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Property Tax Exemptions: Structure in Four States, Impact on Tax Base, Revenues, Equity By Richard K. Green Department of Finance and George Washington Institute of Public Policy The George Washington University 2201 G Street NW Washington, DC 20052 202-994-2377 202-994-9141 [email protected] and Elaine Weiss George Washington Institute of Public Policy 202-552-2052 [email protected] September 9, 2007 Preliminary Draft. Please do not cite or quote without authors’ permission. Opinions are those of the authors, and are not necessarily those of any institution to which they belong.

Green and Weiss, Property Tax Exemptions: Scenarios in Four States


Property Tax Exemptions: Structure in Four States, Impact on Tax Base, Revenues, Equity Richard K. Green and Elaine Weiss The George Washington University I. Introduction The property tax has many merits, not least of which is that it is a benefit tax—it allows people in a municipality or school district to choose the mix of taxes and services they desire. Because, at least theoretically, people can vote both at the ballot box and with their feet, government officials have a powerful incentive to provide an efficient mix of taxes and services. Nevertheless, policymakers are legitimately concerned about the economic, political, and social issues that property taxes raise. Some worry about the distributional implications of the property tax. This concern stems from a straightforward calculation: low-income people tend to spend a higher fraction of their current income on housing than do high-income people; if property taxes are applied in an ad valorem fashion, then low-income people pay a greater share of their incomes on property taxes than do their wealthier counterparts. As such, the property tax appears regressive, and elected officials generally don’t care for regressive taxes. Policymakers also worry about whether property taxes cause rural homeowners to be “taxed off their farms,” or, in the case of the elderly, “taxed out of their houses.” In the same vein, lawmakers express concern that corporate property taxes that are “too high” will drive business elsewhere. All of these problems feed legislators’ sensitivity to the possibility of a “tax revolt,” such as the one that took place in California in 1978. Various state legislatures have developed policies attempting to “solve” the problems discussed above; most states have enacted laws that give property tax relief to low-income people, to the elderly, to farmers, and to business. Ironically, many of these “solutions” have led

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to a narrowing of the tax base, and therefore to higher tax rates and payments for certain groups of property tax payers. This paper assesses some of the implications of these policies; in particular, it will take a prima facie view of how property tax exemptions narrow the tax rate and increase rates on non-exempt property.

A Brief Review of Theory of the Property Tax Economists generally like the property tax because, to the extent that it is a tax on land (rather than improvements), it is a Ramsey Tax—a tax on something with low elasticity, and therefore a tax that has minimal impact on allocative efficiency. However, debates have long existed and continue about both property tax’s true impact on allocative efficiency with respect to improvements, and the impact of the tax on equity. Because lawmakers justify many property tax relief programs on the basis of equity, that will be our focus here. The equitability of the property tax is largely a function of where the incidence of the tax lies. Indeed, Brunori et al. (1996) emphasize that the view one takes on incidence will determine the view one takes on the distributional implications of the property tax. The literature is divided by two competing views of incidence: the “new” view, advocated by George Zodrow (1991), and the “benefits” view, actually the newer of the two, whose principal proponent is William Fischel (2001). According to Zodrow, the burden of the property tax lies with owners of capital. Such people have higher-than-average income and wealth (a fact well established in the Survey of Consumer Finances), and therefore the property tax winds up being progressive. To some extent, Fischel’s benefits view also suggests that the net impact of the property tax might be more progressive than anything else—while low-income households may pay a higher share of their

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income on the property tax than those higher up the income distribution, they may also reap far more benefits than they pay in taxes, meaning that the net effect for low-income households is more welfare enhancing than it is for other households. So even the leading scholars in the field have trouble agreeing on “the basics,” such as who pays more in property taxes. There are good reasons for this. If we look at the property tax in a more straightforward way—if we assume that incidence is closely related to statutory obligation—the distributional impact of the tax is still not entirely clear. This lack of clarity can be attributed in part to the exemptions and tax credit programs that are the focus of this paper. For example, many jurisdictions have in place property tax policies, such as “circuit-breakers” and tax-credits, that are designed to alleviate regressive impacts. These policies effectively reduce property tax burdens for households with incomes that fall below some critical point. Most jurisdictions also have policies that create departures from an ad valorem structure. These might include: use valuation (where property is valued based on how it is currently used, rather than its highest and best use); limits on changes from year-to-year in assessed value (Proposition 13 in California is the most dramatic example of this); and differences in effective tax rates across property classes. While enacted with the intent of increasing equity, some of these may actually make property taxes less progressive than they otherwise would be. In addition to these complications, there is a serious disagreement between economists and policymakers about how to measure income for the purpose of determining tax equity. Economists generally prefer a life-cycle model of income, with tax burdens measured against “permanent income.” Policymakers tend to focus instead on contemporaneous income. The distinction is important. Consider a college student living in an apartment. His tax burden

Green and Weiss, Property Tax Exemptions: Scenarios in Four States


relative to his current income is likely quite high, but relative to his lifetime income might be quite low. Regardless of how one measures incidence, under a life-cycle framework, the property tax is more progressive than it is under a contemporaneous income framework. This is because households “smooth” housing consumption over their lives. For instance, when people first buy a house, their payment-to-income ratio is usually much higher than it is ten years into the mortgage. To some degree, households make choices about housing based on what they think their income will be, not just based on current income. Hence, the relationship between housing expenses and income over the life-cycle is different from the contemporaneous relationship. People who choose a lot of housing when their income is low because they expect their income to rise are very different from people who choose less housing because they do not expect their income to rise very much. The implications are important: in a contemporaneous income framework, the property tax appears regressive,1 but in a life-cycle framework: a pure ad valorem property tax is more or less progressive. The “problems,” then, stem mainly from the exemptions to the property tax, and not from the tax itself.

Problems with Exemptions Public finance theory has some basic tenets, among which two are relevant as we think about property tax exemptions. First, there is a widely-held belief that low rates on a broad tax base are superior to higher rates on a narrow base. The reason for this is straightforward: lower and uniform rates are less likely to create distortions than are higher and non-uniform rates. 1

Although, we must again note that if the incidence of the tax falls on owners of capital, the property tax may be progressive even in a contemporaneous income framework.

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Second, public finance theory asserts that direct expenditures are more efficient than tax expenditures (i.e., tax breaks for certain behaviors relative to others). For example, if policymakers seek to even the income distribution, they would do better by giving direct subsidies to low income people than, for example, giving them homestead tax credits. Let us consider certain broad classes of property tax exemptions and preferences. On average, owner-occupied property pays lower property taxes than that occupied by renters, and commercial property pays higher taxes than residential property. Other common exemptions include farm preservation tax credits and tax benefits for the elderly. Each brings with it its own economic consequences and distortions. Homeownership is among the most sacred of cows in American politics. Writers have championed the glories of homeownership at least since the days of Toqueville, and numerous American presidents have praised its virtues. They are not without reason; there do, indeed, seem to be some social benefits that result from owner-occupation. DiPaqasquale and Glaeser (1998) have shown that homeowners are more likely than renters to be civic-minded, and Green and White (1997), as well has Hauren, Parcel and Hauren (2002), find that child outcomes for owners seem to be better, after controlling for a variety of household characteristics, than renters. Let us assume, then, that ownership carries sufficient social benefits to make it worth subsidizing. It is still not clear that the subsidy mechanism should work through the property tax. Among other things, it is almost certainly the case that giving a property tax reduction to all homeowners would be an infra-marginal subsidy: it would benefit households that would be homeowners regardless of tax treatment. At the same time, a property tax benefit to homeowners would detach taxes from spending, and could therefore produce a less-than-ideal mix of public services.

