Property taxes are a significant concern for Kansas residents, and policymakers are actively seeking solutions to provide relief. While assessment limits have been proposed as a way to curb rising property taxes, they come with unintended consequences that distort the market and create inequities. A more effective solution lies in implementing a property tax levy limit—a fair, predictable, and structurally sound approach to controlling property tax growth.
Why Assessment Limits Fall Short
Assessment limits, such as the one proposed in Senate Concurrent Resolution 1603 (S.C.R. 1603), aim to cap annual increases in a property’s taxable appraised value. While this may seem like a straightforward way to reduce tax burdens, it introduces several problems:
- Market Value vs. Taxable Value Gaps: Over time, assessment limits create a growing disparity between a property’s market value and its taxable value. This distortion can lead to unfair tax burdens, especially for new homeowners or those purchasing newer properties.
- Discourages New Construction: By favoring older homes with lower taxable values, assessment limits make new construction and renovations less attractive. This can stifle housing development and economic growth.
- Inequitable Benefits: Existing homeowners benefit disproportionately, while younger or first-time buyers face higher costs. This creates a system where new homeowners subsidize long-term residents.
S.C.R. 1603, which proposes a 3% annual cap on taxable value increases, would exacerbate these issues. It also includes a provision allowing the legislature to impose even stricter limits without voter approval, further complicating the property tax landscape.
The Case for a Levy Limit
A property tax levy limit offers a more effective and equitable solution. Unlike assessment limits, which focus on property values, a levy limit caps the total amount of revenue local governments can collect from property taxes. This approach has several advantages:
- Predictability and Fairness: A levy limit ensures that property tax growth is controlled in a transparent and predictable manner. Taxpayers are protected from sudden spikes in their bills, while local governments maintain budget stability.
- Neutrality: By focusing on revenue rather than property values, a levy limit avoids distorting the housing market. It treats all properties equally, regardless of age or ownership.
- Encourages Responsible Spending: Local governments must prioritize spending and justify any increases in property tax collections, fostering accountability.
Kansas already has a form of soft levy limit under its Truth in Taxation law, which requires local governments to notify taxpayers and hold public hearings before increasing property tax collections. A true levy limit would go further by requiring voter approval for any increases above the cap.
Lessons from Past Levy Limits
Kansas has experimented with levy limits in the past, most recently with the property tax lid from 2017-2020. However, this policy was criticized for its numerous exemptions, which undermined its effectiveness. A well-structured levy limit without exemptions could avoid these pitfalls and provide meaningful property tax relief.
For example, a levy limit could allow for growth tied to inflation and new construction, ensuring that local governments can meet the needs of a growing population. Alternatively, it could restrict year-over-year collections growth to a fixed percentage, gradually reducing real property tax burdens over time.
The Impact on Kansas Taxpayers
A levy limit would benefit all taxpayers by preventing sharp increases in property tax bills. As property values rise, local governments would be required to adjust mill levies downward to stay within the revenue cap. This ensures that taxpayers are not penalized for rising home values.
For those most vulnerable to property tax fluctuations, Kansas already offers targeted relief programs, such as property tax freezes for seniors. These programs should be maintained and strengthened alongside broader reforms like a levy limit.
A Better Path Forward
While House Bill 2011 (H.B. 2011) proposes a levy limit for the statewide school finance levy, it does not address local property taxes. A comprehensive levy limit that applies to all local taxing jurisdictions would provide more consistent and widespread relief.
Policymakers should also consider allowing for inflation and new growth in any levy limit, as these factors are essential for maintaining government services. Shifting the cost of new growth onto state revenues, as proposed in H.B. 2011, could strain the state budget and limit future tax cuts.
Conclusion
As Kansas policymakers seek to address property tax burdens, a well-structured, exemption-free levy limit offers the most effective and equitable solution. By focusing on revenue rather than property values, this approach protects taxpayers, promotes fairness, and encourages responsible government spending.