Proposed floor for property tax caps draws opposition

A measure that would make “a very small change to Nevada’s property tax calculation,” according to the association of local governments requesting it, drew a large amount of opposition during a committee hearing Tuesday, much of it based in misinformation.  

The Nevada Association of Counties (NACO) requested Senate Bill 10, which the organization says is designed to restore predictability to local government budgeting.  

Caps imposed on Nevada property taxes in 2005, as pre-recession land and home values skyrocketed, have since saved tens of thousands of dollars for individual property owners while costing the state’s cities and counties billions.

Property taxes make up 20 to 60 percent of revenue in Nevada counties, according to Dagney Stapleton of NACO. 

Some counties are more reliant than others. 

Clark County has the highest assessed value of any county ($98 billion of the state’s total $137 billion in fiscal year 2020), according to the Department of Taxation, but derives only about 20 percent of revenue from property taxes.  The bulk is distributed to the Clark County School District and local governments.  

Assessed value in Clark County has increased by more than $30 billion in the last decade.  Property tax revenue in the same period has not kept pace.

Without caps, Nevada counties would have collected about $3.1 billion in property tax in FY 2016. Instead, more than half a billion of that – $549 million – was abated, according to Applied Analysis, a fiscal consulting firm hired by the Legislative Counsel Bureau in 2019.  

In that same year, Clark County generated $2.2 billion in property tax revenue, reduced to $1.8 billion after abatements.

The abatements have caused Clark County and other governments to turn to other sources, such as sales taxes and fees, to pay for public safety. Both place a disproportionate burden on low-income residents. 

In the 16 years since lawmakers imposed the three percent cap on residential property taxes, the floor has dropped below three percent four times.  

The lowest caps occurred in 2017, a decade after the peak of the Great Recession, when the threshold dropped below three percent in nine of 17 counties. The drop cost local governments $69 million, according to Stapleton.   

“The fear of recession drives the need for this bill,” she said. “County revenue can be suddenly reduced because of caps dropping.” 

The measure would not remove the caps but would instead impose a floor of three percent on residential property.

Nevada’s property tax rate is constitutionally limited to five percent of assessed value, not market value.  

Assessed value is 35 percent of taxable value. Taxable value is calculated by adding the value of land and replacement value of improvements, minus 1.5 percent annual depreciation on the improvements for 50 years.

Because of the caps, property taxes in 2021 approximate those imposed in 2007, after adjusting for inflation, according to NACO. 

Stapleton called the measure a minor fix to “what some would say is Nevada’s antiquated tax system.” 

Wesley Harper, executive director of the Nevada League of Cities and Municipalities, testified SB 10 is “not a comprehensive solution to the multifaceted problems in Nevada’s tax policy.”  The League of Cities requested a similar measure.

Harper and others, including former Republican lawmaker Warren Hardy, who also supported SB 10, called for a comprehensive study of the state’s tax structure.

But opponents said with the economic effects of the pandemic still pronounced, now is no time to raise taxes of any kind.

“Raising an abatement floor from 0 to 3 percent is a tax increase, no matter how you slice it,” Republican National Committeeman Jim DeGraffenreid said. “Government caused our current economic pain.”

Janine Hansen of the Independent American Party testified businesses will pass the “increased property tax on to consumers. We are not free. We are tax slaves to the government.”

However, SB 10 does not set a floor for commercial property taxes, which are capped at 8 percent.

Sen. Julia Ratti pointed out the bill does not remove the three percent cap, does not remove the secondary calculation that allows commercial property taxes rates to drop below 8 percent, and does not force property taxes to increase three percent a year.

“There were some things that were said that are not actually in the bill,” she said.