The Truth in Taxation / Revenue-Neutral Act passed in 2021 is easily the most effective property tax protection that ever existed in Kansas. More than half of local taxing authorities each year decide not to raise taxes rather than face taxpayers in a public hearing. The Kansas Truth in Taxation Act was modeled after the very successful laws in Utah and Tennessee, both of which are hugely successful. Truth in Taxation is hailed as the gold standard of property tax reform, yet the Kansas House Tax Committee held a hearing yesterday to repeal it.
Rather than pressure local officials to not raise property tax, HB 2396 would reward them if the tax increase does not exceed inflation plus taxes from new construction, which combined can easily exceed a 5% increase. The bill recreates a version of the Local Ad Valorem Tax Reduction Fund (LAVTRF) with $60 million set aside to ‘reward’ cities and counties that don’t exceed the threshold.
Local elected officials have socked Kansans with property tax hikes over the last quarter century, with increases almost two-and-a-half times the combined rates of inflation plus population. Research also shows that just the 35 largest counties and the 25 largest cities had more than $5 billion in cash reserves in 2022. So, it defies logic that HB 2396 would reward local government for locking in an estimated 5% tax increase each year while depriving taxpayers of the transparency and tax deterrent in the Revenue-Neutral Act.
According to the Kansas Department of Revenue, property taxes for education jumped by 207% since 1997; all other local government entities socked Kansans with a 253% tax hike, while inflation was 85%.
Those are just the average increases. Republic County officials raised property tax by 779%, and property tax in Leavenworth is up 412%! County commissioners, city officials, and school boards in Riley imposed a 390% tax increase, and eight other counties socked residents and businesses with increases exceeding 300%.
HB 2396 allows for a protest petition, but under current RNR law, protesters can now show up at revenue-neutral hearings without collecting signatures. In fact, the ability to protest at RNR hearings is a major factor in many taxing authorities’ decisions not to raise taxes.
Local elected officials and school boards have been trying to jettison revenue-neutral for two reasons: they know it hampers their ability to raise taxes, and having to vote to approve the tax increase undermines claims that they are not raising property tax. For too long, they were able to say, “We’re holding the line on property tax,” while knowing full well that valuations were increasing the bill paid by taxpayers. RNR significantly decreased the incentive of this lie.
Reward behavior that benefits taxpayers
If legislators want to add a carrot to the mix, it should be based on holding to revenue-neutral, not inflation plus new construction. School boards and other local government entities have many options to hold property taxes flat; some have done so for several years.
Even better, marry it with a limit on tax collections that requires voter approval to exceed it.
The following amendment to the revenue-neutral statute would limit total tax collections for each taxing authority to a 3% increase each year. They can exceed the limit if voters approve the proposal on the August primary ballot. That leaves several weeks before budgets must be finalized.
79-2988. Tax levy; approval to exceed revenue neutral rate by taxing subdivisions; requirements; notices and contents; public hearing; majority vote of governing body; requirements; duties of county clerk; costs; complaints; posting of budgets. (a) On or before June 15 each year, the county clerk shall calculate the revenue neutral rate for each taxing subdivision and include such revenue neutral rate on the notice of the estimated assessed valuation provided to each taxing subdivision for budget purposes. The director of accounts and reports shall modify the prescribed budget information form to show the revenue neutral rate.
(b) For the tax years commencing January 1, 2025 no taxing subdivision may levy a tax rate that exceeds the revenue neutral rate by more than 3% unless approved by a vote of the electors in the subdivision.
(c) Public approval relevent to (b) shall be according to the following procedure:
(1) votes are at August primaries
(2) voter-approved increase may only be for one year, effective January 1 of the year following the vote
A recent public opinion survey shows that 87% of Kansans approve of a 3% limit on property tax collections without voter approval, and only 9% are opposed. Local governments hate this degree of accountability and will put the full-court press on legislators to fight it.
It just comes down to whether legislators will agree to the demands of voters or local governments.
Taxpayers need substantive relief, and time is running out this session. The House and Senate should quickly come together and get this done.
