annual property tax bill falls into this category.

General obligation bond issues and civil settlements and judgments are paid out of a "sinking fund" which then has to be replenished. The county excise board determines how much replenishment is needed each year and the amount is divided among property owners in proportion to taxable value. It's a simple fraction -- the numerator is the demanded amount of tax revenue, as approved by the excise board; the denominator is the taxable value of property in the jurisdiction as determined by the county assessor in accordance with state law, which sets valuation caps and freezes.

If the taxable value grows at a slower pace because of a cap on taxable value increase, it doesn't change the amount that has to be covered by property taxes; it just means a higher millage is required to generate the same amount of revenue. This means that even seniors with a valuation freeze will see their property taxes go up.

And because this cap only applies to homesteads and agricultural properties, SQ 758 would shift the burden of replenishing the sinking fund to residential landlords and commercial property owners. That extra cost will be passed on to shoppers (who will pay the store's higher lease costs or higher taxes), employers (who will have less money for salaries and benefits), and those who live in rental property. Among residential homeowners, the tax burden will shift from those with rapidly appreciating properties to those with frozen or slow-growing valuations.

Assessor Yazel has a chart (p. 10 of this PDF) showing the gap of a little more than 6% between fair market value and taxable value in the 15 years since taxable value caps and freezes were enacted. Looked at another way, taxable value lags fair market value by about two years. That lag, however, is not evenly distributed, although it is narrowing as fair market value has flattened in recent years.

If the goal is to keep property tax levels under control, we need to work on the numerator of that fraction:

  • City attorney should aggressively defend against lawsuits, and there should be incentives to encourage that. (As things stand, cities can save general fund sales tax dollars by capitulating to lawsuit demands, which are paid by property tax dollars. That incentive needs to go away. If there's a financial judgment against the city, the responsible elected officials, managers, and employees should bear some of the cost.)
  • Keep bonded indebtedness from increasing. Only pass new G.O. bond issues when old ones expire.
  • Make excise board members more directly accountable to the people. Put watchdogs in those seats who will not merely rubber-stamp sinking fund requests from the taxing entities.

We should also have a review of fixed millage levels and determine whether they ought to be adjusted. Are they generating too much revenue for the taxing entities or too little?

My opposition to this measure puts me at odds with some frequent allies. Americans for Prosperity Oklahoma has endorsed SQ 758, as have State Rep. Jason Murphey, Gov. Mary Fallin and the Oklahoma Conservative Political Action Committee. OCPA writes positively about the SQ 758, but with a caveat:

From a free-market, limited-government perspective, specifying and limiting potential increases in the fair cash value of a property -- which determines property taxes -- enables property owners to better budget taxes in advance and know how much money they will have left for spending, saving and investing in the private sector -- and that's all a positive. It's important to note, though, that this is not specifically a measure to lower property taxes; again, it's a measure to limit increases to the appraised market value of a property, which determines property taxes.

MORE: Tulsa County Assessor Ken Yazel has some excellent resources on his website explaining how property taxes work, where your money goes, and how to apply for the various types of property tax relief that the legislature has authorized over the years. While the stats are specific to Tulsa County, the rules and concepts apply statewide, controlled as they are by state constitution and statute.

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Roy said:

For a multitude of reasons I admire Ken and appreciate his analysis. But I think his arguments actually support voting no.

Ken points out that the restraint imposed by 3% increase limits will have the counterintuitive effect of creating a significant tax imbalance. (An example, btw, of the sort of "unintended consequences" often springing from taxation plans that figure to get something for nothing.) I see that effect as a feature since it will lead people to oppose the spending that provides the cause for the (painful) tax (that hurts them more than others).

And restricting the increased keeps gov't from having a non-discussed nor debated and certainly not voted on automatic increase in revenue. If gov't needs more revenue, let those who think so make the case for that need.

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This page contains a single entry by Michael Bates published on October 31, 2012 8:05 PM.

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