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New report examined Oregon and three other states with limits on property taxes

SALEM — A new report from the Center for Budget and Policy Priorities is critical of Oregon's property tax limits, which could be a target of reform in 2019.

The new report, released July 25, examined Oregon and three other states — Michigan, Massachusetts and New York — with limits on property taxes.

The limits have driven cities and counties to squeeze revenue out of fees and charges that disproportionately affect low-income people, the authors of the report from the Washington, D.C., think tank argue.

Oregon's unusual, and complex, system was enacted through a series of ballot measures in the 1990s.

Supporters say the limits protect taxpayers from sharp annual increases in property taxes and require local governments to be thrifty.

But detractors say the system, which among other caps and restrictions, typically taxes owners on the assessed value of a property — rather than its real market value — creates significant disparities in property taxes, even between similar properties in the same area.

In May, Gov. Kate Brown expressed interest in working with state lawmakers to make changes to the system next year, when the Legislature convenes for a roughly five-month-long budget writing session.

Lawmakers have proposed tweaks to the scheme in previous sessions. Any changes to the state constitution, as a property tax overhaul would require, need a referral to voters for their approval.

Localities can ask voters for additional levies to fund services, but advocates argue that the system has adversely affected school funding, to the detriment of students.

"Oregon schools have never recovered from the damage wrought by the property tax limits enacted in the 1990s," Daniel Hauser, a policy analyst with the Oregon Center for Public Policy, said in a statement released in conjunction with the report. "The Oregon Legislature failed to fully make up for the loss of property tax revenue, and a whole generation of Oregonians have paid the price."

To support services such as schools and police, localities have increasingly relied on new fees and service charges, which can be more burdensome for low-income residents, the study found.

"For example, a $50 fee to participate in the school band is harder to pay for a parent working at minimum wage than for a millionaire," the authors write.

In 1977, local governments in Oregon got about 16.7 percent of their revenues from fees and charges. By 2015, that share had leapt to 26.6 percent.

The study recommends states with property tax limits re-examine their systems.

"Every state with a property tax limit would do well to examine the consequences of its limit and consider relaxing or repealing it," the study says. "States can employ more targeted alternatives, such as circuit breakers (which provide refunds to households whose property taxes are deemed too high) and homestead exemptions (which exempt a flat amount of home value from the tax), to relieve property taxes for seniors and others who might have difficulty affording them."

Wendy Johnson, a lobbyist for the League of Oregon Cities, says her group is surveying its members and considering whether property tax reform will again be among its legislative priorities for the long 2019 session.

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