Nationwide, property owners have seen significant increases in property valuations and are calling for taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. relief. Lawmakers should explore ways to offer this relief, but they need to adhere to sound tax principles. In November, Wyoming voters will be asked to decide whether to grant the legislature additional authority to adjust property taxes. Unfortunately, the measure being proposed is a non-neutral policy that could skew investment decisions and likely shift the property taxA property tax is primarily levied on immovable property like land and buildings, as well as on tangible personal property that is movable, like vehicles and equipment. Property taxes are the single largest source of state and local revenue in the U.S. and help fund schools, roads, police, and other services. burden without providing significant relief for all taxpayers.
**History and Current Proposal**
In 1988, Wyoming voters amended the state constitution to establish three classes of property, requiring each to be assessed at full market value and taxed equally within its class. These classes include: (1) minerals and mine products, (2) industrial property, and (3) all other real and personal property. Residential property currently falls under the third class. Nearly 40 years later, a legislatively referred constitutional amendment from 2023 proposes to add residential real property as a fourth class, allowing for a new subclass for owner-occupied primary residences.
**Implications of a Split Roll Tax System**
In some states like Wyoming, different property classes face distinct tax burdens under a split roll, or differentiated, tax system. This means that various property types are taxed at different rates or assessment ratios, introducing non-neutrality into the tax code and influencing investment choices. Additionally, such a system could motivate lawmakers to increase the tax burden on certain property classes, often disadvantaging businesses, to generate extra revenue without appearing to raise homeowner taxes.
If voters approve this constitutional amendment, it will further split property rolls. Creating a new subclass of residential property with its own assessment ratio could shift the tax burden to other property classes to maintain revenue stability. Effectively, Wyoming voters are being asked to prioritize property owners living in their homes over other groups, including renters.
**Impact on Renters and Businesses**
Apartment complexes, which would fall into a separate class, would likely face higher property taxes, a cost ultimately borne by renters. Similarly, rented single-family homes could be placed in a different subclass, again placing renters at a disadvantage compared to homeowners. Businesses and individuals with second homes would also be affected by different tax treatments, which tends to hurt the broader community in the long run.
Part-time residents, renters, and vacation homeowners contribute to the local economy similarly to full-time resident homeowners through spending and sales tax revenue. Nonetheless, renters often have lower incomes and should not bear disproportionately higher property taxes.
**Alternative Solutions**
In 2024, lawmakers debated various methods for property tax relief, including exempting substantial portions of residential property assessed value and replacing local revenue with an increased statewide sales tax. Although this measure did not pass, others did. The governor signed bills offering increased assessed value exemptions for older taxpayers and veterans, and limiting year-over-year property tax increases.
As property valuations surge nationwide, it’s crucial to avoid unsound policies for relief. We have written extensively on the drawbacks of such measures. Wyoming’s proposed amendment fails to provide a sound solution.
**Conclusion and Call to Action**
To deliver effective relief to Wyoming property owners, the state should implement strong levy (or revenue) limits, which it currently lacks. These limits can control the total revenue raised by the government and can include rollbacks or reductions to prevent excess collections. Lawmakers could also set a revenue growth rate adjusted for inflationInflation is when the general price of goods and services increases across the economy, reducing the purchasing power of a currency and the value of certain assets. The same paycheck covers less goods, services, and bills. It is sometimes referred to as a “hidden tax,” as it leaves taxpayers less well-off due to higher costs and “bracket creep,” while increasing the government’s spending power.. This way, even as property valuations rise, tax payments could decrease to prevent unwarranted government windfalls while ensuring adequate funding.
Wyoming lawmakers are justified in seeking property tax relief, but voters should not support a constitutional amendment that further splits tax rolls and authorizes a new property subclass. Implementing levy limits could offer the necessary relief and stability without the adverse effects of unsound policies.
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