OKPOLICY.ORG
Representative Scott Fetgatter, R-Okmulgee, has assumed chairmanship of the House Subcommittee on Finance after the resignation of former Rep. Ty Burns, R-Pawnee, and Fetgatter wants to look at lowering the property tax burden and finding ways to replace the revenue. He has certainly identified an issue deserving attention. Real property taxes are among the least popular taxes.
One reason is that ownership of real estate no longer reflects a person’s wealth, as it did in 1907 at the time of Oklahoma statehood. At that time, wealth was measured primarily by how much property a person owned. Today, wealth is measured in income and other forms of property such as stocks, bonds, or ownership of income producing-equipment or businesses.
Real estate ownership does not necessarily reflect the ability to pay. For most families who own property, it is used as their home, which is not income producing. If they have owned the home for a while, its value due to appreciation may be a false indication of how much they are able to pay in taxes.
The other problem with property taxes is that it is almost impossible to make them fair — or perceived to be fair. By fairness, I mean accurately assessing the fair cash value of the property and then relating its value to the amount of tax that ought to be paid. The state has a sordid past in properly assessing and taxing property, partly caused by its complexity.
Under Oklahoma’s populist Constitution, there is a “fair cash value” as well as an “assessed” value set by an elected county assessor. The assessed value must be not less than 11% nor more than 13.5% of the property’s fair cash value for the highest and best use for which such property was used during the taxable year. Then the tax rate, which is set by the Oklahoma Constitution and by various votes of the people, is applied to the assessed value in “mills” or one-thousands of a dollar.
At the end of the day, most taxpayers have little idea why their property taxes are what they are. The whole property tax system was designed during a populist period of history to tax according to wealth but to keep taxes low. That’s why the county assessor is elected, and additional taxes require a vote of the people. County assessors often are pressured to keep property values low, especially at election time.
The problem for Rep. Fetgatter and the Legislature is that property taxes are a big source of revenue for local schools, health departments and libraries, and the primary source of revenue for counties. Most counties and cities are already underfunded.
With the unfortunate mantra of Gov. Stitt to lower income tax rates and establish a “path to zero,” the fairest taxation of wealth — the income tax — has become less available to fund core government services, both state and local. That leaves consumption taxes such as the sales tax, which is regressive.
Rep. Fetgatter is a good one to tackle property taxes, but it’s a complicated issue. He’ll find lots of support for lowering property taxes, but not much help in replacing them as he learned in discussing the issue with his committee. It will likely take more than the three years he has left before he is term limited. But maybe he can make a good start.
