Recently, Lincoln Institute fellows Daphne Kenyon and Sally Powers convened property tax experts for a panel discussion, Property Tax Reform and Cautionary Tales, a session at the annual conference of the International Association of Assessing Officers in Indianapolis.
Richard England, Professor of Economics and Natural Resources at the University of New Hampshire and a Visiting Fellow at the Lincoln Institute, gave a talk titled, “Preferential Assessment of Rural Land: Is it Time for Reform?” He discussed a type of preferential assessment known as use value assessment, or current use assessment. England argued for the greater use of financial penalties for those landowners who remove their properties from current use and develop it, citing Vermont’s system of penalties as a model for other states. Adam Langley, a Lincoln Institute Senior Research Analyst, presented his research on homestead exemptions and property tax credits. Langley discussed the important distinction between flat dollar homestead exemptions and credits, which make the property tax more progressive, and percentage exemptions and credits, which do not.
The second half of the panel featured two cautionary tales. Justin Ross of the School of Public & Environmental Affairs, Indiana University, gave a talk on the effects of Indiana’s tax caps, which were inspired by California’s Proposition 13. Intended to ensure tax stability for taxpayers, Indiana's caps have had several negative unintended consequences, including pushing many local governments into budget deficits. Finally, Professor Jon Sonstelie of the University of California, Santa Barbara, described the growth of parcel taxes in California, and attributed their growth to the effects of Proposition 13. Parcel taxes are taxes on real property that are not related to the value of that property. Instead, they are often a flat amount per property.