Ad Valorem Property Tax Why use property tax? –Competition for sources? –Peculiarly local? –Proxy for capacity? –Proxy for liability? –Proxy for benefits? –Way to spread tax burden? –Necessity given limited alternatives? Key policy questions –How to implement? (not so easy) –Allocation of burden? (among various property owners) –Overall burden? (compared to other sources)

Practicalities List real and personal property with county –Define “property” and “value” to be appraised: Real and personal property to be taxed at “true value” in $ (where “true value” is “market value”=“value willing buyer would pay willing seller” OR “use value” in some instances (agriculture) Appraisal to set base (periodic revaluation) (can be appealed) and total base for whole area (e.g $80M) Set rate –Amount of $ needed to be collected (e.g. $700k) –Determine % collected (e.g %, therefore require $736k) –Divide tax levy by taxable valuation ($736k/$80M) –Set rate= 92 cents per $100 value Caveats: “exempt property” for “educational” use?

Question: How Assess? Indiana: St. John Litigation –Constitution: “uniform & equal rate of property assessment and taxation” to secure “just valuation” –Statute: State board to set “true tax value” by rules that consider property classification, size, location, use, depreciation, cost of improvements, “productivity or earning capacity of land”; “Does not mean fair market value”; “any other factor just and proper” –Different methods of assessment and cost schedules for different classifications of property? (says okay) –Different % of market value (residential at 62%, commercial at 81%, industrial at 72%, agriculture at 54%) (?) (why?) –Must be based on objectively verifiable data for each type to enable review and assure uniformity and equality –Value in use okay (need not be “highest and best use”) –Remedies? (NY experience)

Property Tax: Classifications Missouri: Constitutional provision allowed subclasses & authority to define Residential Agricultural/horticultural Utility, industrial, commercial, railroad, other –Question: legislature said residential = four or fewer units; is this a prohibited added subclass? –Dissent: Constitution also said property to be classified “solely on the nature and characteristics of property and not on the nature, residence, or business of the owner, or the amount owed”

Additional questions “Fair market value” v. “use value” for agriculture—does this work? Exemptions: “homestead” (how much)? Caps? (how) Alternative sources of funds? School funding as major driver—state role? Current issues: Medicaid as driver?