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Like renters, commercial property owners tend to pay higher property taxes than their counterparts, in this case, residential owners. In the short run, taxing commercial properties at the expense of residential properties is tempting to government officials: it allows them to provide services while lowering taxes for residents (voters). But ultimately, many commercial enterprises are footloose, and will be less likely ceteris paribus, to remain in a jurisdiction with relatively high expenses, including property taxes. Perhaps more critical, effective differential tax rates on residential and commercial properties distort the mix of land uses in a community.2 In addition to the two general preferences discussed above, many states also engage in differential valuation of certain types of land. States are increasingly taxing agricultural land based on use, rather than market value. This likely reflects both the ingenious nature of farm lobbying, and a preference on the part of suburban dwellers to preserve green space. But it also represents a shift of the tax burden away from farm property to other types, and a shift of the tax burden from farmers who have valuable land to those whose land cannot be converted to urban use. As such, taxing farm property based on use value is both distortionary and inequitable. Finally, policymakers worry about taxing the elderly “out of their houses.” It is surely reasonable public policy to allow retirees to remain in their houses. We must remember, however, that the elderly who own expensive houses are, in fact, wealthier than the elderly who own less expensive houses or rent. As such, the policy is regressive. Changing state laws to allow property taxes owed by the elderly to accrue until time of death or house sale would accomplish the goal of not putting an undue cash flow burden on the elderly without providing


Although we imagine that zoning could well create as many, if not more, distortions than differential property tax rates.

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tax benefits to the relative affluent. We recognize, however, that this may not be a politically popular proposal.3 It is a well-known fact that property taxes are politically unpopular. In fact, that is one reason it is so difficult to truly reform them to achieve both the equity and the broader tax base that both economic and social common sense suggest. It is possible, however, that property tax payers who pay the full property tax rate for their state or municipality do not understand how much higher their rate is because of base narrowing exemptions and assessments based on something other than full market value. They may be interested to know how much, given current spending, property tax rates could be cut if exemptions and special assessments were eliminated.

II. Institutional Structure: What do states exempt and value differently? We now describe policies in four states – Wisconsin, Massachusetts, Minnesota and Kansas – that cause the property tax to depart from a pure ad valorem tax . Wisconsin Real Property Exemptions Wisconsin’s property tax exemptions are not unusual—the state has removed from its property tax base types of property that other states commonly remove. A 2005 report compiled by Secretary of Revenue Roger Ervin for Governor Jim Doyle calculates the percentage of total state exemptions that each type constitutes and the property value of the exemptions.4 Religious


Richard G. Woodbury, a member of the Maine legislature as well as a Research Associate with NBER, relates that he was labeled “immoral” by his fellow legislators for proposing just such a policy. 4 Ervin, at pp.75-76.

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establishments account for 32.9%, or $7.4 billion, non-profit hospitals 11.9%, or $2.7 billion, residential property owned by benevolent associations (this includes YMCAs, Scouts, etc.) are next at 10.3%, or $2.3 billion, K-12 public schools 7.5%, or $1.7 billion, private colleges are close at 6.7%, or $1.5 billion, and “others -- educational, religious nursing and retirement homes, etc – make up the remainder. In addition to these, there are a number of types of real property that are taxed at less than full-market value. These include the sorts of differential valuations discussed above. While not technically exemptions, they work as such; the owners of the properties benefit from lower taxes, and the state obtains less revenue, owing to policy decisions about their merits that change the state’s tax base. These are discussed below.

Personal Property Exemptions Wisconsin, along with many other states, exempts, “[m]ost personal property, [e.g.] household furniture and furnishings, machinery and equipment used in manufacturing, computer equipment, pollution abatement equipment and inventories …from the property tax.”5 In his report on the impact of tax exemption devices, Ervin calculates these costs, which constitute another sizeable chunk of potential revenue: • Machinery and equipment used in manufacturing: $1.34 billion worth of such equipment was taxable, so assuming 10% is taxable, about $13 billion is exempt. • Waste treatment facilities: The Department estimates that approximately $2.5 billion of [nonutility] waste treatment property is exempted.6


Id. The numbers below are also from Ervin’s report at pp.76-77. “Qualifying facilities must remove, alter or store waste materials. The exemption is available to utilities, manufacturers and commercial businesses.” 6

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• Computer Equipment: In 2005, roughly $3.2 billion in such equipment was exempted, and the state’s compensating aid payments in fiscal year 2006 totaled $67.7 million.7

Non-Exemptions that Affect Property Tax Revenue and Distribution As a state with an agricultural tradition, Wisconsin’s farmers have been successful in lobbying to decrease the share of property taxes they pay.8 A set of laws ordering the assessment of farming and other types of properties at less than full market value causes the loss of a third chunk of property tax revenues for municipalities and school districts and further narrows the tax base. In response to farmers’ complaints that property taxes would force them to sell their land to developers, the state passed a law in 1995 valuing agricultural property at its agricultural use value, rather than its (potential) market value.9 A second law, which was initially enacted in 1927 and later revised and combined with another, gives special property tax treatment to owners of qualifying forest land.10 The intention is to reduce the burden on owners of such land, who reap a harvest only once every several years. The state amended the tax code so that landowners pay a flat, annual per-acre fee, plus a severance tax when timber is harvested.11 Finally, “swamp and waste” land has been, since the 1970s, counted as “undeveloped” and assessed at 50% of market value. 7

Exempt are: mainframes, minicomputers, personal computers, networked personal computers, servers, terminals, monitors, disk drives, electronic peripheral equipment, tape drives, printers, basic operational programs, systems software, prewritten software, faxes and cash registers. “Special payments are made to affected local governments to compensate for the lost tax base.” 8 While the state has an agricultural tradition, agricultures share of employment in Wisconsin is now less than 1 percent, and its share of output is less than xx percent (see XX). 9 The law was actually phased in over several years, but rather than continue gradually until 2007, as the initial law mandated, the state “promulgated an emergency rule providing for the full implementation of use value beginning in 2000” based on an October 1999 recommendation by the Farmland Advisory Council. Boldt, Executive Summary, at p.i. 10 In 1985, the state combined the 1927 and Woodland Tax Law (for smaller plots) in the Managed Forest Laws. Ervin at p.79. 11 The DOR estimates a net tax reduction of $61.4 million for FY 2005-06 for the Forest Tax Laws. See, Id., pp.7982 for details, and Table 1, p.81.

