Many of you may be wondering why local governments across the state are proposing property tax increases. To understand why this is happening, it’s important to know who collects property taxes and where they go, and Utah’s Truth in Taxation law.
Property taxes are collected by and allocated to the following:
- School Districts: 57%
- Counties: 18%
- Cities and Towns: 13%
- Special Service Districts: 12%
Utah’s Truth in Taxation law, which passed in the ‘80s, is intended to prevent money from unnecessarily flowing to the government when property values increase. It does this by resetting property tax rates to hit revenue targets. The new property tax rate is calculated to generate the same amount of revenue as it did the year previous. If a local government needs more funds than the tax rate will provide, they are required to give citizens notice and hold public hearings before increasing the rate.
The Truth in Taxation process would normally mean Utahns would pay about the same in property taxes each year, but several factors have contributed to the increase.
Inflation
A record number of local governments are holding hearings to increase property tax rates because of inflation. Local governments can’t get by with the same funds as last year under the Truth in Taxation caps and are being forced to raise rates to make ends meet.
Increased Property Values
Due to COVID-19, there is less of a demand for commercial real estate and an increased demand for homes. As a result, home property values have increased faster than other types of property. Even with the Truth in Taxation process, homeowners pay more because they have comparatively more taxable value than other types of property.
Lifting Freeze on Education Funding
In 2018, the Legislature put a five-year freeze on the education property tax rate to allow for more money to be collected. Since then, the rate has not been rebalanced, allowing revenue to increase with property values. After the freeze lifts in 2023, rates will begin to rebalance each year that property values increase.
All the above factors have collided to create what you could call a perfect storm. In the Legislature, we are conscious of the burden increased property taxes place on Utahns. During the 2022 General Session, we passed S.B. 25 Property Tax Deferral Amendments, which allows senior citizens on a fixed income to defer their property tax payments. However, we know even those not on a fixed income are feeling the effects of increased rates. We are continuing to discuss this issue and are working to find a solution during the 2023 General Session.
Tags: Inflation, Property Tax, Truth in Taxation