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Tax and Spin- Part 6: Eliminating Confusion- Step 1

This entry is part 6 of 11 in the series Understanding Property Tax Levies

taxSince much of voters’ confusion has come from their thinking that replacement levies are renewal levies or from their having no idea how much greater a replacement levy is than a renewal, the explanation for each of the examples below includes a comparison of what the tax was as a replacement levy versus what it would have been as a renewal levy.

For simplicity, the following examples all deal with only the residential-agricultural class of real property. A $100,000 typical city/town residence assessed at 35 percent of its value with 12.5 percent in rollbacks is used to show the cost of the levies. (The taxes are 87.5% of what they would have been without the rollbacks.)

Ballot Example No. 1

The first ballot, presented in November 1999, is the plain “replacement” levy for 1 mill:


A Majority Affirmative Vote Is Necessary For Passage.

A replacement of a tax for the benefit of Greene County for the purpose of SUPPORTING CHILDREN SERVICES AND THE CARE, PROTECTION, AND PLACEMENT OF ABUSED, NEGLECTED AND DEPENDENT CHILDREN at a rate not exceeding 1 mill for each one dollar of valuation, which amounts to $0.10 for each one hundred dollars of valuation, for a period of five years, commencing in 1999, first due in calendar year 2000.”

On a $100,000 residence, the cost of this proposal was this: 35% X $100,000 X $.001 X 87.5% = $30.63.

This replacement levy represents an increase compared to the existing tax that it replaced. Because of House Bill 920, taxpayers were not being taxed on the full 1 mill that had been voted years before. Instead, as the aggregate value of properties in the county increased, the effective millage on which their tax was figured had gradually decreased in order to keep the revenue for the government on that levy at a fairly constant amount. In fact, the effective rate had decreased to 0.844364 mill.

If the 1-mill tax that had been in existence had been renewed instead of replaced, voters would have been voting on the then-effective millage of the existing levy, which was 0.844364 mill. (Even though the effective millage is less than 1 mill on such a renewal, the levy keeps its originally voted 1-mill “name.”) A renewal levy would have cost a homeowner with a $100,000 home this amount: 35% X $100,000 X $.000844364 X 87.5% = $25.86.

Comparing $30.63 with $25.86, or 1 mill with 0.844364 mill, the replacement levy cost about 18½ percent more than the existing tax.

Many voters thought they were voting for a renewal levy. The ballot provides no indication that the proposal is for a tax increase, much less, how great an increase.

Next–Part 7: Eliminating confusion–Step 2

Series NavigationTax and Spin- Part 5: The “Place” Where You Raise Your Own Taxes

Posted in Commentary, Economics, Education, Private Property, Public Policy Principles News, Public Policy Radar, Taxation.