Nevada County Picayune and Gurdon Times Newspaper Archive

Property Tax Item To Be Decided By Voters Next Tuesday

Proposed Constitutional Amendment 2, on the Nov. 7, General Election ballot, will give voters the change to determine the fate of the state's property tax.

The amendment, if passed, would limit the annual increase in assessed value of real property, freeze property assessments for the elderly and disabled while providing a tax credit of up to $300 for homestead owners.

The idea is to replace the state's current method of assessing real property and collecting property taxes.

It proposes to limit the annual increase of assessments to 5 percent unless substantial improvements have been made to the home.

On other real property, the limit is 10 percent, again unless major improvements have been made.

However, these limits don't apply to new construction, or the aforementioned improvements have been made.

In addition, the limits aren't applicable to those living in the county where there has been no county-wide reappraisal between Jan. 1, 1986 and Dec. 31, 2000.

On these properties, one-third of the increase in assessment will be added to the owner's assessment for the next three years, until the adjustment has been completed, at which time the limits will then be used.

Should it pass, the assessment on those residents 65 and older will be frozen at the lower value as of Jan. 1, 2001, or a later assessed value, should it be lower.

Anyone in the state owning a house can get up to $300 in property tax credit under the measure. However, the credit can't be more than the amount of taxes owed. This means if a person owes $100 in property tax, this is the amount of credit they will be given.

Now for the flip side. If this amendment passes, it will automatically activate Act 1492 of 1999, which will increase the state's sales tax by one-half cent to replace the money lost from giving the tax credits.

In effect, if passed Amendment 2 would simply create a sales tax to replace property taxes.

This issue is on the ballot because of the 1998 effort to repeal property taxes. The 98 attempt never made it to the ballot, being rejected due to a misleading title.

But, in response to the request of the people of Arkansas, the General Assembly proposed Amendment 2.

Those favoring the amendment say it addresses concerns of property owners.

It is said this amendment will eliminate large annual increases in assessments resulting from county-wide appraisals; freeze the assessments of the elderly and disabled on fixed incomes; eliminate the difference in real and personal property tax rates; and provide tax relief for homeowners.

The oppositions state it will shift the tax from a property tax to a sales tax, though Arkansas' property tax is among the lowest in the nation, while the sales tax is one of the highest in the U.S.; and reapportionment from the property tax to the sales tax has no merit and is unnecessary.

Additionally, opponents state an increase in the sales tax will stifle the ability of the people and government to address specific local needs and fund them with local sales tax money.

Finally, opponents argue the amendment doesn't offer any type of tax relief to those who rent.

Act 1492 of 1999 will establish a Property Tax Relief Trust Fund, should Amendment 2 pass. The fund will be created from the increase in sales tax.

Money from the trust will be diverted to each county treasurer in accordance with the county's proportionate loss from the total statewide property tax reduction.

The treasure will then dole out the money to the various county taxing units, with these funds to be used the same way the property taxes were used and in the same proportions.

This will be done on a monthly basis until the full amount certified by the county collector has been paid.

And, it doesn't matter how much money the half-cent sales tax increase generates, as counties will only be given the amount certified by the county collector annually.

The largest entity to be affected by this is school districts in the state.

According to information from the Arkansas Department of Finance and Administration, the sales tax hike should generate around $194.4 million in 2001, while the loss from the tax credit is estimated to be $178.4 million.

School districts are considered as other taxing units and will be funded on a proportional basis based on the amount certified by the collector.