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In common with many other states, Wisconsin has a TIF (tax incremental financing) program. Started in 1975, the program substantially expanded in 2003 and 2005.12 Under Wisconsin’s program, city and village governments are permitted to create a TIF district if 50% or more of the area is “blighted,” in need of rehabilitation or conservation work, or suitable for industrial sites or mixed-use development. Once designated, a base incremental tax value, which is equal to the equalized property value and most municipally-owned property, is established for the area. The “tax increment” equals the difference between the value of the TIF zone property tax levy and the base value. All taxing jurisdictions within the district divide the increment and pay it, thus “paying off” the cost of the redevelopment. Data from 1975 to the present indicate that: •

1,428 TIF districts have been established, 516 have been terminated or dissolved, and 912 are still in existence.13

Overall, the average annual change in incremental value in TIF districts has been 12.5%, and the change in equalized value 8.3%.14

Overall, tax increment levies have increased nearly 10% annually, total levies for villages and cities have increased nearly 5%, and the percent of total levies attributable to tax increment is about 3.5%.15 One could make a case that TIFs do not reduce the property tax base, since the benefits to

property owners arising from the TIF are based entirely on the “incremental” value created by the property, and the property does pay taxes on the enhanced value. That said, the taxes go to infrastructure improvements connected specifically to the property. Also, TIFs may have two other negative impacts on the property tax base. First, as lawmakers and residents of non-TIF 12

“2003 Wisconsin Act 231 and 2005 Wisconsin Act 13 provided towns with the limited authority to create TIF districts. Similarly, 2005 Wisconsin Act 357 allowed certain counties with no cities or villages (Florence and Menominee counties) to create TIF districts.” Runde at p.1. 13 See Table 1: Number of TIF Districts, Runde at p.16 14 See Table 2: TIF Incremental Value Compared to Total Equalized Value (in Millions), Runde at p.17. 15 See Table 3: Tax Incremental Lev ies and Total Tax Levies – Villages and Cities (in Millions), Runde at p.17.

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districts complain, many TIF-assisted developments would likely have taken place without the TIF, and hence could potentially add to the property tax base for schools and other municipal services. Second, some TIFs assist developments that are not economically feasible, and as such may cost communities more than their ultimate contributions to the tax base.

Property Tax Relief to Municipalities Wisconsin does have in place several programs that grant property tax relief to municipalities, purportedly in order to compensate them for losses due to property tax exemptions, etc. The largest of these is the shared revenue program (County and Municipal Aid, and Utility Aid). These two aid programs, part of the state’s property tax relief program, are general, unrestricted aid and “rank as the fifth largest state general fund program.”16 The shared revenue program dates back to 1911, when state taxes were used to compensate local governments for exemptions to the property tax. When the individual and corporate income taxes were enacted in 1972 to replace the property tax on intangible personal property, shared revenue became the way to make up for lost revenue for municipalities and counties. Other revenues also shifted from locality to state. In 1971, however, the “return-to-origin” system was replaced with one based on local need, with four components: per capita; utilities; percentage of excess levies; and minimum guarantee.17 Payments are fairly consistent from 1997-2001, with municipalities receiving $761 million and counties $189 million. There is a small spike in 2002-


Shared revenue falls “behind general elementary and secondary school aids, medical assistance, the University of Wisconsin system, and corrections.” In 2004, the state transitioned from shared revenue to county and municipal aid, at which point “total payments declined by 7.9%.” Olin, Shared Revenue at p.1. 17 Further history and details about the current aid system are recounted at Id., on pp.7-11.

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2003, after which the 2004 decline kicks in, bringing the amounts down to about $720 and $175 million, respectively.18 A second area of targeted municipal aid includes the expenditure restraint, computer aid, and small municipalities shared revenue programs.19 Since 2003, the annual distribution has been set at $58.1 million, with distribution based on the share of the municipality’s excess levy within all excess levies of qualifying municipalities.20 Since 1999, when the property tax levy exempted computers, software, and related equipment from property taxes, and the exemption was increased in 2003-04 to include cash registers, faxes, and others, the state instituted a “hold harmless” measure to compensate those localities that lost revenue as a result. “Payments equal the value of the exempt property multiplied by the local government’s current tax rate.” Annual payments are around $65 million, declining slightly recently. A small municipalities’ shared revenue program existed from 1994-2004 but has since been suspended and folded into others. Other programs include the “payments for municipal services program, which pays about $20 million annually to municipalities for services they provide to state government offices,” 21 and state property tax credits, which are made up of school levy and lottery and gaming credits. The latter represent “tax credit programs where credits are paid to municipalities and shown on


“Table 1: Shared Revenues and County and Municipal Aid Payments,” 1997-2007, Id. at p.2. Table 2 sets out “Distribution of Estimated 2007 County and Municipal Aid and Utility Aid (Shared Revenue) Payments,” with county and municipal aid totaling $860 million, and utility aid totaling $38 million. 19 “The expenditure restraint program provides targeted, general aid to towns, villages, and cities.” There are two criteria to receive aid: the municipality must have a full value property tax rate over five mills, and it must restrict the rate of year-to-year growth in its budget as per a formula. “For the year prior to the aid payment, the rate of budget growth cannot exceed the inflation rate plus an adjustment based on growth in municipal property values. … To be eligible for a 2007 payment, municipalities were required to limit their 2006 budget increases to 3.3% to 5.3%, depending on individual municipal adjustments due to property value increases. … For 2007 payments, 413 municipalities met the tax rate test, but only 318 municipalities also met the budget test.” Olin, Targeted Aid at pp.1-2. 20 “Table 1: Expenditure Restraint Payment Distribution Summary” shows that, from 1998-2007, cities received by far the largest share – generally 90% or more – with villages around 9% and towns just a little. Id. at p.3. 21 Runde, Municipal Services, at p.1.

