March 15, 1973
Page 8108
By Mr. MUSKIE (for himself, Mr. PERCY, Mr. MATHIAS, Mr. BAYH, Mr. HUMPHREY, Mr. METCALF, Mr. RIBICOFF, and Mr. TUNNEY
S. 1255. A bill to provide for a program of assistance to State governments in reforming their real property tax laws and providing relief from real property taxes for low-income individuals, and for other purposes. Referred to the Committee on Government Operations.
Mr. MUSKIE. Mr. President, on behalf of myself and the senior Senator from Illinois (Mr. PERCY) and the Senator from Maryland (Mr. MATHIAS), the Senator from Indiana (Mr. BAYH), the Senator from Minnesota (Mr. HUMPHREY), the Senator from Montana (Mr. METCALF), the Senator from Connecticut (Mr. RIBICOFF), and the Senator from California (Mr. TUNNEY), I introduce the Property Tax Relief and Reform Act of 1973, a bill to provide for a program of assistance to State governments in reforming their real property tax laws and providing relief from real property taxes for low-income individuals, and for other purposes.
Mr. President, students of the American past accept as a commonplace the tie between unjust taxation and revolt in our early history. The British Stamp Acts hastened the battle for American independence. Heavy taxes on farmers spurred Daniel Shays, a veteran of Bunker Hill, to take up arms in 1786 against the government of Massachusetts. Excises which Thomas Jefferson called "odious" brought mobs to life in western Pennsylvania during the Whiskey Rebellion of 1794.
We are now a more orderly people. But we live still with that heritage of protest against arbitrary and unjust taxation, and the modern expression of our tradition has taken the form of the "property tax revolt." Just three nights ago in Annapolis that revolt brought a reported 1,500 homeowners to the Maryland State House to demonstrate their deep anger against assessments they say are unfair.
According to an account of the rally in the Washington Post, Gov. Marvin Mandel said of the citizens' protest:
I think it relieves a little of the tension.
Indeed the tension is there. It surfaces in Maryland in a deputation to the legislature. It surfaced in Alabama in a Federal court case which ended in June 1971, by finding the State's whole property tax system "arbitrary and discriminatory." It surfaced in Montana in a successful drive to rewrite the State constitution to open the way for central supervision of the assessment process.
The tension – the ingredients of the revolt – is felt in Gary, Ind., where the secrecy surrounding the appraisal of a huge steel mill drives citizens to organize their own investigation. The discontent is heard in New York City where appraisers are accused of assessing property without using standard manuals to do their job. The distrust has its echoes in citizens' lobbies for property tax reform in Illinois, in Massachusetts, in Texas, in Wisconsin, in New Jersey.
The appeal for relief was part of the legislative messages of 30 Governors this year. Indeed, 15 States, 10 of them acting in the last 2 years, have already taken limited measures to reduce the burden the property tax so often imposes on those least able to pay it.
But scattershot local response can not quell or dissipate the revolt. As much as we might like to hope that local response will prove adequate to solve a national problem, the weight of evidence must confound such optimism.
One indisputable fact is the importance of the property tax to local finance. The tax raised over $40 billion last year, a little less than half of which came from levies on residential property. An estimated $14 billion came from the tax on single family homes. Unless Americans in great numbers move back into tents, their permanent shelter is going to remain a focus for local officials searching for means to finance needed community services.
And despite suggestions that the unpopularity of the tax may cause its gradual disappearance, statistics indicate, instead, that it has been growing in importance. Where the tax collections on
an average home amounted to an average of 1.3 percent of the property's value in 1958, the proportion had risen to 2 percent in 1971. And an average family which paid $110 or 2.2 percent of its income in property taxes 20 years ago was paying a little over $400, or 3.4 percent of its income, in 1971.
Such proportional increases have brought the greatest suffering to the doorsteps of those whose welfare has already aroused the deepest public concern – the old and the poor. For the elderly – at the mercy of fixed incomes in an era of spiraling inflation – the tax often menaces and sometimes destroys the hopes of a decent and secure old age. For the poor, the tax is an obstacle to progress, a barrier to savings and an actual counterweight to Federal programs designed to supply the lowest income groups with the means to move up the economic ladder.
Statistics compiled by the Advisory Commission on Intergovernmental Relations show that 6.3 million homeowners over the age of 65 are forced to pay an average of 8.1 percent of their household income to the property-tax collector, and nearly 1.3 million of these, saddled with incomes under $2,000 a year, lose an average of 15.8 percent of their support to property taxes.
For the poor in general the tax bite is even more painful. Over 400,000 Americans under the age of 65 live on incomes of less than $2,000 a year and see property taxes consume nearly 19 percent of their meager subsistence. And of 14 million Americans with yearly incomes under $5,000, 10.4 million face property tax payments in excess of 6 percent of their total income.
The statistics roll on and on. Each State has its own horror stories. But the problem is a national one, and it cannot be remedied by isolated protest or piecemeal response.
Most of all, it cannot be wished away from the Federal level by those apostles of inaction who would consign the National Government to the role of a theater prompter: A man who whispers encouraging hints to the main actors but never steps on the stage himself. Such an attitude may explain the failure of the President to send Congress the property tax relief measures to which he pledged himself in his 1972 state of the Union message.
