June 14, 1973
Page 19605
FEDERAL PROPERTY TAX ROLE
Mr. MUSKIE. Mr. President, it has long been the conventional wisdom that the property tax is solely the responsibility of State and local governments, and that the Federal Government has no role whatsoever in this field. Nationwide the property tax constitutes over 75 percent of all local government tax revenues. Consequently, the administration of this tax has been and continues to be primarily a function of local governmental units, with the State exercising supervisory powers.
Today, this basic assumption is being challenged. Though the consensus is still that the ultimate responsibility for administration of the tax lies with State and local units of government, it is be
coming increasingly clear that some greater effort is needed in order to reform and strengthen the credibility and fairness of this most important source of revenue.
Extensive research by the Advisory Commission on Intergovernmental Relations has provided ample documentation that the property tax burden is highly regressive – too often – falling most heavily on those who can least afford to pay it.
A study conducted by the Senate Subcommittee on Intergovernmental Relations has demonstrated clearly that by and large, the States have not acted to eliminate the most inefficient and arbitrary aspects of the property tax structure.
Taken together, this body of evidence points to a growing need for a limited Federal involvement in the property tax field. To the extent that the property tax burden is distributed inequitably, the Federal commitment to alleviate poverty is undermined. To the extent that the property tax is administered inefficiently and arbitrarily, the credibility of all Government revenue-raising mechanisms is weakened.
In the face of this growing case for Federal involvement, the National Governors' Conference, at its annual meeting last week, voted to endorse the concept of a limited Federal role in the field of property tax relief and reform.
Noting that "improvements in State and local policies and procedures surrounding use of the property tax are critical if administration of the tax is to be fair, equitable and effective," the conference adopted a resolution which recognizes a legitimate Federal interest in property tax relief, and a proper, though limited, Federal role in promoting property tax reform.
I have introduced legislation in the Senate – S. 1255 – which would promote just such a cooperative effort, and so I welcome the action taken by the Nation's Governors.
I ask unanimous consent that the text of this resolution adopted by the National Governors' Conference be printed in the RECORD.
There being no objection, the text of the resolution was ordered to be printed in the RECORD, as follows:
STATE OF UTAH, OFFICE OF THE GOVERNOR,
Salt Lake City,
Utah,
June 7, 1973.
Hon. EDMUND S. MUSKIE,
U.S. Senate,
Washington, D.C.
DEAR ED: Thanks very much for your letter on S. 1255 to provide Federal incentives for state property tax relief and reform.
As you know, the issue of property tax relief and reform came before my National Governors' Conference Committee on Executive Management and Fiscal Affairs. This policy affirms that the administration of the property tax is and should remain the responsibility of state and local governments. However, the policy (1) recognizes the Federal interest in limiting the adverse impact of a property tax in certain classes of excessively burdened tax payers, and (2) states that Federal incentives promoting better assessment administration and encouraging states to assume greater responsibility for property tax matters are desirable. Enclosed is the policy statement adopted by the Annual Meeting and a brief background report.
I share your view that state activity in property tax relief and reform is a very difficult and important task. It is my hope that states will take appropriate initiatives with minimum Federal intervention.
Relative to S. 1255, the Committee was in general agreement that your legislation mandates an appropriate, indirect Federal role in property taxation.
Sincerely,
CALVIN L. HAMPTON,
Governor.
NATIONAL GOVERNORS CONFERENCE 1973-74
POLICY STATEMENT OF EXECUTIVE MANAGEMENT AND FISCAL AFFAIRS COMMITTEE
PROPERTY TAX RELIEF AND REFORM
In 1963 the Advisory Commission on Intergovernmental Relations completed a major report on the status of property tax administration at state and local levels. The report included twenty-nine recommendations aimed at clearly identifying state responsibilities in the property tax field and providing a basis for improved state and local performance in administering this important tax.
Since August 1971, when the California Supreme Court rendered its landmark decision in Serrano vs. Priest, the property tax as used to finance public education has been the subject of increasing attention and analysis. While the Serrano and Rodriquez school finance cases did not deal directly with the constitutionality of the property tax, they gave rise to increasing scrutiny of state and local administration of the tax.
During 1972 and 1973 major studies of the property tax have been carried out by the Advisory Commission on Intergovernmental Relations, the Education Commission of the States, and the Sub-Committee on Intergovernmental Relations of the U.S. Senate. All three reports deal with two major components of the tax – the manner in which it is administered, and relief from excessive burden created by the tax on certain categories of low income property owners.
The ACIR study was undertaken upon request of the President, and examined issues aimed at defining the appropriate federal role in achieving property tax relief, reform of property tax administration, and relieving intra-state fiscal disparities in financing education. The Commission concluded that a federal role in any of the three areas was neither necessary nor desirable.
In reaching its conclusions, the Commission underscored its belief that these areas are state responsibilities and that federal entry into the field would be detrimental to the federal system. In evaluating the advisability of a federal role, two rigorous criteria were applied:
(1) The problem that precipitated the demand for federal intervention stems from a head-on conflict – a serious under cutting of a major federal program objective by policies of most states; and
(2) The intergovernmental conflict can be resolved only by Federal government action.
ACIR explicitly rejected proposals for even modest federal programs to assist States in providing limited property tax relief for low-income home owners and renters, and to encourage improved administration of the property tax.
The study carried out by the Education Commission of the States did not deal with the federal role, but did conclude that provisions for relief from excessive burden and current administrative practices are in need of major attention by the States.
Finally, a report prepared for the Senate Sub-Committee on Intergovernmental Relations found a need for major improvement in both assessment practices and relief mechanisms. The report, based upon a survey questionnaire mailed to each Governor, has resulted in the introduction of federal legislation which would offer assistance to States which make major strides in reforming their property tax systems.
The National Governors' Conference does not have policy in this important and controversial area. In view of increasing interest and debate surrounding the property tax, it is appropriate that the Conference consider the adoption of a new policy statement on property tax reform and relief.
PROPOSED POLICY POSITION
The National Governors' Conference notes increasing interest in the issue of property tax reform and relief. Studies and recommendations of the Advisory Commission on Intergovernment Relations, the Education Commission of the States, and the Sub-Committee of Intergovernmental Relations of the U.S. Senate underscore the importance of action aimed at strengthening and at the same time improving public acceptance of this important revenue device.
The Conference believes that the administration of the property tax is and should remain the responsibility of the States and their local governments.
However, the Conference recognizes the federal interest in limiting the adverse impact of the property tax on certain classes of excessively burdened taxpayers. But we believe that a federal effort in this area should avoid requirements for arbitrary national uniformity in use, impact and/or administration since such requirements would he an undesirable federal intrusion.
We further believe that federal incentives which would promote better assessment administration, or encourage the States to assume greater responsibility for property tax matters are desirable.
Therefore, the Conference supports a federal program to assist States in alleviating the regressivity of their property tax systems, and calls upon Congress to explore means by which the States may be encouraged to assume greater responsibility with respect to more equitable administration of property tax assessments and appeals.
The Conference further calls upon all States to review the policies and procedures which guide use of the property tax by all taxing jurisdictions within each State. Such a review should focus at a minimum upon:
(1) policies, practices, and standards of assessment and general administration.
(2) devices used to provide relief to certain classes of property taxpayers.
(3) identification of state and local programs financed by the property tax which would more equitably be financed by other sources of revenue.
(4) identification and measurement of the property tax base that has been eroded by exemption.
(5) alternate remedies for appealing assessments and adjustment of excessive assessments.
Improvements in state and local policies and procedures surrounding use of the property tax are critical if administration of the tax is to be fair, equitable, and effective.