A New Smoking Pipe Or New Taxes?
Here in Washington our property tax system is extremely complex, and I have found that very, very few people understand it. Unfortunately governments at all levels use that confusion to mislead voters about what the true effects of levy and bond votes will be.
I received this week my ballot, and my voter’s pamphlet, a guide that I read in great detail. I don’t imagine that many others spend nearly as much time with their own pamphlets but such is the nature of life when ones livelihood is determined by success and failure at the ballot box.
I was disturbed to see that my particular pamphlet contained 8 local levy proposals, all for fire/EMS services, and in my opinion all the supporting statements were written in such a way as to mislead the voters about what the actual effects of passage would be.
For this reason I have decided to attempt to explain how property taxes in Washington work here on ‘The Mayor’s Vice.’
Before I begin, there are a few things I would ask you to remember:
1. As stated previously, property taxes in Washington are extremely complicated. As someone with ultimate responsibility for the financial health of a City dependent upon property tax revenue it was necessary for me to understand exactly how property taxation works. My ability to explain the process however might not reach the same level of proficiency as my understanding of the process. Therefore my explanation may result in you having follow-up questions, I would be happy to answer any such questions via email.
2. You will have likely never heard property taxes explained in this way before. That is because governmental entities occasionally rely upon voter confusion to pass levies. It is unfortunate, but nevertheless true that your government has a vested interest in providing property tax information in such a way as to confuse.
3. I have found when explaining the property tax process to others that the largest stumbling block to understanding the process is a mistaken belief about how assessed valuation effects ones tax bill. It is not true that an increase in assessed valuation requires or must result in an increased tax bill. I ask that you forget any mistaken beliefs about how assessed valuation comes into the process as you start to read and in turn I promise that I will explain it at the appropriate time.
4. I am not advocating for or against any measure on the ballot. I have no way of knowing if any particular levy you are being asked to vote in favor of is a reasonable proposal or not. I am simply explaining the process so that you can make a properly informed decision.
With all of that out of the way, on to the process:
Each year every local government that you pay taxes too decides how much money it wants to run it’s operations for the next year. The County, the City, the School District, the Library District, the Fire District and so on. They all do this.
The governing body when making this decision has three options. It can decide to collect the same amount of money next year as it did this year, it can decide to collect one percent more money next year than it did this year, or it can decide to ask the voters for permission to collect an amount greater than one percent more money next year than this year. The important thing to remember is that the governing body, on it’s own can maintain the same level of tax collection, or even raise tax collections by one percent. It only must seek the consent of the voters if it desires to raise tax collections above one percent in a single year. Hence, any levy that passes will increase your taxes, and likely will increase them dramatically. Technically I suppose that the governing body could also, on it’s own decide to reduce the level of it’s tax collection. I doubt however if hell is yet so cold.
This decision states how much money will be collected in the upcoming year. A dollar figure for the entire taxing authority. It is not decided by how many ‘dollars per thousand’ or any other measure intended to confuse. The government in question simply states how much money will be collected from property taxes in the upcoming year.
Once that decision is made by either the governing body or the voters the tax collectors go to work. They figure out exactly how much all of the real property located within the taxing jurisdiction in question is worth then divide the amount decided to be collected by the total value of all taxable real property.
Once this broad number is figured out it is broken down by individual property owner. Each property owners tax bill is based upon how much of the total property value within the taxing jurisdiction he or she owns. This is where your assessed valuation comes into play.
If your home increases in value faster than that of most in your community, perhaps due to home improvement projects your taxes will rise because you now own a larger percentage of the total value within the community. If your home decreases in value faster than that of most in your community, perhaps due to an issue effecting it’s livability your taxes will fall because you now own a lesser percentage of the total value within the community. If however like most people your house rises or falls in value at the same rate as that most everyone else your taxes will remain roughly the same because your total percentage of ownership of the entire value of the community has neither gone up, nor gone down. In my experience, the vast majority of people do not understand this. They believe that their tax bill always increases as the value of their real property increases, thus they direct their concern, indeed anger, towards rising assessments instead of rising levels of revenue collection. The wrong process is blamed for increased tax bills, how convenient for those who hold public office and seek to raise taxes!
Property tax exemptions also play into ones tax bill, and in a large way. Churches pay no property taxes, many senior citizens pay lesser property taxes, and other exemptions exist as well. None of these exemptions reduce the amount of money collected by the government. That burden is simply shifted to everyone else. Remember that in step number one the government decided how many dollars it would collect. If your neighbor doesn’t have to pay his full amount, for whatever reason, you and the rest of your neighbors will have it added to your bill. Therefore the wise voter would use extreme caution before ever lobbying for additional property tax exemptions. In the end such exemptions hurt far more people than they ever help.