Those who argue against Federal involvement in an area traditionally left to local action are now asserting, with some facts to support them, that the States themselves have taken up the burden of relieving excessive property taxes. Since Wisconsin adopted the first "circuit-breaker" relief program in 1964, 14 other States have enacted similar programs to assure that property taxes not take an excessive portion of the income of the elderly and the poor.
But the pattern of progress is uneven. State resources are limited. Only nine States have extended relief to renters as well as homeowners, and of those, only California helps taxpayers under the age of 65. Indeed, only two States provide help to all low-income taxpayers regardless of age.
And the low income ceilings imposed by most States on recipients – generally between $3,000 and $7,000 per household – are a measure of the restricted State finances that can be allocated to tax relief programs.
The uneven pace of State progress toward property tax relief for the poor and elderly is further slowed by the overall failure of the States to reform antiquated, inexpert, arbitrary, and confusing systems of property tax administration. By and large the States have not met their responsibilities for making assessments fair, expert, and easily understood.
Although they were given thoroughgoing, professional recommendations for assessment reform 10 years ago by the ACIR, few States have made a comprehensive effort to update their systems.
A survey by my Subcommittee on Intergovernmental Relations documents the fact that extensive reform has been the exception, not the rule. Property tax administration generally remains the crippled stepchild of indifferent State and local governments.
The survey, like the findings of a similar one conducted independently by the education commission of the States, documents the breakdown of property tax administration. Some of its principal findings are simply put:
For central supervision of property tax administration States spend on the average only one-tenth of 1 percent of the revenues the tax itself generates. Only Hawaii and the District of Columbia spend more than 1 percent of property tax collections to monitor the collecting process.
Only 11 States require that local property assessors be professionally qualified – through training and certification procedures – for the crucial job they do.
No significant consolidation of taxing jurisdictions – numbering in the thousands, many of them too small and too poor to do their job properly – has occurred in any State in the last decade.
Only one State – Hawaii – distributes directly to its taxpayers the information it gathers on the quality of assessment, the degree to which uniformity of valuation is a reality rather than a pious wish.
In many States the appeals boards at both the local and State levels, from which taxpayers may seek assessment changes, do not meet recommended standards of independence and expertise. In many cases, in fact, the officials who hear appeals are also wearing other hats, employing the assessors whose rulings are in dispute.
Only 15 States reported that they regularly publish the assessments of real property exempted from taxation. Yet this is one of the areas where, if the law is not actually being abused to protect special interests, the exemption system imposes a hidden and poorly understood cost on the general taxpayer.
To be effective, relief and administrative reform of the property tax must go hand in hand. Now, while progress toward one goal may be jerkily underway, its companion consideration remains largely neglected. State legislatures apparently see little to justify the initial outlays required for administrative reform. Entrenched local politicians and special interests prefer to maintain a system they alone find profitable.
But not far from the surface revolt simmers. And, aside from our interest in tranquil progress, the Federal Government has a new cause to be concerned with the way States manage their resources. Through general revenue sharing, we are shifting major spending decisions once taken at the Federal level to State and local officials. The quality of those decisions is certain to depend in large part on the degree to which State fiscal policies are uniform, integrated and professionalized. As long as administration of such a major revenue source as the property tax is treated with nonchalance, we cannot expect that our revenue sharing funds will be used for the maximum benefit of either the Government or the taxpayer.
I have outlined a situation which requires redress. To conclude I will briefly discuss the remedy I propose in the legislation I introduce today.
The Property Tax Relief and Reform Act of 1973 is, first of all, a program for limited Federal involvement, but a plan that turns words of encouragement into tangible assistance. It is directed toward the goal of relieving both the inequities and the most severe burdens of existing property tax systems.
Its key provision is the one which makes the States the agents of relief and reform. To those who insist there is no Federal role at all in this area, this legislation will appear extreme. To those who wish to see the Federal Government take over the entire task, the bill will seem disappointing.
Its relief provisions are founded on the principle that States should be compensating the poor and the elderly, homeowners and renters alike, for that portion of their property tax payments which exceeds a reasonable level of their incomes. State programs of relief which meet this objective will be financed by a Federal grant equal to one half the cost of the relief distributed, up to a maximum Federal share equal to $6 multiplied by the total population of each State.
Those States which qualify for Federal funding of their relief programs will be required to show progress toward reform of their property tax administrations. But all States, whether or not they enact relief mechanisms, will be eligible to receive Federal grants and loans to modernize their tax-collecting machinery.
These grant and loan programs are directed at speeding those reforms which the ACIR agreed 10 years ago were needed to strengthen the States' own financial structures. They seek, first of all, the establishment of regular and comprehensive procedures for conducting and publishing assessment – sales ratio studies, the primary tool for measuring and enforcing uniformity in property assessments. Armed with the information disclosed in those studies, taxpayers would be better able to use the simple and direct appeals procedures the States would also be helped to create. Simultaneously, the States, with Federal aid, would be assessing the properties which
are exempt from taxation and would be publishing that information so that taxpayers can know what revenue losses from such exemptions they are being made to cover.
All of these measures, incorporated in title IV of the bill, are designed to assure taxpayers easy access to a system whose complexity alone now generates distrust. Whether or not local assessors are favoring special interests or political cronies, it is essential that citizens receive the data they need to understand the system and, where necessary, contest its workings. Our survey has shown that in most States the opportunity for intelligent appeal is virtually foreclosed.
