A Missing Piece in the Property Tax Reform Puzzle?
Property tax reform is a difficult puzzle to solve. But one successful policy solution has been Truth in Taxation. Over time, Truth in Taxation laws have proven to aid economic competitiveness and individual liberty in states like Utah and Tennessee.
Since its enactment in 1985, Utah’s Truth in Taxation law has helped the Beehive State maintain a low property tax burden as a portion of income. When the law was passed, Utah had the 24th lowest property taxes in the country, but thanks in large part to their Truth in Taxation law, Utah has improved to 14th lowest today.
Truth in Taxation requires citizens be notified of any proposed property tax increase and its potential impact on their tax liability. Then, taxing authorities are required to hold public hearings and votes on the proposal. Constituents must be notified of these hearings, so they have the opportunity to attend and voice their concerns or support. While Truth in Taxation does not directly limit property taxes, it increases transparency and accountability in the process, preventing numerous property tax increases along the way.
Because of the success experienced by Utah, state legislators who are members of the ALEC Tax and Fiscal Policy Task Force passed the Statement of Principles on Truth in Property Taxation and Truth in Taxation Act in 2020. Our members believe that property taxes should not expand simply as a result of inflationary increases in property values. They agree that the proper function of taxation is to raise money for core functions of government, not to close budget gaps created by overspending.
In the 2021 legislative sessions, state lawmakers in Kansas and Nebraska have taken note of Utah’s success, introducing Truth of Taxation bills of their own. As debates over property tax reform continue in statehouses throughout the country, it is worthwhile to examine the benefits of Truth in Taxation laws which can create a distinct economic advantage over neighboring states by increase transparency and accountability to the benefit of taxpayers.