Extreme Relief in Nevada

A good friend of mine is a huge fan of home improvement reality shows such as ABC's Extreme Makeover: Home Edition and The Learning Channel's Town Haul. The basic premise of these shows is simple - they help disadvantaged property owners fix up their homes and/or small business properties. My friend marvels at the extent to which these properties are remodeled and revamped. I on the other hand, being a progressive tax advocate, think - Wow, I wonder how much their property taxes are suddenly going to increase once the property is reassessed?

Now think about this concept on a much larger scale and you have an idea of what Nevada property owners are going through. In the past few years, market forces have dramatically increased the assessed value of Nevada homes--which means property taxes are going to increase too.

Nevada lawmakers, to their credit, have seen this coming-- and are scrambling to come up with tax relief measures that can prevent an anti-tax revolt. The main constraint they face is a constituional rule that tax breaks must be"uniform and equal"-- meaning that all Nevada residents must be taxed the same way. (This constitutional rule handicaps Nevada in a number of ways, not least of which is that they're not allowed to levy a progressive personal income tax.) The leading proposal is to cap the growth of property taxes for single-family homeowners, with homes not exceeding $500,000 in taxable value, at 4 percent. For owner's whose property is worth more than $500,000 in taxable value, non-owner occupied or commercial, they would receive relief conditioned on average assessed value for their area. Note that in Nevada, taxable value is 35 percent of actual market value. For example, a home worth $500,000 in taxable value is actually worth $1,428,571 on the market.

This plan is allowable despite the "uniform and equal" requirement because Nevada's constitution has a exemption for cases of "economic hardship". The "economic hardship" exception has been employed in order to provide relief to Nevada's senior citizens in the form of a circuit breaker. This circuit breaker is allowed to senior citizens 62 or older with incomes equal to or less than $21,000. The actual amount of relief is determined by the senior citizen's income and property tax bill. The maximum amount of relief allowed is capped at $500.

The "4% cap" proposal assumes that taxable value is an adequate measure of someone's economic hardship. This could very well not be the case; there are more than a few instances where homeowners are property rich but cash poor. Why don't Nevada lawmakers simply use income as a measurement of economic hardship? Good question. Why not expand the existing property tax relief for seniors, which is based on income, to all of Nevada's most vulnerable homeowners? Another good question. Proponents of the "4% cap" proposal like it because they believe it would pass the "uniform and equal" requirement. However, if there's already a circuit breaker in place based on income that has passed constitutional requirements, why not simply expand it for all Nevada residents?