In addition to the grant programs – rising from $15 million the first year to $25 million in the third year of authorization – interest free loans to the States would be available to finance the reform priorities set out in title V. Those States responsibilities include the training and certification of professional assessors; compiling tax maps of all jurisdictions to find property which now, in many places, escapes assessment altogether; analysing the effectiveness of personal property taxes by measuring the revenues they generate against the cost of administering them equitably; and encouraging small taxing districts to share with others the costs of expert personnel and modern machinery.
Finally, the new Office of Property Tax Relief and Reform in the Treasury Department, while overseeing State progress in administrative reform, will be actively engaged in coordinating Federal data on property values for use by the States. Many Federal agencies – from the Department of Defense to the Department of Housing and Urban Development – are constantly involved in assessing property. Their valuations should be available as a matter of course to local authorities concerned with the same or similar properties. Similarly, the information on Federal income tax returns showing individual holdings of securities can be helpful to those 15 States which now attempt to tax intangible personal property. Only two of those States, however, now use Internal Revenue Service data to bolster their property tax collecting system.
The new Treasury Office would also be available to assist States in appraising those complex industrial properties valued at over one million dollars which now – because of the lack of local expertise – often receive less than professional attention from assessing officials. Further, the Office would join interested States – using grants limited to $5 million a year – in experimental tax modernization programs. Experts have long maintained that site value taxation would greatly simplify and improve property tax administration. It is time to give their theory a full-scale test.
Finally, the Office would engage in efforts to help States coordinate their property tax policies with the development of comprehensive land use plans to assure coherent growth and to protect scarce natural resources. Local tax policies are too often unwitting obstacles to the most efficient use of property. On its own, the Office would make a full-scale survey of Federal property now exempt from local taxation and, within 18 months, would recommend Congressional action, if appropriate, to reimburse State or local governments for the tax revenue lost through such exemptions.
I see the reform program set out in this legislation as a finite task to which the Federal Government must contribute the initial financial impetus. The States, finding that reform puts them on a sounder financial footing, will be able to complete the job themselves after the 3-year grant authorization expires. The relief cost-sharing plan and the loan program will have lives of 6 years and 10 years respectively.
Both relief and administrative reform are tasks that can no longer be ignored or deferred. For the health of our Federal system, we must begin now.
Mr. President, I now yield to my distinguished colleague, the senior Senator from Illinois, the chief co-sponsor of the Property Tax Relief and Reform Act of 1973. I ask unanimous consent that at the conclusion of his remarks the text of the bill we introduce today be printed in
the RECORD.
The PRESIDING OFFICER. Without objection, it is so ordered. (See exhibit 1.)
PROPERTY TAX RELIEF AND REFORM ACT OF 1973
Mr. PERCY. Mr. President, during my campaign for reelection to the Senate, one of the major concerns constantly expressed by the people of my State was the increasing rate of taxation on their homes.
This concern was expressed in all parts of the State by all kinds of people: Farmers in the great, grain-growing sections of the State, businessmen in small towns in southern Illinois, the elderly and the poor in urban Cook County.
This adverse reaction to what people consider a particularly unfair tax is borne out by national polls. In 1972, the Opinion Research Corp. found in a survey for the Advisory Commission on Intergovernmental Relations – ACIR – that Americans consider the property tax by far the most unpopular form of taxation.
What accounts for this intense public reaction against the property tax? I believe it stems from a feeling that a heavy tax on one's house is a threat to the security and continuity of both home and family. Statistics show why people feel this way. According to the ACIR, for those families with incomes under $4,000, property taxes absorb 7 percent of income nationwide, and take 24.8 percent and 10.2 percent of family income in the New York and Chicago areas, respectively.
Property taxes become even more difficult a burden when family income falls below $2,000. In such cases the property tax is estimated by the ACIR to take 30.8 percent of family income in the Northeast, and 22.9 percent in the West.
States have been responding to the resulting outcry against the property tax. Fourteen States, Illinois included, have now implemented programs of relief to low-income – mainly elderly – homeowners, and, as of February 8, eight other States were in process of considering such programs. Because these programs all share the characteristic of providing relief from real property taxes when they exceed a certain proportion of personal income, they are known as "circuit-breaker" programs.
This response of the States to local needs is highly commendable. But analysts of these programs have concluded that, in general, such State circuit breaker programs provide a rather low level of financial assistance for needy taxpayers. Only two of the 14 States have extended circuit breaker relief to low-income families other than the elderly, and only about half the 14 States extend circuit breaker relief to low-income renters.
This demonstration of the unfair effects of the property tax is ample reason for providing more adequate relief from property taxes when these taxes are too burdensome. There is an important reason why the problem of property tax relief, which many see as a matter of concern strictly for State and local governments, is a Federal problem as well. When local property taxes become so great as to cancel out the efforts of Federal Government programs that are intended to provide a subsistence income floor to elderly and other low-income citizens, the Federal Government has a right – indeed a duty – to take an interest.
There are other reasons that dictate action at the Federal level. Certainly one of the most important is our concern over the ability of State and local governments to effectively and fairly generate income sufficient to meet local needs. Our objective is to promote the development of coordinated Federal, State, and local revenue-raising systems.
