Eliminating property taxes would devastate crucial local services

Property values have increased nationally since the pandemic, leading to higher property taxes. This has created a financial strain on some lower- and middle-income households. The need for effective solutions is real, but eliminating property taxes – as some state legislators are pushing – isn’t the answer.

In Oklahoma, property taxes account for 56 percent of local tax revenue and fund critical services like fire response, law enforcement, emergency responders, trash collection, libraries, and schools. Without property taxes, counties, municipalities, and school districts would have to depend on the state to fund core services – and that money often shifts with politics.

With Oklahoma’s supermajority requirement to raise taxes, the legislature is not well positioned to raise revenue when needed. Oklahoma’s general revenue is at further risk from the impacts of this summer’s federal megabill H.R. 1, which is expected to reduce funding and jeopardize SoonerCare and SNAP benefits for many everyday Oklahomans. While some Oklahomans do need help with rising property taxes so that they can keep their homes, there are more fiscally responsible ways to provide targeted relief without threatening the services every community depends on.

Local governments need property taxes to provide community services

Property taxes are one of the main mechanisms reserved for local governments to raise revenue and meet the needs of local residents quickly and efficiently. They allow local governments to tailor services to their community’s priorities.

The county assessor sets property values, and the county treasurer applies the tax rate, collects tax revenue, and distributes it to various government entities. Property tax rates are set by procedures established in the Oklahoma Constitution or voted directly by taxpayers, but they must comply with state-mandated limitations. Compared to other states, Oklahoma already has several limitations on property taxes, including caps on the tax rate, limits on property value increases, and restrictions on what percentage of the budget property taxes can cover.

In 2024, property taxes in Oklahoma brought in $3.9 billion for local governments and made up at least half of the budget in 62 of Oklahoma’s 77 counties. County governments, school districts, and fire districts all depend on this money to fund vital services and infrastructure. Eliminating property taxes would blow a huge hole in local budgets while preventing local governments from exercising local control if voters choose to invest in the success of their own communities.

Life-saving services rely on property taxes

Nationally, about 9 in 10 dollars for policing comes from property taxes, as does most funding for emergency medical services. Special districts in Oklahoma, which include emergency medical service districts and fire protection districts, received over $71 million in property taxes in 2022. These dollars fund more than 600,000 annual ambulance runs in Oklahoma.

Without this funding, cities would have to find a way to make up the difference or rely on the state to step in. Cities are already greatly limited on revenue sources – cities may only use property taxes to pay the debt on bonds, which is the primary way governments finance projects like new buildings or infrastructure – and must rely instead on sales taxes, user charges such as fees for utilities, and hotel/motel taxes. With no clear funding mechanism in place, residents may face a future without access to life-saving services.

Public school funding would be decimated if property taxes are eliminated

In 2019, 68 percent of property taxes in Oklahoma went to fund schools. These dollars pay for essentials like teacher and staff salaries, textbooks, supplies, school buildings, and sinking funds (savings funds for specific projects).

Schools are funded through a combination of local, state, and federal money. Federal funding tends to be the smallest portion, with schools relying primarily on state and local funding. Before state funding is distributed, local revenue sources – including property taxes – are subtracted from the distribution in an effort to equalize per-pupil funding across school districts. Eliminating the property tax would mean the state needs to step up and cover that loss. But with decreasing revenue due to sales and income tax cuts, as well as looming uncertainty related to the impacts of federal funding cuts in H.R. 1, the state budget is not in a position to do so.

Meanwhile, Oklahoma’s school system already faces many challenges. The state is experiencing a teacher shortage. Oklahoma public school funding and expenditure for the 2023-2024 school year ranked 49th in the nation. When adjusted for inflation and population growth, per-pupil funding has decreased by $717 since 2008. At the same time, lawmakers are increasingly funneling public dollars into private schools. Our children can’t afford cuts to local funding that threatens their educational outcomes.

Property tax elimination would largely benefit wealthy landowners and corporations

Wealthy Oklahomans would receive the largest tax benefit from eliminating property taxes. One in 5 Oklahoma homeowners has an annual income of $150,000 or more, yet they would be asked to pay nothing in property taxes. Meanwhile, there is no guarantee that the 30 percent of Oklahomans who rent and struggle to make ends meet would benefit from property tax cuts despite paying for property taxes indirectly through rent. Landlords are unlikely to pass on savings from property tax elimination to tenants through rent reduction since rent is largely determined by market demand.

Wealthy homeowners already benefit from undervalued property assessments that lower their property tax bill. Corporations and wealthy homeowners are also more likely to work the system to get their property taxes even lower through a process of “contesting” their bill, which creates additional issues like freezing of funds meant for school districts. Simultaneously, the impact of lost services due to reduced revenue would hit hardest in middle-income, low-income, and rural communities, while wealthier households would be able to send their children to private schools and pay for specialists instead of waiting in a rural hospital. Eliminating property taxes would worsen existing disparities by creating funding shortages for schools, roads, hospitals, and fire stations. We should not allow subsidization of land and homeownership for the wealthy on the backs of everyday working Oklahomans.

Corporations also stand to benefit greatly from property tax elimination. Many corporations already receive generous tax breaks in Oklahoma. Eliminating property taxes would give them yet another way to avoid investing in the communities they operate in. Everyday Oklahomans will see the impact of this lost revenue directly through decreased services while corporate CEOs rake in even larger profits.

Real ways to provide property tax relief exist and should be implemented

The strain on people’s pocketbooks is real. Rising property values have led to higher property taxes and Oklahomans need relief. But the answer is not to eliminate property taxes. That would do far more harm than good – leaving people without reliable emergency services and children without access to free public schools. Eliminating property taxes strangles local autonomy while benefiting wealthy people and corporations at the expense of everyday Oklahomans.

We don’t need to eliminate property taxes – just ensure tax relief is targeted to those who need it most. Some data-driven strategies include:

• Circuit breakers : used to prevent a property tax “overload” by crediting back property taxes that exceed a certain share of income.
• Renter tax credits: provide financial relief to people who pay rent for their primary residence and indirectly contribute to property taxes.
• Vacancy taxes: a tax applied to properties that are unoccupied for a certain period of time in a year. This is targeting households with vacation homes or secondary homes or property. Helps combat housing shortages and discourages property speculation by penalizing property owners for leaving residential properties vacant, encouraging them to rent or sell these homes.
• Standardize and automate assessment procedures: Increase the frequency of property assessments and reduce bias in assessment procedure