In November 2012 voters in Arizona will address Proposition 117, entitled Property Tax Assessed Valuation. It arises from the Senate (SCR 1025) as a proposed Constitutional Amendment. If passed Proposition 117 would cap the annual increase in the value of real property used to calculate property taxes to 5% over the value of the property for the previous year, beginning with the 2015 tax year. Currently, there is no limit on full cash value.
Advocates of Proposition 117 say that:
- This will protect property taxpayers from dramatic increases in property valuations that often lead to significant tax increases. A reasonable limit of 5% will provide greater predictability for taxpayers and will bring stability to future local government budgets.
- The current system is flawed with many complicated formulas that are outdated and no longer are applicable. The Limited Value formula needs to be simplified and property taxes need to be more predictable. This measure does both.
- By taxing property owners on one value rather than the current method that uses two different valuations, everyone will be better able to predict their property tax burden. In addition, a 5% limit on the growth of property valuations will ensure short that short-term spikes in property value, do not result in exorbitant, unsustainable tax bills for property owners.
- This measure will provide predictability to a system that has been extremely volatile. This volatility has placed significant burdens on homeowners who have experienced significant tax increases and businesses seeking to plan for new investments in hiring and capital. Proposition 117 will simplify the property tax system by using a single limited value for the calculation of all property taxes.
- Our property values on average have dropped more than 30 percent, but taxes have not because Arizona raised the tax rate as values plummeted, taking a higher percentage of your equity. As values start rising again, so will your tax bill, and now based on newer rates that in most cases are the highest they have been in years. Prop 117 would limit government from gorging on property owners in times of rapidly increasing valuations, which we might be facing again. It will limit government to more sustainable growth levels.
Opponents of Proposition 117 say that:
- Prop 117 does nothing to prevent taxing authorities from raising property taxes. Municipalities can raise the tax rate on property owners to offset any loss in tax revenue. All Prop 117 does is reduce the current cap on Limited Property Values (LPV) from 10% to 5%. If the existing Constitutional cap of 10% is not working, why would 5% be effective?
- Passage of Prop 117 would change the constitution to allow unfair and inequitable taxation; it only caps appraisal values. Therefore, governmental bodies can merely increase the tax rates to make up the difference - they have done it before. Because the implementation of appraisal caps always shifts taxation away from higher appreciating property to lower appreciating property, developers and large land owners will have some of their tax burden shifted over to owners of houses in medium and low income neighborhoods. The right way to limit Arizona property taxes is to cap tax rates or cap government budgets. Studies show that appraisal caps are bad public policy. It is best to not change the constitution unless you fully understand and agree with the change.
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Note: pro and con arguments for the proposition were quoted or paraphrased from the official arguments. More arguments may have been submitted; I am presenting only a few that I believe will most help readers decide how to vote. You can find the entire wording of the ballot proposition, and all the pro and con arguments, in the official election pamphlet.