For these reasons we at the Federal level have a special interest in programs to provide relief from excessive property taxes, and to encourage property tax reform. The need for reform has been thoroughly documented. In 1963 the Advisory Commission on Intergovernmental Relations issued a landmark report describing State property tax systems. The study presented harsh conclusions about the inequities, inefficiencies, and even the corrupt practices permitted in many areas. Among the specific criticisms were–
Administration of the tax by unprofessional, part-time assessors.
Fragmentation of States into hundreds of taxing jurisdictions.
Gross underassessment of large mineral, commercial and industrial properties.
Unnecessary and unfair exemptions for certain groups.
Indiscriminate creation of special taxing districts in which all property is free from tax, or taxed at very low rates.
Federal or State government property, including Government land or buildings, which is leased to private commercial and industrial users, but which is not taxable by local jurisdictions.
Property owned by local jurisdictions which is leased for industrial and commercial use, but is tax free because still owned by the jurisdiction.
Exemptions for classes of homeowners regardless of the income or assets of such persons.
A survey made this year by the Subcommittee on Intergovernmental Relations shows that this situation has not significantly improved. It is fair to conclude from the survey that the property tax situation in the States is still gravely defective.
The enactment of the new 5-year Federal revenue-sharing program adds a special urgency to the need for reform. In a great many localities, Federal revenue-sharing funds are being used to alleviate onerous property taxes. This is understandable and no doubt necessary, but raises the
serious problem that as property tax burdens are eased, local pressures for reform will disappear.
The Federal Government, I believe, has a continuing right to expect local governments to reform their own revenue-raising systems, at the same time that we develop Federal programs of revenue sharing with these local governments.
A variety of factors suggest the need for a Federal program of incentives to local property tax relief and reform:
The failure of most existing State relief programs to provide sufficient levels of relief for all low-income homeowners.
The failure of many State programs to include low-income renters.
The continuing, urgent need for reform of local property taxation systems.
The need to encourage the development of stronger State and local revenue systems and thus to strengthen the federal system by improving intergovernmental revenue-raising relationships.
For these reasons I am introducing today, with Senator MUSKIE, a bill to provide a system of Federal incentives to State relief and reform programs. This bill is based on a bill I introduced on October 9 of last year with the cosponsorship of Senators MATHIAS, HUMPHREY,
PACKWOOD, RIBICOFF, HATFIELD, MONDALE, and STEVENSON.
The bill creates an Office of Property Tax Relief and Reform in the Treasury Department. The Office would:
Assist States which adopt programs of property tax relief geared to help low-income taxpayers, by paying half the relief provided by qualifying State programs up to a limit of $6 for every State resident. To qualify for Federal cost-sharing, State programs would have to offer relief in the form of cash payments, tax credits or refunds to homeowners and renters, regardless of age. The State relief program would rebate the excess of property taxes on a principal place of residence when the excess was over 3 percent of household incomes up to $3,000, over 4 percent on household incomes up to $7,000, over 5 percent on household incomes up to $10,000, and over 6 percent on incomes up to $15,000. States would have flexibility in setting the relationship between rent and property taxes. Property taxes for renters, depending on local circumstances, would be computed at between 15 and 30 percent of rent. States receiving Federal funds for their relief programs would lose half that support in the third year of the program and all of it in the fourth year, if they failed to adopt the property tax administration reforms set out in titles IV and V of the bill.
Administer, under title IV, a mixed program of interest-free loans and grants – to match up to 60 percent of the cost of State programs – to encourage reforms of State property tax administration. The programs would be available to all States that qualify regardless of whether or not they participated in the relief program.
However, to qualify for assistance, State programs would have to provide for annual assessment- sales ratio studies of residential, commercial, and industrial property and vacant land in the State's taxing jurisdictions. They would also provide that the relationship between the assessed and actual market value of any one piece of property be no more than 10 percent higher or lower than the average sales-assessment ratio in any tax jurisdiction. An assessment-sales ratio is the ratio derived by dividing the assessed value of a piece of property by the market price of that property.
State programs would also have to assure wide distribution of such assessment-sales ratio studies and key the information obtained from them to every taxpayer's bill in such a way that he will know his assessment in relation to the value of his property, and how that relationship matches the standard ratios for all classes of property in the jurisdiction where his property is located. For example, if a taxpayer's property is assessed at 45 percent of value, he will be able to check whether his neighbors, or others who own similar property, are assessed as much as he is.
State programs would also have to guarantee quick and easy procedures for appealing assessments and automatically readjusting those which are 10 percent greater or lesser than the average for similar properties in the jurisdiction. Within 2 years of implementing a qualifying program embodying such reforms, States would also be required to assess and fully disclose all tax-exempt properties and publish calculations showing the amounts of property tax revenue lost in each jurisdiction because of such exemptions.
Make, under title V, interest-free loans, but not grants, for State programs to provide professional certification of assessing and appraising officials. Such State programs must provide for training for such officials and contribute to the costs of instruction – and of salary improvements based on higher levels of skill. They must also provide for compilation of tax maps of all jurisdictions and they must determine the degree to which taxes are uniformly assessed.
Assist States in conducting their assessment-sales ratio studies by providing the States with better access to information gathered by Federal agencies, such as the Census Bureau, the Department of Housing and Urban Development, and the Defense Department; by standardizing State and Federal information-gathering procedures about property values and by making Federal or outside personnel available to the States for the appraisal of industrial properties worth over $1 million. The Office would be authorized $5 million a year to conduct with interested States experimental programs in property tax administration such as an experiment in site value taxation. The Office would also help interested States develop land-use plans and would, on its own, be required to inventory Federal property now exempt from State and local property taxation and recommend to Congress legislation to correct any harmful effects of such exemptions, thereby updating the 1968 Douglas Commission study.
