Ad Valorem = Agitation, Anxiety, Apprehension,
Solutions to ever increasing property taxes are being proposed from far and wide. There have been 25 bills and resolutions submitted on the topic of property taxes. Some of these bills would change how assessed values can be increased, some limit the actual tax payment amounts to a slight increase paid the previous year, a few would ignore improvements to current homes.
Limiting revenue or assessed values is a consequential mistake that alters the tax system and will distort how properties share the burden of paying for public services. Artificially restricting the values or payment of taxes will change the tax system from being based on a home’s value to one based on when you purchased that home.
South Dakota made that mistake when it threw out agriculture land sales that exceeded 150% of the land’s assessed value. There were counties that had no way to increase values for more than a decade. It took about another decade to correct that mistake. Repeating that approach would be like trying to cure the measles by giving someone the mumps.
The most dramatic proposal is HB 1019 which would increase the portion of the state’s sales tax from 4.2% to 5%. This would raise an estimated $250-280 million dollars which would be used to eliminate the school general fund levy and special education levy which would decrease the overall property taxes paid by owner-occupied homes by 30% to 35%.
This bill proves that it takes a massive amount of money to significantly reduce property taxes for an entire class of property. In a tight budget year, the chances of finding a couple of hundred million laying around is like finding the pot of gold at the end of a rainbow or two, or twelve.
A Possible Solution (?)
If limiting the increases in values or money from property taxes distorts the system and finding enough money to buy relief for taxpayers is unrealistic, is there anything that could help ease the current crisis? Yes . . . partially.
There is general agreement that some kind of policy should be found to keep older citizens living on fixed income from being driven out of their homes because of increases in property taxes. The state already has a program that freezes assessed values for disabled and senior citizens. It is found in statute:
CHAPTER 10-6A : FREEZE ON ASSESSMENTS OF DWELLINGS OF DISABLED AND SENIOR CITIZENS
To be eligible:
· You must be 65 years of age or older OR disabled (defined by the Social Security Act).
· You must own the property or have retained a life estate in the property.
· You have resided in the house for at least 200 days during the previous calendar year.
· Un-remarried surviving spouses of persons previously qualified may still qualify.
· The limits for the applications are:
o Single member household (one person in household), income less than $41,579.
o Multiple member household (all members income), income less than $53,459
o Property Valuation Limit Property with a full and true market value of $356,391 or more is not eligible for this tax program unless the applicant has received the assessment freeze on the property in a prior year.
This program could be changed to increase the income limits, increase the market value of the home and use tax returns to demonstrate applicants are living on a fixed income and then a freeze on assessed values could be offered to this limited number of people without distorting the broader tax system. It has a very significant advantage that it already exists and will not need and entirely new system to administer it.
For those that are following this issue in great detail (all three of you) here is the list of the bills listed on the Legislative Research Council’s website as being related to property taxes including one oddity the addresses having car titles in electronic formats:
Bills on Property Taxes
Here are the bills that address Property taxes:
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Bill
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Title
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SB 50
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prohibit the use of drones for purposes of assessing real property for taxation, and to provide a penalty therefor. No position
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SB 55
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revise property tax levies for school districts and to revise the state aid to general and special education formulas. Standard - monitor
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SB 85
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provide property tax relief to certain senior owners of owner-occupied single-family dwellings. Doesn’t work – could use the title. We talked
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SB 90
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clarify provisions regarding tax deeds.
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SB 101
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provide a tax credit to limit the taxes due on property over the previous year.
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SB 121
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reduce maximum values for certain property taxes levied on owner-occupied single-family dwellings, and to increase the rates for certain gross receipts taxes and use taxes.
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SB 131
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establish an electronic system for vehicle titles. Support
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SB 141
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distinguish between new construction and improvements to existing structures for purposes of calculating increases in revenue payable from property taxes.
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SB 169
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require that taxing districts hold a public hearing when increasing property tax revenues relative to the previous year.
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SB 190
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establish an education property tax credit program.
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SB 191
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limit annual valuation increases on owner-occupied single-family dwellings.
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SB 207
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freeze property tax revenues and assessments for two years.
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SB 208
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amend provisions pertaining to a school district's proposed opt out, capital outlay certificate, or other agreement.
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SJR 506
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Proposing and submitting to the voters at the next general election an amendment to the Constitution of the State of South Dakota, limiting to a flat rate the real property taxes. Oppose
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HB 1019
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eliminate certain property taxes levied on owner-occupied single-family dwellings, and to increase certain gross receipts tax rates and use tax rates. Monitor – applaud the example of what needs
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HB 1119
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limit annual valuation increases on owner-occupied single-family dwellings and nonagricultural property.
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HB 1138
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reduce a maximum property tax mill levy on owner-occupied single-family dwellings for school district general funds, and to repeal certain sales tax exemptions. List exemption repeals
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HB 1191
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subject advertising services to a gross receipts tax, and to allocate proceeds to property tax relief. Have opposed years ago. Doesn’t work
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HB 1194
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authorize the cooperation of counties for purposes of operating an office of county director of equalization.
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HB 1199
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repeal a provision requiring the sale of property acquired by a tax deed.
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HB 1229
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provide an exemption from certain property taxation for owner-occupied single-family dwellings, and to limit the taxes due on property over the previous year.
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HB 1235
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reduce a limit on the annual increases of property tax revenues payable to certain taxing districts, and to subject school districts to a limit on property taxes collected in a year. Explain the limits
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HB 1246
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require the director of equalization to adjust certain agricultural land values.
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HJR 5005
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Proposing and submitting to the voters at the next general election an amendment to the Constitution of the State of South Dakota, limiting the assessed value of real property and limiting real property taxes. Read - oppose
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HCR 6003
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To provide for an interim study regarding property tax reduction and preservation of the American dream to own a home.
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Business Day is Next Week!
Register today for Business Day at the Legislature – Thursday, February 20th in Pierre! The agenda and registration details can be found here.
Business Day at the Legislature is brought to you by the following:
- First PREMIER Bank/PREMIER Bankcard
- Summit Carbon Solutions
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- Wellmark Blue Cross and Blue Shield of South Dakota
- NextEra Energy Solutions
- Avera
- American Petroleum Institute
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Business Day provides an opportunity for business and community leaders to meet in Pierre to advocate for sound business policy! If you are interested in sponsorship opportunities, please email terib@sdchamber.biz.
Thank you for your support of the South Dakota Chamber of Commerce & Industry!
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