SOUTH DAKOTA STRAIGHT TALK

It seems that these ballot proposals with anacronyms seem to be associated with bad ideas. First J A I L and now S T O P.

The issue that S T O P (Stabilize Tax On Property) seems to want to address is the rising property tax valuations and seemingly consequent property tax increase that are being assessed on real property. I wonder if it is not just a way to wreck the real property tax system with some other agenda in mind.

There is a problem - Proponents correctly point out the current system creates a hardship on homeowners, farmers and ranchers, and commercial property owners who live near like property that is being sold at escalating prices because of the locations newly found desirability. The clamor seems to be coming mostly from the Rapid City area and the Black Hills, although they are taking their movement and petitions statewide. What you don’t hear them complaining about is the increase in their land’s value because of its profitable location.

This proposal is an anathema to me as I have always held that the best way to valuate something is by letting a free market establish the value, a very I believe Republican concept. The proposal’s principal proponent seems to be taking a detour here from party philosophy, a wonder because he usually is so intolerant of those who are not following the Republican philosophy of free men and free markets.

The STOP organization claims that because of rapidly increasing property tax assessments that people are being forced out of their homes and off their land. While theoretically true there is not much evidence of this. The petition’s organizers should substantiate these claims and cite specific examples rather than just use this assertion as a scare tactic.

Property Tax valuations and tax levies are a complicated subject and unfortunately not easily understood by average citizens without considerable study. This proposal is gaining support, in that it is appealing to people who don’t want to pay more taxes. I have not met very many people who want to their taxes raised.

Basically what this Constitutional Amendment would do is freeze property tax assessment in place and not allow raising valuations to fair market value until the property is sold. Otherwise the maximum the valuation could be increased annually is 3 percent or the rate of inflation whichever is less.

There are three key reasons that this proposal is a bad idea.

The First reason is simply fairness. People who own like property can pay dramatically different taxes. Why is it fair that someone who has owned property for a longer period of time pay fewer taxes than someone who has just purchased a like property? Everyone has a stake in government why should they pay different and what could be dramatically different taxes? The proponents’ claim that t he ultimate objective is to be "FAIR" to property owners – nothing could be further from the truth.

Secondly this proposal will hurt young families, young farmers and ranchers, young small business people and place a real barrier to buying homes, farms and ranches, and small business. When we want to develop South Dakota and keep our young people at home why would have a Constitutional provision that discriminates against them? This proposal will have the effect of shifting the tax burden from current property owners who tend to be older and wealthier to property purchasers who tend to be younger or lower income people. We should encourage home ownership. We should not pit young people against seniors. Think of empty nesters that would be reluctant to sell their homes despite wanting a smaller home because of tax consequences of leaving the low tax home for a smaller home with perhaps much higher taxes. This also would have the effect to keeping many larger homes off the market that are desired by younger and growing families.

Finally this proposed valuation limitation measure undermines our current system of taxation that is a low tax one. It could lead to other new taxes to fund government with perhaps even dramatic increases in the sales tax or a state income tax. Either would be hard on working people, seniors, or small businesses.

If this amendment does get on the ballot and I expect it will. And if it passes which may be a close call at this point; expect large amounts of real property to be deeded and incorporated so that property will not be sold but the stock in the corporation that owns the property will be sold to the purchaser, thus avoiding the reevaluation of the property. After a very short period of time people will understand how outrageous an unfair this new system is that even more drastic changes will be made.

S T OP is another B A D idea .

Just as a sidebar see what “Governing Magazine” has to say about these types of policies in their September 2005 issue.

How To Kill A Community

By Otis White

Governing Magazine

September 2005

When cities are healthy, they're buzzing with change. Newcomers are moving in, old-timers are moving out, new housing is built, old housing is rehabilitated, and streets that rarely saw a baby carriage in the past are suddenly chockablock with strollers. Want to kill all that? Enact a "welcome stranger" law.

What's a welcome stranger law? That's what they call special property-tax exemptions for longtime residents in the Atlanta area. They work by freezing property assessments, slowing their rise or simply granting ever-larger tax exemptions to homeowners - until they sell their houses. Then the new owner pays taxes on the full value.

These tax breaks are harmful - they penalize new residents, who are the lifeblood of communities - and blatantly discriminatory. How discriminatory? The Atlanta Journal-Constitution looked at two houses in the same suburban Atlanta neighborhood with vastly different tax bills, even though both were valued at about $400,000. One, owned by an old-timer, paid $970 in county taxes; the other, owned by a newcomer, paid $2,798.

So why do we have these harmful and discriminatory tax breaks? Because they're wildly popular with voters. Georgia's legislature permitted voters to enact welcome stranger laws in 2000; five years later, 24 counties have voted them in and another five are voting on them later this year. As the Journal-Constitution observed, "Approval is a near certainty."

Fortunately, they may not last for long in Georgia. A former county commissioner from rural Dade County has filed a lawsuit challenging the constitutionality of the welcome stranger laws in his county and elsewhere. Like other states, Georgia's constitution requires that taxation "be uniform upon the same class of subjects," and some legal observers believe that the uniformity principle applies to all residents, no matter how long they've lived in a community.

As for the man filing the lawsuit, Chuck Blevins has two objections. First, he believes the exemptions hurt communities. "It's going to be the ruination of us," he told the Journal-Constitution. "Not now but five or six years down the road." Second, he thinks the tax breaks are unfair. "Most people know when something is just plain wrong," he said. "But if these people are saying, 'I don't care if my neighbor is paying higher taxes,' then fine."