I believe my bill is a creative and thorough approach to providing Federal assistance for solution of a major local problem. It can be argued that property taxation is intrinsically a local matter and that local governments should be allowed to solve their problems for themselves. I deeply respect this viewpoint. However, I think it is possible to design, as we have tried to do, a Federal program that relies on the States to act as the agents of change and reform, with Federal encouragement and within Federal guidelines.
The property tax is under increasing attack from many quarters as costs of public services increase. Relief for certain property owners, most particularly the elderly is necessary. Reforming the property tax can, in my view, do a great deal to reduce inequitably high rates for many people, and raise them for those who are unfairly exempted or underassessed.
My bill encourages both objectives. Through the program of matching grants it provides an incentive to States to develop adequate property tax relief programs for all low-income homeowners and renters. Yet it provides a strong incentive for reform by making these grants conditional on implementation – within 4 years – of specified property tax reforms. These reforms have been carefully considered and well studied. They are in measure based on work of the Advisory Commission on Intergovernmental Relations which has studied the property tax systems of the States for at least a decade. These reforms themselves should do a great deal to alleviate the concerns of people who are now so angry over glaringly unfair assessments, the difficulty of obtaining access to information about their taxes, and of appealing unfair assessments on their homes.
Finally, I believe that the programs of grants and interest-free loans provided in titles IV and V are an appropriate encouragement to the States to improve their property taxation systems whether they adopt relief programs or not. As the recent report of the Subcommittee on Intergovernmental Relations on property taxation in the States showed, property tax administration in all States must be improved. In my own State of Illinois important steps have been taken to upgrade assessment practices. Illinois adopted last year a relief program that should do much to assist the poor homeowner and renter. Nonetheless the property tax problem remains a serious one in Illinois, as it is in the vast majority of other States. This bill is an effort to
encourage both relief and reform in all the States. I think it is a responsible response to this extremely important problem.
EXHIBIT 1
S. 1255
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That this Act may be cited as the "Property Tax Relief and Reform Act of 1973."
TITLE I – FINDINGS AND PURPOSES
FINDINGS
SEC. 101. The Congress finds that–
(1) it is necessary to strengthen the revenue-raising systems of State and local governments in order to preserve a strong Federal system of government;
(2) real property taxes, an essential source of revenue to State and local governments, often place a heavy burden on individuals with low and moderate incomes and this burden is particularly heavy for low-income elderly individuals;
(3) a Federal program designed to promote relief from the burden of real property taxes should apply to those individuals who are most heavily burdened by such taxes;
(4) the poor and uneven administration of real property tax laws diminishes their effectiveness as means of raising revenue and causes resentment among taxpayers;
(5) reform of administration of property tax laws can be expected to increase the yield to State and local governments from that tax and insure that its burdens would be more fairly shared by all taxpayers; and
(6) a Federal program designed to encourage the States to provide property tax relief for those upon whom the property tax burden rests more heavily must also encourage significant reforms in the administration of the property tax laws.
PURPOSES
SEC. 102. The purposes of this Act are–
(1) to provide for property tax relief for those persons upon whom real property taxes place the heaviest burden;
(2) to strengthen the ability of State and local governments to raise their own revenues, and strengthen the Federal system by improving the intergovernmental revenue-raising relationship within that system;
(3) to improve the coordination and cooperation among all levels of government and to provide technical assistance to State and local governments in the administration of their property tax laws;
(4) to encourage the reform of the administration of such laws and to establish Federal outlines for their fair and competent administration;
(5) to promote coordination of property tax reforms with the development in all the States of sound land use policies for the protection of scarce natural resources and the coherent growth of urban areas; and
(6) to increase the responsiveness of government at all levels by providing taxpayers full information on the assessments of all lands within their State and locality.
SEC. 103. As used in this Act, the term–
(1) "Office" means the Office of Property Tax Relief and Reform established under title II;
(2) "Director" means the Director of the Office, or his delegate;
(3) "State" means each of the United States and the District of Columbia; and
(4) "Assessment-sales ratio" means the assessed value of a piece of property, divided by the market price of that property.
TITLE II – THE OFFICE OF PROPERTY TAX RELIEF AND REFORM
ESTABLISHMENT
SEC. 201. (a) There is established within the Department of the Treasury an office to be known as the Office of Property Tax Relief and Reform (hereinafter referred to as "Office"). The Office shall administer the real property tax relief and reform programs established under this Act.
(b) The Office shall be headed by a Director, who shall be appointed by the President. The Director shall be responsible for the exercise of all the functions of the Office, and shall have authority and control over all activities and personnel of the Office. There shall be in the Office a Deputy Director who shall be appointed by the President. The Deputy Director shall perform such functions as the Director may prescribe and shall act as Director during the absence or disability of the Director, or in the event of a vacancy in that Office.
FUNCTIONS
SEC. 202. (a) The Office shall–
(1) administer the property tax relief and reform programs established under this Act.
(2) strengthen the relationships and coordination among the Federal, State and local governments in order to encourage State and local governments to develop, and Federal agencies to assist in the development of compatible fiscal and administrative systems of property taxation.