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property tax bills.”22 School levy tax credits are distributed to municipalities, which then give them directly back to individual property-owners, based on each municipality’s share of statewide levies for school purposes. The lottery was established in 1987 with the specific goal of property tax relief, and, since 1991, it goes to owners of taxable property,23 with owners of less valuable property getting a higher percentage of tax relief. The school levy tax credit system had annual funding of $469 million from 1996 to 2005, and has been increased to $593 starting in 2006(07).24 For 2005-06, lottery and gaming credits were $120 million, increasing to $145 million in 2006-07.25 Property Tax Relief to Individuals Finally, Wisconsin has in place programs to grant property tax relief to individuals. In 1963, the Homestead Credit helped low-income senior citizens, providing a maximum of $300, refundable, against income taxes for 50% (or 75% at lower incomes) of property taxes (or rent that was property taxes) exceeding 5% of income. It has since broadened substantially, costing the state much more as a result.26 In order to help farmers in an era in which farming increasingly does not produce revenue equivalent to other uses, and to preserve some land as open space, a tax credit was given in 1977, with a range.27 And the state established a property tax deferral loan program to help low-income elderly homeowners hold onto their homes in the 22

Olin, State Property Tax Credits, at p.1. In some years, the credit was targeted to “property used as the owner’s primary residence,” thus fewer recipients of the credit. In other years, all property owners received it, leading to more recipients. Id. at p.5. 24 “Statewide, the credit reduced the school portion of 2006(07) property tax bills by an average of 15.2%. On a home with a full market value of $150,000 subject to the average statewide levy rate for school purposes, school taxes of $1,247 would have been reduced by a credit estimated at $190. Higher-valued homes would receive a proportionately higher credit. For example, a $250,000 home taxed at the same rate would have a school tax bill of $2,078 and would receive a credit estimated at $316. The actual percentage reduction in school taxes will vary by municipality.” Id. at p.2. 25 For a table showing amounts allocated for all types of Wisconsin State Property Tax Relief Credits from 1980 (total $344 million) through 2007 (total $738 million, estimated), and how they have changed in amount and shifted in type over time, see Table 2: State Property Tax Credits, Id. at p.6. 26 Stark at p.35. 27 Id. at p.51. 23

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face of rising property tax rates. Finally, in 1981, state property tax credits were revised in response to discontent in disadvantaged rural areas: “[b]etween 1982 and 1983, both GPTR (general property tax relief) and PPTR (personal property tax relief) were replaced by the Wisconsin state property tax relief program (WSPTR).”28

Massachusetts Massachusetts, like Wisconsin and many other states, provides property tax exemptions for real property owned by traditional non-profit (literary, benevolent, charitable, scientific, and temperance) organizations, as well as religious groups. However, much of its system is local in nature. The key fact is that Massachusetts law allows cities and towns to give real estate tax exemptions to ‘seniors, the blind, surviving spouses and minor children, homeowners facing hardships, and certain disabled veterans who meet financial, residency, and other eligibility requirements. Thus there are a number of categories, and it is up to individual cities and towns to decide which they will adopt and to what degree. The state government reimburses cities and towns for some fraction of some types of exemptions granted. In addition, cities and towns can choose to adopt a ‘homestead exemption’ which removes from the taxable base a certain (chosen by the community) percentage (up to 20 percent) of the value of properties that are the principal residence of their owners…. Note: there are 351 cities and towns in Massachusetts, each of which independently levies the property tax; the cities and towns are mutually exclusive and exhaustive of the state’s area, and no other governments levy property taxes.29


“In 1982, $54,417,900 was distributed according to the old PPTR formula and $118,729,900 was paid according to the old GPTR formula. According to a new WSPTR formula based on the share of school property taxes collected, municipalities were to be paid the following amounts: $59.4 million in 1982, $105 million in 1983, and $195 million in 1984 and thereafter. The rest of the WSPTR payment, which was to increase annually, was to be paid to municipalities according to the school aid formula, thereby adding an element of equalization to shared revenue. Current credits are paid on 2 bases: property taxes levied for school districts and property taxes levied for municipalities.” Id. at p.53. 29 Email, Katharine Bradbury, July 18, 2007

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In other words, Massachusetts’ system of property tax exemptions is extensive, heavily locallycontrolled, and fairly complex. Massachusetts localities have the option to adopt tax exemption provisions by vote. As such, keeping track of which exemptions apply in which localities, how much they are purported to “cost,” and their ultimate impact on both local and state-wide taxpayers is difficult. A list of some of the major options for municipalities demonstrates the range of exemptions a locality might adopt, and, thus, the percent of property within it that is not taxable, or only partially taxable: • “Brownfields” – Environmental Tax Agreement. Enacted in 1998 to help remove financial impediments to the cleanup and redevelopment of abandoned contaminated properties, the bill made a number of changes in the state’s environmental laws and provides financial incentives to develop these properties. As of 2007, 17 municipalities have adopted the law. • Open Space Discount: “A municipality can apply a discount of up to 25 percent of open space. The open space discount reduces taxes on property classified as open space and shifts those taxes onto residential property. The purpose of the discount is to encourage preservation of a community’s undeveloped open space land.” • Personal Property Exemption: The exemption allows municipalities that adopt it to establish a minimum fair cash value required for personal property accounts to be taxed, no more than $10,000. About 70 localities have adopted the exemption, ranging from $500 to $10,000. • Residential Exemption: “A municipality can grant a residential exemption of a dollar amount that cannot exceed 20 percent of the average assessed value of all residential class properties. Communities that receive special legislation can exceed the 20 percent maximum. The exemption reduces, by the adopted percentage, the taxable valuation of each residential parcel that is a taxpayer’s principal residence. Granting the exemption raises the residential tax rate and shifts the residential tax burden from moderately valued homes to apartments, summer homes and higher valued homes. A residential exemption is one way resort areas (e.g., Cape Cod and the Berkshires) can provide some tax relief for permanent residents.” Twelve municipalities currently grant such exemptions, ranging from 10% to 30%.

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• Small Commercial Exemption: This provision allows a community to exempt up to 10% of the value of some commercial parcels, in effect shifting the tax burden from small businesses to other commercial and industrial taxpayers. Eligible businesses employ, on average, no more than ten people. The exemption has been adopted by seven municipalities, all at 10%.

Local Option Reimbursement Exemptions: This second set of local-choice exemptions, which grant property tax breaks to individuals who fall into a set of specific disadvantaged groups, offer localities the option to “choose up” from the default provision. The state partially reimburses localities based on the default provision, but municipalities may choose to be more generous. In some cases, there are three or even four options beyond the default. • Blind Person Clause 37, 37A: “Clauses 37 and 37A of section 5 of Chapter 59 provide alternative exemption provisions for blind persons who satisfy certain ownership and domicile requirements. Clause 37A provides an exemption amount of $500, while Clause 37 provides an amount of $437.50.”30 • Elderly Persons Clause 41, 41B, 41C, 41D: All of the alternatives to the original Clause 41 provide different exemption options for the communities that have adopted them “for persons 70 year of age or older who satisfy certain whole estate or asset, annual income and residency requirements.”31 • Surviving Spouses, Minor Children and Elderly Persons Clause 17, 17C, 17C ½, 17D, 17E: As with the above, Clause 17 applies unless a community has adopted one of the alternative tax relief measures.

Kansas 30

Clause 37 applies by default unless the city or town has enacted 37A by vote. Irrespective, the state reimburses communities $87.50 per exemption. A table on the website lists all communities that have enacted Clause 37A. 31 The DOR website contains a table listing all communities’ enactments and the relevant exemption amounts.