There you have it, property taxes in a nutshell.
Now let’s look at a specific example or two.
Snohomish County Fire Protection District Number 1
From the voter’s pamphlet, statement for:
“This levy is not a new tax. Prop. 1 restores the existing fire levy to the same rate approved by voters in 2006: $1.50 per $1000 assessed valuation.”
Let’s break this down.
The statement clearly wants voters to believe that if Proposition 1 passes their taxes will not go up. Rather their taxes will remain the same. The statement is of course misleading, and quite likely designed to mislead.
The truth we can learn from this statement is that in 2006 the voters approved a levy that resulted in taxes of $1.50 per $1000 in assessed valuation at that time. Of course since 2006 property values have risen. The dollars collected by the district have either remained the same, or more likely have risen by a couple of percentage points in the intervening years. The dollars collected from the average taxpayer have also remained about the same, or risen by a couple of percentage points. Since however the value of all real property within the district has risen property owners are no longer paying $1.50 per $1000 of assessed valuation. This is because the property owners have more thousands. The taxes collected have remained the same, but the amount collected per thousand has fallen because there are more thousands.
Bottom line, a vote in favor of Proposition 1 is not a vote to keep paying the same level of tax, it is indeed a vote in favor of a rather large tax increase.
Snohomish County Fire Protection District Number 12
From the voters pamphlet, statement for:
“This levy is a restoration of the Emergency Medical Services levy rate, which re-sets the levy to .50 cents per $1000 of assessed valuation, the same level previously approved by voters in 2004.
Washington State law sets a 1 percent limit on property tax increases. As a result, the EMS levy rate drops a few cents each year. The previously authorized EMS levy has dropped in the City of Marysville and Fire District #12 to .34 cents ad .38 cents per $1000 of assessed valuation respectively. Passage of this levy will allow the fire district to restore the EMS levy to the .50 cent rate previously approved by voters.”
This statement is in my opinion also intentionally written to mislead and foster confusion. It clearly hopes that the voters will think something along the lines of:
If you vote for this levy your taxes will not go up beyond what they were in 2004. That due to some odd quirk of state law the fire district has been collecting a bit less money each year since 2004, and that the fire district will be harmed if this decline in revenue is allowed to continue. Therefore a yes vote will just be taking things back to how they were back in 2004.
The truth is I’m afraid much different, but can be gleaned from the statement. We can learn that in 2004 the voters approved a levy that resulted in taxes of .50 cents per $1000 in assessed valuation at that time. Since 2004 property values have of course risen. The dollars collected by the fire district have increased by at least one percent each year since 2004, but as the value of real property within the district has risen the number of cents collected on each thousand has fallen. Since there are more thousands within the district less cents per thousand must be collected in order to collect the same or in this case slightly increasing amounts of money. If the levy rate is currently at .34 cents, and this proposition seeks to raise that levy rate to .50 cents that will not result in the fire district collecting about the same amount of money it collected in 2004. Rather it will result in close to double the dollars collected. It will come close to doubling the taxes each property owner within Fire District 12 pays for EMS services.
The statement was written so that the average person would believe that passage would result in the same amount of taxes paid as were paid in 2004. The truth of the matter is that passage will result in an almost doubling of the taxes paid. Quite a difference!
It is worth pointing out that voter’s pamphlets come with little disclaimers, mine says:
“The for/against statements are the opinions of the authors and have not been checked for factual or grammatical accuracy by any government agency.”
In other words, no one checks to see if they are misleading, indeed no one checks to see if they are filled with lies. Unless you know and trust the person who wrote the statement it is best to remember what the disclaimers say and take the statement with a nice healthy grain of salt.
I have picked on Fire Districts 1 and 12 here simply due to random choice. All the other statements within my pamphlet are written in similarly misleading language, so the fact of my choosing them as examples should not be perceived as a belief that they are somehow worse than other local governments. Additionally, I do not live within either Fire District, so cannot judge the merits of their propositions, I do not suggest a vote either way, they are simply examples. My own fire district is quite conservative when it comes to tax increases and they do not have a levy before the voters this year which is why I had to choose others to serve as examples.
The choice is yours, either choose to vote to increase your taxes or choose to spend that money on a fine new smoking pipe instead. I cannot give advice about the levies you are asked to vote in favor of, but I hope that at least by providing this explanation I am able to provide you with the understanding you need in order to make an informed decision. A role that should be, but is not, fulfilled by our Secretary of State.