(4) act as a clearinghouse of information for State and local governments with respect to the various programs and activities of the Federal Government which may affect the administration of property taxes.
(5) provide technical and training assistance to States under title VI;
(6) provide other assistance to State and local governments, consistent with the purposes of this Act, and consult regularly with the Advisory Commission on Intergovernmental Relations;
(7) provide financial assistance for special experimental programs in the administration of property tax laws;
(8) evaluate all Federal efforts in the areas of property tax relief and reform; and
(9) review Federal laws applicable to, or having an effect on property taxes.
ADMINISTRATIVE PROVISIONS
SEC. 203. (a) The Director shall make annual reports and recommendations to the Congress and the President, including recommendations for additional legislation, beginning on the first anniversary of the enactment of this Act.
(b) Upon request made by the Director, each agency of the Federal Government is authorized and directed to make its services, equipment, personnel, facilities, and information (including suggestions, estimates and statistics) available to the greatest extent practicable to the Office.
COMPENSATION OF DIRECTOR AND DEPUTY DIRECTOR
SEC. 204. (a) Section 5315 of title 5, United States Code, is amended by adding at the end thereof the following:
"(98) Director, Office of Property Tax Relief and Reform."
(b) Section 5316 of such title is amended by adding at the end thereof the following:
"(132) Deputy Director, Office of Property Tax Relief and Reform."
TITLE III – REAL PROPERTY TAX RELIEF FOR LOW-INCOME INDIVIDUALS
GRANTS TO STATES
SEC. 301. (a) The Office is authorized to pay to each State which operates a qualified program of real property tax relief an amount equal to–
(1) one-half of the cost of that program (other than administrative costs) to the State; but not to exceed
(2) 6 dollars multiplied by the population of the State.
(b) For purposes of this section, the term "qualified program of real property tax relief" means any such program which the Director determines to meet the requirements of this title.
PROGRAM REQUIREMENTS
SEC. 302. (a) The Director shall determine that a State program of real property tax relief meets the requirements of this title if that program provides relief to both homeowners and renters of residential property (including apartments) which meets the minimum standards set forth in subsections (b) and (c).
(b) In order to meet the minimum standards of real property tax relief for individuals who own or are purchasing their principal place of residence a State must provide, by way of cash payments, tax credits, tax refunds, or otherwise, relief from real property taxes in an amount equal to the lesser of–
(1) an amount determined by the State, but not more than $500 per year; or
(2) an amount equal to the amount by which the total real property taxes the taxpayer pays on his principal place of residence for the taxable year exceeds a percentage (determined under subsection (d)) of his household income for that year.
(c) In order to meet the minimum standards of real property tax relief for individuals who rent their principal place of residence, a State must provide, by way of cash payments, tax credits, tax refunds, or otherwise, relief from real property taxes in an amount equal to the lesser of–
(1) an amount determined by the State, but not more than $500 per year; or
(2) an amount equal to the amount by which a percentage of the rent the taxpayer pays during his taxable year for his principal place of residence, determined by the State but not less than 15 percent and not more than 30 percent, exceeds a percentage (determined under subsection (d)) of his household income for that year.
(d) The percentage required under subsections (b) and, (c) to be determined under this subsection shall be the percentage specified in the following table:
If the household the percentage
income– is–
not more than $3,000 3.0
more than $3,000 but
not more than $6,999 4.0
more than $7,000 but
not more than $9,999 5.0
more than $10,000 but
not more than $14,000 6.0
(e) For purposes of this section, the term (1) "household income" means the aggregate annual income of all the members of the taxpayer's household (including the taxpayer). For purposes of the preceding sentence the term "income" means–
(A) wages, salary, or other compensation for services;
(B) any payments received as an annuity, pension, retirement, or disability benefit (including veterans' compensation and pensions, workmen's compensation payments, monthly insurance payments under Title II of the Social Security Act, railroad retirement annuities and pensions and benefits under any Federal or State unemployment compensation law) ;
(C) prizes and awards;
(D) gifts (cash or otherwise), support and alimony payments; and
(E) rents, dividends, interest, royalties, and such other cash receipts as the Secretary may by regulation prescribe;
(2) "rent" means consideration paid under a lease, whether written or oral and regardless of duration, solely for the right to occupy a dwelling house (including an apartment), exclusive of charges for (or any part of the rental fee attributable to) utilities, services, furniture, furnishings or personal property appliances furnished by the landlord as part of the lease agreement, whether expressly set out in the rental agreement or not; and
(3) "household" means the members of a family (and anyone dwelling during the taxable year with that family) dwelling together during the taxable year in the same residence.
LIMITATIONS
SEC. 303. No amount shall be paid under section 302 to any State as reimbursement for the costs of any program of real property tax relief attributable to–
(1) amount of property tax relief furnished by that State to any taxpayer whose household income exceeds $14,999 for the taxable year; or
(2) amounts of property tax relief furnished by that State to more than one member of any household.
CONDITIONS
SEC. 304. No payment shall be made under section 301 except upon application made by a State containing such information as the Director may require, and each State receiving any payment under that section shall agree to provide the Director with such additional information, reports, and assurances as he may require, consistent with the purposes of this Act. Payments may be made under that section in advance, by installment, or otherwise as determined by the Director.