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Kansas’ system of property tax exemptions is similar in many respects to that of most other states in the country: it began with constitutional exemptions for the traditional types of real property: educational, government, religious, and charitable,32 expanded in the past few decades to include most types of personal property, and most recently exempts property deemed important for economic development purposes. As a result, the authors of a 2006 report on the erosion of the state’s property tax note, “[t]he Kansas property tax is evolving into a real estate tax, and residential real estate is becoming a more important part of taxable real estate.”33 They also report that Since the adoption of the Wyandotte Constitution in 1859, the constitution’s finance and taxation article has been successfully amended on only eight occasions concerning matters of property taxation (twice in 1924, 1964, 1976, twice in 1986, and again in 1992). These eight amendments, however, have departed from uniform and equal assessment and taxation of property for the benefit of at least 23 specific property interests.34 Specifically, fourteen of the benefits have been targeted to business property, five to agricultural property, three to homeowners, and one to nonprofit organizations. Appendix A of the report, a “Chronology of Constitutional Departures from Uniform and Equal Taxation of Property 1859 to Present,” shows only the original exemptions to real property listed above and a 1924 mineral rights exemption, until 1964, when the pace picks up considerably. Among the major exemptions of the next few decades: • All household good and personal effects not used in the production of income (1964) • Motor vehicles exempted from uniform and equal assessment and taxation (1974) 32

Kansas Governor Thomas Carney (1863-65) asserted the state’s intent to “[l]et all protected by the State share equally its burdens in proportion to their property,” and the early Kansas constitution states that, “The Legislature shall provide for a uniform and equal rate of assessment and taxation; but all property used exclusively for State, county, municipal, literary, educational, scientific, religious, benevolent, and charitable purposes, and personal property to the amount of at least two hundred dollars for each family, shall be exempted from taxation.” Fisher and Gile at p.5. 33 Id., Executive Summary at p.ii. 34 Id at p.5.

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• Land devoted to agricultural use exempted from uniform and equal taxation and authorized to be taxed on the basis of agricultural income or productivity (1976) • Exemption of merchants’ inventories, manufacturers’ inventories, farm machinery and equipment, and livestock (1986) • Differential assessment for residential real estate, commercial and industrial equipment, commercial and industrial real estate, agricultural land, mineral leaseholds, and public utilities properties (1986) In 1992, a second spate of changes brought the 1986 set of classifications down to an even lower level of assessment – from 30% to 12% for some, and down to 30% for the first time for others. Data showing the assessed value and percent of total property taxes collected on various types of property from 1988 to 2005 paint a vivid picture of the changes the authors assert have taken place: real estate increased from 44% to 65.% of all property taxes collected; personal property dropped from 24% to 14%; public utilities from 18% to 10%; and motor vehicles from 14% to 11%. At the same time, total assessed value declined from $13 million to $11 million. In addition to these, the authors say, there are at least 51 (non-constitutional) statutory exemptions – twenty benefiting business, seventeen benefiting agricultural, and fifteen benefiting individual property – that the state has enacted. These are too numerous, and, in many cases, too complicated to list here. E.g., in 2001, K.S.A. 79-256-259 exempts “certain electric generation facilities and pollution control devices of independent power produces and of public utilities placed in service after 2000, for six to twelve years.”35 The bottom line is a complex, but not terribly coherent, state-wide web of property tax exemptions with very different impacts on different areas of the state. Exemptions as a percent


Id. at p.31

Green and Weiss, Property Tax Exemptions: Scenarios in Four States


of total value range from 2.59% in Stevens County, which is in the Southwestern part of the state and contains only two “communities,” Hugoton and Moscow, to a whopping 44.54% in Jackson County, which comprises ten “communities.” The statewide mean is 12.46%, still a relatively high percent. Moreover, as the authors note, the ever-increasing list of exempt and partially-exempt properties and those that are assessed differently have resulted in a system that taxes only seven percent of real and personal property in the state.36 A bigger-picture look shows that Kansas’s exemptions can be divided into the following categories, with data based on market values: classification (32%); untaxed intangible personal property (22%); untaxed individual personal property (11%); untaxed agricultural value (10%); exempt (9%); untaxed business real and tangible personal property (6%); and untaxed agricultural personal property (3%). As we shall discuss below, in Kansas, the use valuation of agricultural land has a particularly profound impact: such land is assessed at about ten percent of its highest-and-best use value. The fact that the assessment ratio for farmland is 30 percent (compared to somewhere between 11.5 and 25 percent for most other types of property) does, to some degree, mitigate the effect of the low valuations. Nevertheless, agricultural land is taxed at just one tenth the market rate, and at about one-third the rate of residential property. The state also allows some local governments to exempt property from taxation, either for economic development or community redevelopment purposes. Local exemptions increased from $1.3 billion of exempt value in 1993 to over $3.3 billion in 2005, but exemptions as a


Id. at p.20.

Green and Weiss, Property Tax Exemptions: Scenarios in Four States


percent of taxable value have fluctuated over that time, coming to 1.9% in 2005.37 In other words, these constitute a very small part of the larger picture of Kansas property tax exemptions.

Minnesota Minnesota has a list of categories of property, similar to those of the other three states, that are wholly or partially exempted from tax: charitable and religious institutions; publiclyowned property; Indian reservations; business inventories and equipment; personal property (including jewelry, furniture, and livestock); and JOBZ property.38 In FY2004, property taxes raised a total of $5.07 billion, $4.47 billion of that local, and about $600 million for the state. Property taxes are second only to (and almost equal with) personal income taxes as a source of revenue for state and local governments. In FY2002, individual income taxes raised $5.4 billion, property taxes $5.2 billion, sales taxes $3.7 billion, excise taxes $2.1 billion, corporate taxes $0.5 billion and other taxes $1.3 billion. Also like other states, Minnesota provides property tax exemptions, abatements, and other provisions for owners of specific types of property, including: • Residential Homestead Classification. This classification “provides a property tax credit for property that is owned and occupied by the owner (sic)…. The amount of the homestead credit varies depending on the market value of the property. The maximum amount of the credit is $304 for properties with a market value of $76,000.”39 • Special Agricultural Homestead. This provision “extends homestead status to property owners who do not live on their farm but actively farm their land and who have a spouse or a child who actively farms the land” and can result in lower property taxes than would be true of non-homesteaded property. 37

Id. at pp.20-22. Minnesota’s Property Tax System, Overview. JOBZ is discussed in more detail below. 39 As the market value increases, the tax credit decreases., Property Tax Fact Sheet #11: Applying for the Residential Homestead Classification. 38

Green and Weiss, Property Tax Exemptions: Scenarios in Four States


• Senior Citizen Property Tax Deferral. Rather than tax forgiveness, this program provides a low-interest loan from the state to eligible low-income senior citizens, so that they can defer a portion of their home property taxes. • JOBZ Tax Exemptions. A type of enterprise zone provision, Job Opportunity Building Zones located throughout the state (except within the Minneapolis-St. Paul MSA) allow businesses that have entered into Business Subsidy Agreements at the local level to be exempt from sales, income, and property taxes and may also grant them refundable job credits based on increased payroll. • Green Acres. Officially the “Agricultural Property Tax,” much like Wisconsin’s, Minnesota’s law allows farmers meeting certain qualifications to pay property taxes based on the use(agricultural), rather than fair market-value, of their farms. In recognition of a policy desire to preserve farmland in the face of rapidly increasing property values, the assessor calculates both actual market and agricultural value, but taxes are paid on the lower of the two.40 • The Sustainable Forest Incentive Act. Passed in 2001, the act “allows annual payments to be made to enrolled farmers of forested land as an incentive to practice long-term sustainable forest management.”

