Raymond Gray: Can Property Taxes Be Fair?

In states recognized for their fair property tax systems, five characteristics account for their being called fair.

1. The tax appraisal process is separate from tax levy and collection. Giving an appraisal district sole responsibility for assessing tax values removes valuation from political influence. It also promotes transparency, because a single value is established on a property for use by all taxing units.

2. All properties are treated the same and all values are set by an easily understood standard. The valuation of property based on 100 percent of market value each year accomplishes both of these goals. It is equal because the same standard applies to all, and is understandable because property owners understand market value. Systems with ratios such as valuation at a percentage of market value or with appraisal limitation caps that artificially limit increases, invariably create unfair taxation.

3. Information and the tax process are accessible. A single notice of appraised value is mailed for each property and the protest deadline is the same across the state. An owner can challenge the proposed value by filing a simple form, administrative level hearings are informal and decisions are immediate.

4. Value is comparable within commercial property types. If an investor purchased an office building for $100 per square foot, but unsold office properties in the market remain at $80 a foot, then the taxable value for the purchased property should be $80 per square foot. An equal and uniform statute allows comparison between the tax value of $100 per square foot property and the value of comparable properties.

5. The playing field is level. Systems that allow multiple appeals in valuation cases encourage governments to negotiate in good faith. The appeal process should consist of an informal administrative hearing and then a formal appeal to district court.

Commercial property owners bear the burden of unfair taxation in states where these five characteristics are not present.

Raymond Gray is a partner with the Austin, Texas, law firm of Popp, Gray & Hutcheson L.L.P., which focuses its practice on property tax disputes and is the Texas member of American Property Tax Counsel, the national affiliation of property tax attorneys. He can be reached at raymond.gray@property-tax.com.