April 08, 2005

In Nevada, Something Is Better Than Nothing

Nevada Governor Kenny Guinn has signed Assembly Bill 489 into law. AB489 provides much needed property tax relief to Nevada residents (for background info, see here). However, it’s also sloppy tax policy. Here's what the bill does:
  • Places a 3 percent cap on annual property tax increases for most homeowners, and
  • Places a 10-year average growth cap (or 8 percent, whichever is less) on property tax increases for businesses and the majority of rental properties.

So what's wrong with this? In brief, it's a very poorly targeted approach to tax cuts-- too generous to homeowners, and too stingy in its treatment of renters. Simply placing a cap on property tax increases provides relief to all homeowners whose taxes are increasing, regardless of their ability to pay. Furthermore, it gives nothing to renters — who typically are low–income and feel the heat from rising property values as well.

People hate property taxes, and there's a good reason: they often change in ways that don't reflect your ability to pay them. If you pay $2,000 in property taxes this year and lose your job next year, your property taxes won't go down (of course, your income taxes will-- they're the ultimate "ability to pay"-based tax). This basic disconnect between property taxes and ability to pay is what makes these taxes so painful to low- and middle-income families. A smart approach to property tax relief resolves that disconnect by explicitly tying tax relief to your income levels. Tax caps give indiscrimate tax cuts to everyone whose taxes increase-- and therefore leave the property tax disconnect unchanged.

For more information on targeted property tax relief measures and other tax policy topics, check out ITEP's policy briefs here and here.


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