III. Impact: How much do these exemptions cost the state?

Wisconsin The Ervin Report investigates the impact that exemptions have on the property tax base. We use this to calculate how much the state “loses” annually as a result of its various property tax exemptions and differential valuations and classifications. Real property that is exempt from taxation includes property owned by religious establishments, educational and medical facilities, and residential property that is owned by benevolent associations. In total it is estimated that the value of this 40

“The difference between the tax calculated on agricultural market value and the actual market value is deferred until the property is sold or no longer qualifies for the Green Acres program.”, Property Tax Fact Sheet 5: Green Acres.

Green and Weiss, Property Tax Exemptions: Scenarios in Four States


exempt property is $22.5 billion. There are also a number of exemptions to personal property taxation, most notably the exemption for machinery and equipment for manufacturing, which comprises an estimated value of $12.0 billion. If the exempt property examined in this report were taxable, property tax rates would be reduced by an estimated 8.6% statewide, ranging from a 12.6% reduction in cities to a 3.2% reduction in towns.”41 While it offers a well-calculated estimate of the cost to the state of its various property tax exemptions and differential valuations, the report beings with a caveat on how the cost of exemptions is measured, noting that there are several potential problems.42 First, when fiscal impacts are measured (which is difficult), it is assumed that only that provision, and no other, is changed, which may not be realistic. As such, two or more changes should not be combined to produce a “total” estimate of the fiscal impact. It is also assumed that changes do not alter behavior, which is also unrealistic. For example, a change in income tax deductions may prompt people to spend and save differently. As with many such data collection efforts, this one is not complete; not all districts may report. Indeed, in 2006, as of the time the report was compiled, 248 of 1,907 taxation districts, about one of eight, had not reported. The author notes, too, that “the value of exempt federal, state, and local government property is not included in this report.” Finally, and perhaps most difficult to correct for, exempt property may be systematically undervalued for two reasons: 1) the inability to properly value highly-specialized property, which has not been on the market and is unlikely to be in the near future; and 2) a desire, for political reasons, to minimize the perceived benefit of the tax exemption. These caveats aside, however, the report goes into substantial detail about how the value of the property and exemptions were calculated, suggesting that, at the very least, Wisconsin has made a good faith effort to inform the public, and policy-makers, on this important issue. The

41 42

Ervin at p.2. Calculations are derived from Ervin report.

Green and Weiss, Property Tax Exemptions: Scenarios in Four States


report focuses on exempt real property, using the estimated fair market value submitted by owners of such property.43 Each type of property is categorized – as a place of worship, a hospital, etc. – and then placed within a value range. The ranges include $1-$10,000, $10,000 $100,000, and so on. The calculation involves using the midpoint of each range and then multiplying the number of parcels within that category and value range by the mid-point dollar value. Based on this aggregation, the value of the 19,483 exempt parcels in the summary report is $21.5 billion.”44 For those exemptions that were not reported – as noted above, 248 municipalities did not report for the most recent set of calculations – estimates were made based on the percentage of taxable property reported to be exempt among districts that did not report. “[T]he value of exempt real property in the non-filing municipalities was added to the $21.5 billion for the municipalities that filed, producing a total of nearly $22.5 billion.”45

Massachusetts Given the number of municipalities – 351 – each individually in charge of its own system of property tax exemptions, it is extremely difficult to calculate what the myriad measures cost the state. As discussed above, some of the more “obscure” provisions, such as the Brownfields Bill or the Small Business Exemption, are adopted by only a handful of localities, while others, such as the Personal Property Exemption, have been adopted by 70 or more. As well, within a 43

“Owners of several types of exempt real property must report, in even-numbered years, the estimated fair market value of the property. Municipalities submit these numbers to the DOR, which tabs the data and estimates total property value by owner category. NOTE: Owners of exempt personal property do not have to report it, and new 1996 legislation repealed the reporting requirements for many types of districts, so this report ‘focuses on exempt private real property.’” 44 “In order to estimate total values for each category of property, “the number of parcels in each value cell for a category is multiplied by the midpoint of the range of values for that cell, and the results summed. Thus, for the ‘place of worship” classification, the 142 parcels in the $1-$10,000 range multiplied by $5,000 is added to the 974 parcels in the $10,000-$100,000 range multiplied by $55,000, and so on for each value category and classification.” Id. at p.75. 45 Id.

Green and Weiss, Property Tax Exemptions: Scenarios in Four States


given provision, localities vary widely in how much of an exemption they give – i.e., 10%, 20%, 30% or more – and how many dollars the exemption costs, based on the value of the property being taxed. It seems quite likely that exemptions burden municipalities in very different ways, based on their property tax bases, demographics, and economic situations. Indeed, a September 2005 report by the state auditor on the system of relief to the elderly documents exactly that: This report profiles each municipality’s approach to senior property tax relief, and demonstrates the disparate nature of benefits from one community to another. Secondly, it details the uneven distribution of state assistance to cities and towns for these programs, (sic) the unintended consequences of outdated reimbursement formulas.46 The state website does provide some measures of what the various exemptions cost the state each year, such as estimates of the value of tax-exempt properties from 1993 through the present.47 Such properties constitute a fairly large chunk of the state’s value, but Massachusetts does not seem to have either the willingness or the ability to calculate the cost more specifically to its citizens or localities. The state also calculates how much specific provisions, such as various options for reimbursable exemptions for the elderly, disabled, veterans, and surviving spouses, have cost the state in recent years.48 While this list is impressively large, the provisions sum to a relatively small percentage of all property tax exemption costs. Finally, it provides annual calculations of the CIP (Commercial and Industrial vs. Personal) shift.49 Kansas There is no existing estimate of how much Kansas’ many property tax exemptions cost the state annually, but the available data allow some insight into the issue. The “Erosion of the 46

DeNucci, Introduction. State Total Taxable Property Values, Tax Exempt Values and Total Values, Massachusetts Department of Revenue, Division of Local Services, Municipal Databank/Local Aid Section, 48 Id., Property Tax Exemption Reimbursements, Number of Exemptions Granted & Tax Dollars Abated. 49 This chart shows, for each municipality: relevant exemptions adopted; total FY CIP value; total FY value; percent of total value of residential and open space; CIP % of total value; and CIP shift adopted by the municipality. 47