REDUCTION AND TERMINATION: NOTICE
SEC. 305(a) The Director shall reduce by one-half the amount of the payments to which a State would otherwise be entitled under section 301 during the fourth year that State receives payments under this title unless the Director determines that the State has substantially implemented the reforms and complied with the guidelines of title IV and title V. No payments shall be made to any State after it has received payments under this Act for 4 years unless the Director determines that the State has substantially implemented such reforms and complied with such guidelines.
(b) The Director shall notify each State which will have its payments under this title reduced or terminated under the provisions of subsection (a) of that reduction or termination not later than 1 year before the reduction or termination takes effect, together with information as to what changes in that State's real property tax laws or administrative practices must be made to avoid the reduction or termination.
TITLE IV – REFORM OF PROPERTY TAX ADMINISTRATION; DISCLOSURE, ACCESS, AND APPEAL
AUTHORIZATION OF REFORM GRANT AND LOAN PROGRAM
SEC. 401. (a) In order to encourage States to provide property taxpayers complete and easily understood data about property appraisals and assessments and to provide swift and uncomplicated means of appealing such appraisals and assessments and to provide for the widest and fullest understanding of the value of real property in the States now fully or partially exempt from taxation, the Office is hereby authorized to administer programs of grants and interest-free loans to State programs which meet the requirements of this title.
(b) The grants established under this title shall be administered so that the Federal contribution does not exceed 60 percent of the total cost of a program in any State.
PUBLICATION OF ASSESSMENT-SALES RATIOS
SEC. 402. (a) In order to meet the requirements of this title, a State program shall collect and cause to be published not less frequent than annually, the assessment-sales ratio for each taxing jurisdiction within that State of–
(1) residential real property located within the taxing jurisdiction;
(2) commercial property located within the taxing jurisdiction;
(3) industrial property located within the taxing jurisdiction;
(4) vacant land; and
(5) such other classes of properties as may be recognized by the taxing jurisdictions.
(b) In determining the assessment-sales ratio of any property, State regulations shall be based on the best existing practice, including, but not limited to, actual sales wherever practical, and shall be, to the extent practicable, in conformity with the standards used by the Bureau of the Census, in its computations of the census of governments.
TAXPAYER APPEALS
SEC. 403. (a) In order to meet the requirements of this title, a State program shall–
(1) provide that all real property within a taxing jurisdiction be so assessed that the assessment- sales ratio of any particular piece of real property, stated as a percentage, is not more than 10 percentage points greater or lower than the average assessment-sales ratio for all properties within the taxing jurisdiction required by State law to be uniformly assessed;
(2) provide for the notification of each real property taxpayer, not later than 60 days before the final date for appeals or the date on which payment of the real property tax on that property is due, whichever is earlier, of the average assessment-sales ratios for each class of real property and for all such classes taken as a whole within the taxing jurisdiction in which his property is located, the assessed value of his property, and the market value placed on his property for purposes of the assessment; and
(3) provide a means by which a real property taxpayer can quickly and easily appeal the assessed value or the assessment rate of property within his taxing jurisdiction.
(b) A real property assessment appeal procedure shall not be considered to meet the requirements of paragraph (3) of subsection (a) unless it provides for the automatic reassessment of any property which, on the basis of the market price established by the taxpayer to the satisfaction of the officer or body to which the appeal may be taken, is shown to be assessed at an assessment- sales ratio which falls to meet the requirement of paragraph (1) of subsection (a).
PUBLIC ACCESS TO REAL PROPERTY TAX DATA
Sec. 404. In order to meet the requirements of this title, a State program shall provide–
(1) for the publication in a newspaper of general circulation within each taxing jurisdiction and through other suitable means of the results of any assessment-sales ratio study made of real property located in that taxing jurisdiction; and
(2) that records containing assessed valuation and market price of all property located within a political subdivision of the State be kept in a public building convenient to residents of that political subdivision and that records be indexed according to address of the property and the name of the owner of the property and be available for public inspection and copying at reasonable hours and at lowest possible cost to anyone wishing to copy any such record.
TAX-EXEMPT PROPERTY
SEC. 405. (a) In order to meet the requirements of this title, a State program shall provide for–
(1) the assessment and separate public listing of all tax-exempt real property, and the disclosure of the assessment of any such property to the public in the same manner as the assessment of other real property is made available to the public;
(2) the publication in the State budget and by each taxing jurisdiction in a newspaper of general circulation within it of the aggregate assessments of all tax-exempt property located in the State and in the taxing jurisdiction and the amount of any revenue loss attributable to the exemption from real property tax of such property.
(b) In the administration of this title, the Director may waive the requirements of subsection (a) for not to exceed 2 years in the case of any State.
TITLE V – REFORM OF PROPERTY TAX ADMINISTRATION; UNIFORM ASSESSMENT PRACTICE
AUTHORIZATION OF LOAN PROGRAMS
SEC. 501. In order to encourage States to improve the professional qualifications of property appraising and assessing officials, to bring records of real property ownership and value up to date and to improve the quality and efficiency of assessments of personal property, the Office is hereby authorized to administer programs of interest-free loans to State programs which meet the requirements of this title.
