A new national report targets Oregon’s unfair property tax system, saying it creates significant disparities in tax burden among property owners. Read more…

 

Report knocks Oregon property tax system

by Claire Withycombe
Capital Bureau Thursday, July 19, 2018
(Portland Tribune July 31, 2018)

Excerpts:

SALEM — A new report from the Center for Budget and Policy Priorities is critical of Oregon’s property tax limits, which could be a target of reform in 2019.

The new report, released Wednesday, examined Oregon and three other states — Michigan, Massachusetts and New York — with limits on property taxes.

The limits have driven cities and counties to squeeze revenue out of fees and charges that disproportionately affect low-income people, the authors of the report from the Washington, D.C. think tank argue.

Oregon’s unusual, and complex, system was enacted through a series of ballot measures in the 1990s.

Supporters say the limits protect taxpayers from sharp annual increases in property taxes and require local governments to be thrifty.

But detractors say the system, which among other caps and restrictions, typically taxes owners on the assessed value of a property — rather than its real market value — creates significant disparities in property taxes, even between similar properties in the same area.

In May, Oregon Gov. Kate Brown expressed interest in working with state lawmakers to make changes to the system next year, when the legislature convenes for a roughly five-month-long budget writing session.

“Oregon schools have never recovered from the damage wrought by the property tax limits enacted in the 1990s,” Daniel Hauser, a policy analyst with the Oregon Center for Public Policy, said in a statement released in conjunction with the report. “The Oregon legislature failed to fully make up for the loss of property tax revenue, and a whole generation of Oregonians have paid the price.”

The study recommends states with property tax limits reexamine their systems.

“Every state with a property tax limit would do well to examine the consequences of its limit and consider relaxing or repealing it,” the study’s authors write. “States can employ more targeted alternatives, such as circuit breakers (which provide refunds to households whose property taxes are deemed too high) and homestead exemptions (which exempt a flat amount of home value from the tax), to relieve property taxes for seniors and others who might have difficulty affording them.”

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Comments:

The study report goes on to say…

Because Oregon’s property tax limits do not reset when a property is sold, similarly valued homes can receive drastically different tax treatment. The problem is especially acute in the Portland area, where “properties in fast price-appreciating neighborhoods pay lower taxes — relative to actual market value — than those in slower-appreciating neighborhoods.” This benefits higher-income people moving into gentrifying areas. Research from The Oregonian indicates that 57 percent of homeowners in the Portland metro area would pay less under a system based on market value rather than the one based on Measure 50 because the system has created such inequities over the years.

For one thing, the dollar savings from a property tax limit typically will be greater for owners of high-value homes, who are more likely to be white (due in part to policies that blocked African Americans from buying homes in higher-value jurisdictions). Those greater dollar savings for white households will increase racial gaps in income and wealth. Further, disparities will grow over time whenever property values rise more quickly in areas with more high-value homes, increasing the relative value of a property tax limitation.

A tax assessor in Oregon said: “The present system is extremely complex to administer and very difficult to explain. When I am giving educational presentations in town halls, it takes an hour just to give a good 30,000-foot overview of how the system works. It’s unfortunate that we have that complex of a system.”

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State Limits on Property Taxes Hamstring Local Services and Should Be Relaxed or Repealed: Michigan, Massachusetts, Oregon, and New York Reveal Range of Problems With Limits
By Iris J. Lav and Michael Leachman, Center on Budget and Policy Priorities
July 18, 2018