Green and Weiss, Property Tax Exemptions: Scenarios in Four States


Kansas Property Tax Base” report cites $20 million in exempt real estate in 2005, or 14.8 % of the state’s real estate, with nearly 30% attributable to educational institutions, another 16% to municipal property, 15% to federal property, 14% to religious institutions, and 10% to benevolent ones.50 However, given that real estate is more consistently taxed than other sorts of property, this clearly constitutes only a small portion of the value of Kansas tax-exempt property. The report then estimates the total market value of all real and personal property in the state. While it does not calculate the cost to the state of the exemptions, this estimation shows their scope and might be able to be translated into cost. Classification accounts for the largest chunk, at 32% of the total value of state property, with untaxed intangible property next at 22%. Untaxed individual personal property (11%), untaxed agricultural value (10%), exempt property (9%), untaxed business real and tangible personal property (6%) and untaxed ag personal property (3%) round this out, with the current tax base accounting for just 7% of the total value of Kansas property. Finally, the authors note that, In addition to the administrative costs borne by local governments, the expenses of departing from “uniform and equal taxation” are legislative, judicial, and administrative costs borne by state government and applicants for exemptions. As a rule, the more exemptions that are granted the more lines that must be drawn between exempt and nonexempt property and the more the administrative and judicial costs.51

Minnesota The 2006 annual Limited Market Value Report, which “provides summary and municipal tables on the market value limitation exclusion for farm, residential and seasonal recreational residential property” finds that 7.2% of the total taxable market value of the limited classes of 50 51

Fisher and Giles at p.19, Tables 9 and 10. Id. at p.24.

Green and Weiss, Property Tax Exemptions: Scenarios in Four States


property, or $33 billion at the statewide level, has been excluded from taxation.52 A “primer” on Minnesota property tax exemptions includes a list of major credits, tax refunds, and aid, with the estimated cost to the state in FY 2004: local government aid, $465 million; residential homestead market value credit, $297 million; agricultural homestead land market value credit, $23 million; homestead agricultural credit aid, $135 million; rents property tax refund, $143 million; homeowner’s property tax refund, $130 million; county criminal justice aid, $33 million; and family preservation aid, $24 million.

IV. Bottom Line: How much more are state residents paying, and who is burdened? We take the information above to develop a first order estimate of how much the average property tax payer’s tax burden would be reduced if no property were exempt from the tax and all property were treated equally under the tax system. Wisconsin has arguably the closest thing to a uniform property tax system among the four states we have reviewed. Overall, the state has a potential property tax base of $469 billion, of which $40 billion is exempt from taxation (Doyle 2007). The effect of this is straightforward. More difficult is the issue of “use value” assessment for agricultural land. We approach the issue by looking at assessed value of agricultural land in Wisconsin during both the last year it was taxed on a highest and best use basis (2001) and the first year it was taxed on a use value basis (2002). In 2001, the taxable value of agricultural land in Wisconsin was $5 billion, falling to $2.8 billion in 2002. We can estimate, based on these figures, that 44 percent of agricultural value was removed from the tax base in that single year.53 In 2006, the assessed value of

52 53

Einess, Introduction. See and

Green and Weiss, Property Tax Exemptions: Scenarios in Four States


agricultural land in Wisconsin slipped even further, to $2 billion, meaning that the tax base lost to the exemption was $1.6 billion.54 When these numbers are added together, they show a Wisconsin property tax base that has been eroded by at least 9 percent by exemptions and special assessments. If property taxes were levied on a uniform basis, those paying full rates on full values would pay about 8.6 percent less in property taxes than they do now. In Massachusetts, we can get a sense of the minimum cost of exemptions and differential treatments. Eleven percent of property in Massachusetts is tax exempt; eliminating exemptions could therefore reduce property tax rates on those who pay by about 11 percent. Kansas is more complicated. Fisher and Gile (2007) estimate that about 15 percent of property in that state is exempt, but its property tax system is not remotely uniform. Table 3 presents data on assessment ratios, share of total assessed value and share of total market value for different types of property in Kansas. It shows that the market value of agricultural land in Kansas is nearly five times its taxable value, and that the share of the taxable value of residential property is less than its share of market value. On the other hand, commercial properties’ share of the tax base is 80 percent higher than its share of property values. If Kansas were to move to a uniform system of taxation, the impact would be a large increase for residential homeowners and an extraordinary increase for farmers, while owners of commercial/industrial property would see a sizeable tax cut. In other words, the political issues involved in moving the state toward a more uniform system of property taxation would be quite complicated, pitting some groups of residents against others.


It is possible that it is larger than this, because residential property value (the likely alternative use) rose quite rapidly in Wisconsin between 2002 and 2006.

Green and Weiss, Property Tax Exemptions: Scenarios in Four States


That said, according to the US Department of Agriculture, 4.3 percent of workers in Kansas are directly engaged in agricultural production, and 17.3 percent are engaged in agricultural production, processing, marketing and retail trade.55 On the other hand, County Business Patterns data shows that more the half of Kansas’ employment is in the service sector.56 The story for Minnesota is similar to, but less dramatic than, that of Kansas (Table 4). What is striking here is that apartments pay more than their share of property taxes relative to renters. Where the incidence of this tax lies is open to question—it could fall on owners, renters or, in the new view, all owners of capital. While we lack the data to estimate the cost of state tax exemptions to residents, it seems likely that the Minnesota property tax system potentially disproportionately taxes the young and the unmarried (who are more likely to be renters), as well as lower income older people (see Green 1996). Such may be the unintended consequence of favoring home-ownership over rental housing.

55 56

See Accessed September 8, 2007. Accessed September 8, 2007.

Green and Weiss, Property Tax Exemptions: Scenarios in Four States


References Bradbury, Katharine, email, July 18, 2007 DeNucci, A. Joseph, The State Auditor’s Report on the Local Financial Impact of Property Tax Exemptions for Senior Citizens, Pursuant to Massachusetts General Laws Chapter 11, Section 6B, September 2005. Doyle, Jim, State of Wisconsin Summary of Tax Exemptions Devices, February 2007, Department of Administration, Division of Executive Budget and Finance and Department of Revenue, Division of Research and Policy. Einess, Ward, Limited Market Value Report, 2006 Assessment Year, Taxes Payable 2007, Tax Research Division, March 1, 2007, Minnesota Department of Revenue. Fischel, William A., ‘Municipal corporations, homeowners and the benefits view of the property tax’, in Wallace E. Oates (ed.), Property Taxation and Local Government Finance, 2001 Cambridge, MA: Lincoln Institute of Land Policy.

Fisher, Glenn W. and Crystal Gile, Erosion of the Kansas Property Tax Base, December 2006, Kansas Public Finance Center, Hugo Wall school of Urban and Public Affairs, Wichita State University. Green, Richard K. Should the Stagnant Homeownership Rate be a Source of Concern? Regional Science and Urban Economics. Green, Richard K. and Michelle J. White (1997), “Measuring the Benefits of Homeowning: Effects on Children,” Journal of Urban Economics, 41, 441-461.

