Property Taxes Already Taxing Legislature

This legislative session is seeing ad valorem turn into ad nauseum.

Sen. David Malone, D-Fayetteville, says at least half of the 50 proposals already before the General Assembly have to do with property tax reform. Assessments for the tax are supposed to be done ad valorem, or “according to value,” but many of Malone’s constituents back in northwest Arkansas believe the tax is especially unfair to them.

The region’s real estate market saw such dramatic leaps in the 1990s that many property owners now pay three times as much tax on the same home or parcel that they did 10 years ago. Some other parts of the state that saw population decreases even had a reduction in taxes.

“We’re noticing the problem more in northwest Arkansas because we’ve had so much more growth and our real estate market has been stronger that anywhere else in the state,” Malone says.

“Highways and property tax reform are probably No. 1 and No. 2 on our agenda this session, depending on what part of the state you’re from.”

A proposed constitutional amendment, Amendment 4, that would have abolished the state’s property tax was struck from the ballot in November by the Arkansas Supreme Court. But the Arkansas Taxpayers Rights Association, which supported the amendment led by Fort Smith lawyer Oscar Stilley, is already working to get it back on the ballot for the next general election in 2000.

Stilley says he was “livid” when the amendment was struck this time around. He says property taxes are not only unfair but unconstitutional.

“This problem is not going to be solved,” Stilley says, “until the Legislature gives the people procedural due process and the ability to decide their own tax rates.”

The issue remains emotionally charged for both sides. Abolitionists say property taxes are oppressive to the elderly and poor. Government officials claim public schools would be forced to close and government services would suffer without property taxes.

Gov. Mike Huckabee’s office is trying to help the situation by introducing a taxpayer’s bill of rights and two bills before the the General Assembly aimed at streamlining the system. His communications director, Rex Nelson, says the taxpayer’s bill of rights would establish uniform procedures to make sure people are treated fairly when property is assessed.

“It will also ensure they clearly understand what their rights are as a taxpayer,” Nelson says. “And we want to send one or two proposed constitutional amendments to the voters next November. The first would make changes to Amendment 59 that would ensure the predictability of taxes by making sure revenues don’t increase at a rate greater than 5 percent at any one time for a taxing unit.

“The other proposal would be a freeze of residential taxes when the property owner turns 65. This would be a benefit to those on fixed incomes.”

Nelson says there are always going to be people who won’t be satisfied unless property taxes are completely abolished. But he believes the Legislature will make a strong effort for reform this session and look closely at amendments that would prevent abolishment, which he says “would decimate public education in Arkansas,” he says.

“I definitely think at least our second proposal concerning property owners over 65 will have statewide appeal and, if it makes it to the ballot in the year 2000, would pass overwhelmingly,” Nelson says.

Stilley says undoing the damage done by complicated Acts 916 and 758, which, in short, called for regular reappraisals but allowed for balloon increases of 30-40 percent, could stop the total abandonment of property taxes. But Huckabee has said publicly the state can’t afford to “give back” what would be an estimated $200 million in tax relief.

“A break for people over 65 is going to give the Legislature absolutely no mileage with the ATRA and absolutely none from me,” Stilley says. “But I think we have the Legislature’s attention right now and there’s a chance that something real can be done in the way of reform.

“[The Legislature] realizes it has a tiger by the tail. Whether or not they can turn loose before he bites, we’ll see.”

Phillip Scott, a partner with Arkansas Cama Technology Inc. in Fayetteville, sat on the governor’s work group that met six times in the past two months. His company assists several northwest Arkansas counties in assessing mostly urban property.

Scott says a large value exemption or a freezing of taxes for people over 65 were two of the most frequent suggestions the group heard. The age group already has some protection with the Homestead Act.

“Another of the things we heard most,” Scott says, “was that people, after they died over the initial shock of how much their taxes increased, wondered why they couldn’t be assessed a little at a time.

“Instead of it jumping up so much every few years, it would be easier for people to budget their money if they could figure out their tax rates.”

The proposal by Sen. Jim Scott, D-Warren, is apparently one of the most popular solutions being considered. It includes language that would require appraisal every three years to keep taxes closer in line with the market as it gradually goes up and down. Washington County Assessor Sue Phillips says whatever reforms are made, voters should be educated about the ramifications.

“Whatever the people want is what they should have,” Phillips says. “But they should really be educated about what they’re going to get when they vote for it. Nobody likes taxes.”