Taxation of Business Property: Is Uniformity Still a Valid Norm?

By John H. Bowman; Frederick D. Stocker | Go to book overview

should this obstacle prove insuperable, Netzer sets forth some brief guidelines for rational departures from uniformity in a "second-best" world.


SUMMARY AND CONCLUSION

Property taxation has changed substantially, and no doubt will continue to do so. One change is its diminished relative financing role over time, the result of increasing revenue diversification at the state-local level. This was prompted largely by complaints about various features of property taxation, some inherent and some in the particulars of its administration. Such complaints are not of recent origin, as Fisher reminds us in Chapter 5, but they became harder to ignore as the property tax grew in relation to GNP, personal income, and property value in the 1960s and 1970s.

Increasingly, states moved to restrict the property tax role in various ways, but with major differences in the particulars across states. Approaches included indirect property tax relief through new local authority to levy non-property taxes and increased state aid funded by non-property taxes, as well as changes in property taxation to provide more direct relief, including various rate and levy limits. While these approaches generally applied equally to all types of taxable property within a taxing unit, direct property tax relief approaches targeted the relief more narrowly to create de jure differences in effective property tax rates. Exemptions for inventories and other types of personal property, as well as programs targeted on real property--such as homestead exemptions, agricultural use-value assessment, circuit breakers, and classification--are among the programs in this category. As noted, every state now has one, and often more, of these programs in place to differentiate even within the real property component of the tax base.

Whatever the reasons for the changes--to reduce tax burdens deemed excessive, to set more realistic goals for tax administration, to promote economic development, among others--a consequence has been a narrower tax base and a less uniform legal standard for property taxation. The changes have created so many and such major differences in effective tax rates in some states that they mark a wide departure from the usual concept of a uniform tax, which still is the basic underpinning of the American property tax system. The U.S. Supreme Court seventy years ago upheld the primacy of the uniformity requirement under the federal equal protection clause: "Where it is impossible to secure both the standard of the true value, and the uniformity and equality required by the law, the latter is to be preferred as the just and ultimate purpose of the law" ( Sioux City Bridge Co. v. Dakota County 1923: 445).

It reiterated this view in 1989, and stated: "The fairness of one's allocable share of the total property tax burden can only be meaningfully evaluated by comparison with the share of others similarly situated relative to their property holdings" ( Allegheny Pittsburgh Coal Co. v. Webster County 1989: 639; emphasis added).

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Taxation of Business Property: Is Uniformity Still a Valid Norm?
Table of contents

Table of contents

  • Title Page iii
  • Contents v
  • Tables vii
  • Foreword xi
  • 1: Taxation of Business Property Overview 1
  • Conclusion 21
  • 2: Perspectives on the Business Property Tax Base 25
  • Conclusions 43
  • Notes 43
  • 3: Emerging Legal Issues: Valuation and Expenditures Limitations, Toxic Waste Impacts, and Intangibles Valuation 45
  • Conclusion 61
  • Notes 62
  • 4: Uniformity as a Policy Objective 63
  • 5: Uniformity in the Context of Other Concerns 77
  • Conclusions 89
  • Notes 91
  • 6: Enforcement of Uniformity 93
  • Notes 109
  • 7: Business Property Tax Incentives and Economic Development 111
  • Appendix 7 Business Property Tax Incentives by State, 1992 124
  • 8: Special Problems in the Valuation of Business Property 139
  • Conclusion 149
  • 9: Tax Valuation of Contaminated Property 151
  • Conclusions 158
  • 10: Selected Business Property Taxation Issues: Personal Property 161
  • Notes 169
  • 11: Future Directions for Business Property Taxation 171
  • Notes 182
  • References 185
  • Index 195
  • CONTRIBUTORS 203
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