Kobach has plan to cap property tax increases; critics say it would create inequality

If you own a home, you know your property taxes go up as the value of your home increases.

In some areas, those increases can be steep. Some cities in Johnson County saw average home appraisals increase more than 10 percent this year. In Sedgwick County, the typical increase was 5 percent.

Republican Kris Kobach wants to change that. He calls the appraisal increases stealth property tax increases and wants to cap them at 2 percent a year.

“The problem with the status quo is that the elderly retire and then they’re trying to get by on a fixed income and they find they can no longer afford to pay the taxes,” Kobach said in an interview.

His two major opponents in the race for governor — Democratic Sen. Laura Kelly and independent Greg Orman — back property tax relief in general. But they oppose his approach and say the state must first stabilize its finances.

And critics say his plan would create an unequal system, with neighbors owing different amounts on homes with similar market values.

That’s because every time a home is bought and sold, its appraisal value would reset to correspond with the market value. That means the new owner may pay a significantly larger tax bill than the previous owner.

Homeowners who live in the same home their whole lives would benefit the most from Kobach’s plan because the appraised value of their homes would not be reset to market value for potentially decades. The gap between their home’s appraisal value for property tax purposes and its market value could be large.

‘Bad tax policy’

Most taxpayers want the tax code to be fair and believe that two properties next to each other that look about the same should have similar property taxes, said Jared Walczak, an analyst at the Washington D.C.-based Tax Foundation, who is critical of the reappraisal cap, which he called an assessment limit.

“But assessment limits can change that dramatically and properties that look about the same can be paying radically different property tax effective rates,” Walczak said.

According to the Tax Foundation, about 18 states have some type of assessment limit. The limits can reduce the incentive among homeowners to sell their property, Walczak suggested.

Walczak gave an example of a couple nearing retirement who wants to downsize into a smaller home but currently has a low property tax bill because of the reappraisal limit. The couple may move into a smaller home worth less and still pay more in property taxes.

“That creates what’s called a lock-in effect, and it’s bad tax policy,” Walczak said.

A 2 percent limit could affect real estate markets, said Erik Sartorius, director of the League of Kansas Municipalities. Many Kansas cities face challenges in providing housing, particularly housing for people who want to downsize, he said.

“I think if you freeze in place values or you cap values, you’re going to exacerbate that,” Sartorius said.

‘Absurd’ increases

Throughout his campaign, Kobach has attacked what he views as excessive increases in the appraised value of homes.

Kobach, the Kansas secretary of state, told a business audience in Wichita recently that “in many counties the reappraisals have been just absurd. Double-digit appraisals year after year after year. Both on commercial property and on residential property.”

Asked about criticism of his plan, Kobach said it’s an advantage to allow homeowners to stay in their homes for a long period of time. He emphasized the plan would help elderly homeowners with fixed incomes.

He acknowledged the reappraisal limit could create an advantage to staying in one home for a long time, but said that usually when someone purchases a new home they’re expecting to purchase a home of a different value.

“I don’t see that as a significant barrier to people wanting to move going ahead and moving,” Kobach said.

A home’s appraised value could still eventually match its market value, he said. It would just take longer because appraisers would only be able to raise a home’s value 2 percent a year.

Paul Waggoner, a Hutchinson Republican running for the Kansas House unopposed in the general election, said Kobach’s plan “fundamentally makes sense.”

“People, voters — property tax is the one tax they dislike the absolute most. And so anything to keep it under control would matter because it has gone up an incredible amount,” Waggoner said.

Others are skeptical.

Wichita homeowner Jay Plank said his valuation went up nearly 15 percent last year. But Plank said he isn’t unhappy about his property tax bill and wants to know more about Kobach’s plan.

“I’m open to more information. If he’s got a good plan that will take care of some pressing issue with property tax, I might get behind it. But I haven’t heard anything about what’s wrong with the way it currently is,” Plank said.

A major change

An appraisal limit would represent a major change for a state where property taxes make up more than a third of all state and local tax revenue. Property taxes in Kansas produced $4.7 billion in revenue last year.

In addition to slowing property tax growth, Kobach wants to cut sales taxes and return income tax rates to where they were during Gov. Sam Brownback’s tenure, which was marked by years of budget problems.

Kelly says the state will be able to provide property tax relief “once we make sure our state is stable again.”

She added that “if Kris Kobach reinstates the Brownback tax experiment like he has promised multiple times, we will see higher property taxes.”

Orman said “the idea that appraisals are what is driving these significant increases is accurate, but only in certain parts of the state.

Orman said it would irresponsible to cut taxes before shoring up the state’s financial obligations, such as pensions. If Kansas does examine tax relief, Orman said he would be most inclined to focus on property taxes and the sales tax on food.

If Kobach wins the governor’s race, he would need the Legislature to approve his property tax plan.

Questions have been raised about whether the reappraisal limit can be put in place simply by changing statute or whether a constitutional amendment is needed because of a constitutional requirement that Kansas use “a uniform and equal basis” when valuing and taxing property.

Kobach said he believes the change can be made through statute, but either way, lawmakers would have to sign off on the plan.

Rep. Steven Johnson, an Assaria Republican who chairs the House Tax Committee, said if lawmakers were to move forward on the plan, they would need to figure out how it would affect local government leaders.

“Does it place constraints that just make the end result of running the city, county or government entity more difficult?” Johnson said.

Sen. Tom Hawk, D-Manhattan, said Democrats believe property taxes are a problem. But the Legislature went the wrong way when it cut income taxes under Brownback, he said.

Kansas needs a “three-legged stool” of property, income and sales tax, he said.

Hawk expressed concern that Kobach’s plan could limit a community’s ability to fund infrastructure and other needs if there’s a lot of growth in the community.

“I think it’s a simplistic notion that’s made to sort of con the voter,” Hawk said.

Kobach said checks exist on increases in property tax rates, and that a state law designed to slow property tax revenue growth can force votes on whether to raise property tax rates.

But the same isn’t true right now for appraisals.

“There aren’t any political forces that can stop appraisals from going up,” Kobach said.

This story was originally published September 28, 2018 at 9:29 PM.