Saturday, January 24, 2009

Taxes, taxes and tax relief

Homestead exemption advances

Property tax relief is high on the agenda for the governor and many legislators this session. Ideas for providing it have been proliferating like mice.

The House Revenue Committee approved a homestead exemption bill on Wednesday, Jan. 21. But the committee killed other bills proposing property tax cuts on Friday (Jan. 23).

The Equality State Policy Center and the Wyoming Taxpayers Association – usually not allies – both opposed the property tax bills before the Revenue Committee on Friday.

The homestead exemption has several good points. Governor Dave Freudenthal proposed House Bill 68 – Property tax-homestead exemption. It was taken as a committee bill by the Revenue Committee at its last interim meeting in December 2008.

How a homestead exemption works

Let’s say the fair market value of a home, as determined by the county assessor, is $100,000. The assessment ratio for residential property is 9.5%. So, the assessor multiplies $100,000 by 9.5% to arrive at an assessed valuation of $9500.

In HB 68, the homestead exemption is $4,400 of assessed value. That means $4,400 will be subtracted from the assessed valuation of $9,500, leaving $5,100 in assessed valuation.

The assessor then multiplies the assessed valuation of $5,100 by the mill levy of about .071 mills to reach the actual tax of approximately $362, instead of the $675 it would have been if the assessed value was $9,500.

This approach to cutting property taxes benefits lower-value homeowners, because the lower the value, the bigger a chunk the $4,400 is.

However, the tax revenue losses still are significant – the HB 68’s fiscal note shows a loss of about $33.4 million to local governments, and nearly $7 million to the school foundation fund.

Current Wyoming law states that the homestead exemption cannot be implemented unless the Legislature funds it – so HB 68 has an appropriation of $40.2 million to make up the revenue losses affecting local governments – “holding them harmless” in the vernacular. The school foundation fund would not be held harmless and would simply lose revenue.

If the Legislature chooses to reduce property taxes, the ESPC favors the homestead exemption because the revenue to fund it has to be available up front and more of the benefit goes to lower-value homes. The Casper Star-Tribune ran a story about the Jan. 21 Revenue committee meeting.

Last Wednesday, the ESPC also supported passage of HB 138, which broadens eligibility for the property tax refund program. The Revenue Committee passed HB 138 unanimously and, like HB 68, it is waiting to be heard on the House floor.

Variations on an assessment theme

Friday’s bills – all killed -- included three variations on lowering the assessment ratio and one bill modeled on California’s Proposition 13, which limits increases in assessed valuation. The revenue losses for each of the bills would have been significant.

House Bill 189, sponsored by Rep. Lisa Shepperson (R-H58, Casper) and co-sponsored by Sen. Don Dockstader (R-S16, Afton) was a Proposition13-like bill to limit increases in assessed valuation to 2% per year, with no make-up revenues.

Under HB 189, revenue losses to local governments were projected at $15 million for fiscal year 2010, nearly $25 million for fiscal year 2011, and $35 million for fiscal year 2012, going up in future years. Losses to the School Foundation Program were projected at approximately $3 million, $5 million, and $8 million for those three fiscal years, respectively.

Lower assessment ratios

House Bill 87 was sponsored by House Speaker Colin Simpson (R-H24, Cody), and co-sponsored by Reps. Ed Buchanan (R-H4, Torrington), Keith Gingery (R-H23, Jackson), David Miller (R-H55, Riverton) and Sens. Eli Bebout (R-S26, Riverton), Hank Coe (R-S18, Cody) and Grant Larson (R-S17, Jackson).

House Bill 87 permanently lowered the assessment ratio for residential property but included make-up revenues for local governments only for the year 2010. After that, revenue losses would start hitting the School Foundation Program (nearly $10 million in fiscal year 2011) and local governments (about $46 million in fiscal year 2012 and going up thereafter).

House Bill 175, sponsored by Rep. David Miller (R-H55, Riverton) and co-sponsored by Rep. Frank Philp (R-H34, Shoshoni) lowered the assessment ratio for both industrial and residential properties for the years 2010-2011, with make-ups revenue for local governments only.

House Bill 214, sponsored by Rep. Lisa Shepperson (R-H58, Casper) and co-sponsored by Rep. Bob Brechtel (R-H38, Casper) and Sens. Eli Bebout (R-S26, Riverton) and Charles Scott (R-S30, Casper), permanently lowered the assessment ratios for industrial and residential properties with no make-up revenues.

Under HB 214, revenue losses for local governments begin at $83 million in 2011 and $87 million in 2012, going up thereafter. Revenue losses to the School Foundation Program were projected at $18 million for fiscal year 2011 and $19 million for fiscal year 2012, increasing in future years.

Revenue Committee member votes had not been listed on the LSO website as of Saturday evening. On Friday, five committee members opposed all four bills that would have adjusted assessed valuations or assessment ratios, including Chairman Rodney "Pete" Anderson, (R-H10, Pine Bluffs), Amy Edmonds (R-H12, Cheyenne),Mike Madden (R-H40, Buffalo), Owen Petersen (R-H19, Mountain View) and Mark Semlek (R-H1, Moorcroft).

Rep. Ken Esquibel (D-H41, Cheyenne) supported only HB 87. Rep. Patrick Goggles (D-H33, Ethete) supported HB 87 and HB 175. Rep. David Miller (R-H55, Riverton) voted for HB 189, HB 175, and HB 124, but opposed HB 87.

Rep. Sue Wallis (R-H52, Recluse) voted in favor of all four bills.

(Equality State Watch thanks Sarah Gorin, the ESPC's tax expert, for reporting on the House Revenue Committee's actions on Jan. 21 and 23.)

House kills Throne campaign finance bill

House Bill 117 - Campaign finance, which would have limited state Political Action Committee contributions to campaignsd was defeated 35-18 in Committee of the Whole Friday. (The seven members who did not vote were excused for a meeting of the Appropriations Committee.)

Confusion over the pre-election receipts reporting apparently troubled the representatives, who were tired from a week of working bills.