Donald R. Haurin, Toby Parcel and R. Jean Haurin, 揇oes Home Ownership Affect Child Outcomes,?Real Estate Economics, 30, 2002, 635-666 Minnesota Department of Revenue, Minnesota’s Property Tax System: an Overview. Available at: Olin, Rick, Shared Revenue Program (County and Municipal Aid and Utility Aid), January 2007, Informational Paper 18, Wisconsin Legislative Fiscal Bureau Olin, Rick, State Property Tax Credits (School Levy and Lottery and Gaming Credits), January 2007, Informational Paper 22, Wisconsin Legislative Fiscal Bureau Olin, Rick, Targeted Municipal Aid Programs (Expenditure Restraint, Computer Aid, and Small Municipalities Shared Revenue), January 2007, Informational Paper 19, Wisconsin Legislative Fiscal Bureau Runde, Al, Tax Incremental Financing, January 2007, Wisconsin Legislative Fiscal Bureau Stark, Jack, A History of Property Tax and Property Tax Relief in Wisconsin, Legislative Reference Bureau Zodrow, George. On The Traditional and New Views of Dividend Taxation," National Tax Journal, Vol. 44:4 (December 1991), pp. 497-509.

Green and Weiss, Property Tax Exemptions: Scenarios in Four States


Table 1 State Total Taxable Property Values, Tax Exempt Values and Total Values, Massachusetts Fiscal Year 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007


Total Tax Exempt Values 58,245,102,098 56,116,163,348 56,817,074,922 62,997,678,104 60,135,413,562 59,788,480,407 61,825,394,666 64,288,484,342 75,006,526,468 80,990,406,818 87,365,818,247 96,291,647,692 102,874,066,502 114,852,523,686 125,063,539,132

Total Values 411,997,916,140 404,297,354,768 405,094,623,452 416,981,219,173 423,969,388,350 440,515,312,217 467,679,638,356 502,983,075,322 576,045,882,223 650,078,356,091 725,407,206,638 829,207,881,034 933,401,126,752 1,029,914,832,033 1,107,782,129,323

Taxable as a % of Total 85.86 86.12 85.97 84.89 85.82 86.43 86.78 87.22 86.98 87.54 87.96 88.39 88.98 88.85 88.71

Tax Exempt as a % of Total1 14.14 13.88 14.03 15.11 14.18 13.57 13.22 12.78 13.02 12.46 12.04 11.61 11.02 11.15 11.29

Clearly, taxable property values have increased more quickly than those of tax-exempt properties.

Table 2 Tax Dollars Abated on Exemptions, Massachusetts 2002-20072 All municipal 17 17C 17 C ½ 17D 18 Hardship 22(a-f) Veterans Paraplegics etc. 22A 22B 22C 22D 22E 37 Blind 37A Blind 41 Elderly 41B 41C 41 C ½ 41A Deferred taxes 42 43 50 Elderly housing 52 Elderly sewer water debt shift 53 Septic system cesspool Total


2002 $3.8K $47K $307K $3.3 mill $656K $10.3 mill $773K $222K $56K $105K N/A $2.5 mill $917K $2 mill $34K $765K $10.6 mill N/A $3 mill

2003 $3.3K $45K $277K $3.3 mill $652K $10.1 mill $739K $239K $58K $104K N/A $2.8mill $925K $2 mill $36K $813K $10.5 mill N/A $3.3 mill

2004 $2.8K $49K $252K $3.2 mill $655K $9.8 mill $803K $202K $59K $97K N/A $3.1 mill $936K $2.1 mill $31K $706K $11.9 mill N/A $3.5 mill

2005 $3.9K $37K $231K $3.1 mill $603K $9.4 mill $856K $197K $59K $89K N/A $3.4 mill $918K $2 mill $33K $643K $12.7 mill N/A $3.7 mill

2006 $176K $15K $118K $2.9 mill $710K $9 mill $866K $243K $60K $90K N/A $3.6 mill $756K $2.2 mill $37K $558K $13.7 mill N/A $4.3 mill

2007 $33K $72K $115K $2.4 mill $529K $10.7 mill $755K $247K $84K $143K $80K $5 mill $612K $1.7 mill $469K $355K $10.2 mill $261K $3.8 mill

$413K $22K $35K

$439K $13K $38K

$444K $20K $40K

$467K $18K $46K

$475K $10K $48K

$390K $10K $42K













$36.2 mill

$36.5 mill

$37.9 mill

$38.6 mill

$40 mill

$38 mill

This table sets out the amount reimbursed to localities each year for property tax exemptions that fall under the reiumbursable categories. As can be seen, they constitute a very small percentage of all property tax exemptions. For example, in 2002, the state reimbursed localities $36.2 million, while total tax-exempt property was valued at nearly $81 billion. Department of Local Revenue, Division of Local Services.

Table 3 Assessment Ratios and Estimates of Market Values for Kansas Assessment Assessed Market Share of Share of Change in Property Tax Ratio Value (billions) Value (billions) Tax Base Market Value with Uniform Taxation Residential Property Agricultural Land (Based on use Value) Vacant Lots Not for Profit Commercial-Industrial Agricultural Improvement All Other

11.5 30 12 12 25 25 28

12.2 1.6 0.2 0.1 5.6 0.2 0.3

106.09 53.33 1.50 0.43 22.40 0.72 1.00

0.40 0.05 0.01 0.00 0.18 0.01 0.01

0.47 0.24 0.01 0.00 0.10 0.00 0.00

17.4% 349.9% 12.5% 12.5% -46.0% -46.0% -51.8%

Residential Mobile Homes Mineral Leaseholds Motor Vehicles (Locally assessed) Commercial/Industrial Mach./Equip. Boats/Marine/Trailers All Other

11.5 30 20 25 30 30

0.1 1.9 0.1 1.8 0.1 0.1

0.60 6.33 0.74 7.20 0.28 0.21

0.00 0.06 0.00 0.06 0.00 0.00

0.00 0.03 0.00 0.03 0.00 0.00

17.4% -55.0% -32.5% -46.0% -55.0% -55.0%

State Assessed Public Utility







Motor Vehicles Motor Vehicles, Taxed When Tagged 16/20M Vehicles 20 68 0.4 State Assessed Vehicles

20 20 30

3.0 0.1 0.2

15.00 0.34 0.72

0.10 0.00 0.01

0.07 0.00 0.00

-32.5% -32.5% -55.0%



Source: Fisher and Giles (2007) and authors’ calculations.

Table 4 Shares of Tax Burdens and Market Values for Minnesota

Residential Homestead Residential Non-homestead Seasonal Recreational Agricultural Apartment Utilities Commercial

Share of Share of Property Tax Property Value Burden 0.589 0.478 0.059 0.052 0.045 0.028 0.135 0.059 0.040 0.046 0.016 0.038 0.116 0.299

Change in Taxes with Uniform Taxation 23.2% 13.5% 60.7% 128.8% -13.0% -57.9% -61.2%

Source: and Authors’ calculations.

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