UNIFORM ASSESSMENT GUIDELINES
SEC. 502. In order to meet the requirements of this title, a State program shall provide for–
(1) the certification by a State supervisory agency of professionally qualified State and local officials for assessing and appraising property;
(2) training such officials and for making supplementary payments to taxing jurisdictions to cover the cost of training and paying certified appraisal and assessment personnel;
(3) the sharing of the cost of certified appraisal and assessment personnel by taxing jurisdictions which lack the resources to maintain such personnel separately;
(4) the compiling of maps of taxing jurisdictions to disclose the location of all parcels of property and any improvements on such property within the taxing jurisdictions, along with convenient methods of identifying the ownership and use of such property and improvements;
(5) the determination by a State supervisory agency of (A) the degree to which State taxes on residential personal property, commercial inventories, farm personal property, personal holdings of bank deposits, and securities and other financial assets are uniformly enforced and (B) the cost of administering such taxes relative to present and potential revenues raised by them; and
(6) such other assessment improvement activities as the State and the Director shall determine to be worthwhile.
TITLE VI – FEDERAL ASSISTANCE TO TRAINING AND TECHNICAL PROGRAMS
TRAINING AND INTERCHANGING PERSONNEL
SEC. 601. The Office shall provide assistance to the States for the training of real property tax assessment and appraisal personnel, including, but not limited to, arranging for the training of such personnel under the Intergovernmental Personnel Act of 1970.
ADDITIONAL ASSISTANCE
SEC. 602. (a) The Office shall provide additional assistance to the States in undertaking assessments-sales ratio studies required under title IV, by–
(1) assisting States in obtaining assessment appraisal data now collected by other Federal agencies, together with such additional information as may be requested by the States in improving their assessment programs; and
(2) appraising or arranging for the appraisal of industrial property the market value of which is in excess of $1,000,000, upon request of any State.
(b) The Office shall develop, jointly with interested States, and provide grants for, special experimental programs, such as site value taxation, to improve the administration of property tax laws. The aggregate amount of grants made under this subsection shall not exceed $5,000,000 during any fiscal year.
(c) The Office shall develop jointly with the States and other concerned Federal agencies programs for presentation to the State legislature (or to the Congress in the case of the District of Columbia) containing detailed plans to coordinate State and local real property tax policy with the requirements of sound land use planning and to promote coherent urban growth and the protection of scarce natural resources.
(d) The Office shall conduct a survey of all Federal property exempt from State and local property taxes and of the effect of such exemptions on State and local tax bases and shall, within 18 months after the date of the enactment of this Act, submit the survey to the States and Congress along with recommendations to correct any effects of such exemptions it determines to be harmful.
TITLE VII – MISCELLANEOUS: CONDITIONS OF GRANTS AND LOANS
SEC. 701. (a) No payment shall be made under title III, IV, V, or VI except upon application made by a State containing such information as the Director may require, and each State receiving any payment under this Act shall agree to provide the Director, with such additional information, reports, and assurances as he may require, consistent with the purposes of this Act. Payments may be made under this Act in advance, by installment, or otherwise as determined by the Director.
(b) Mass appraisal firms.
(1) The Director shall establish standards for the qualification of firms engaged in providing property appraisal services to State and local governments, and shall certify any such firm which meets those standards.
(2) No State or local government shall receive any assistance under this Act during any year in which it utilized the services of a firm engaged in providing property appraisal services to such governments for the purpose of appraising property within its jurisdiction unless that firm is certified by the Director.
(3) No firm certified under subsection (2) shall have its certification revoked by the Director except after an opportunity for hearing.
GENERAL AUTHORIZATION OF APPROPRIATIONS
SEC. 702. (a) There are authorized to be appropriated to the Office such sums as may be necessary for the purposes of carrying out the provisions of this Act (other than title III and other than the grant and loan programs authorized by titles IV and V) for the fiscal year ending June 30, 1974, and for each of the succeeding 9 fiscal years.
(b) There are authorized to be appropriated to the Office such sums as may be necessary to carry out the provisions of title III for the fiscal year ending June 30, 1974, and for each of the succeeding 5 fiscal years.
(c) There are authorized to be appropriated to the Office for the purpose of carrying out the grant program authorized by title IV $15,000,000 for the fiscal year ending June 30, 1974, $20,000,000 for the fiscal year ending June 30, 1975, and $25,000,000 for the fiscal year ending June 30, 1976.
ESTABLISHMENT OF LOAN FUND
SEC. 703. There is established in the Treasury of the United States an Intergovernmental Relations Loan Fund for the purpose of making loans under title IV and title V of this Act. There are authorized to be appropriated to the Fund such amounts as may be necessary to carry out the loan programs authorized under such titles. Amounts appropriated to the Fund shall remain available without fiscal year limitation until June 30, 1983. The Fund shall be credited with any amounts appropriated to it and any amounts repaid under any such program by any State government to which any loan is made under that program.
Mr. RIBICOFF. Mr. President, I am pleased to join with Senators PERCY and MUSKIE in introducing the Property Tax Relief and Reform Act of 1973.
No one likes taxes, but the one most disliked of all is the property tax, because it is unfair. What was originally designed to be a general tax on wealth has now become an oppressive burden on private homeowners of all economic classes.
Recent studies have shown that the homeowner often pays more than his fair share. Texas law students revealed that in Houston, commercial properties were assessed at only 13 percent of fair market value, while residences were assessed at 32 percent. A Vanderbilt University study showed that the largest companies operating in Appalachia were grossly underassessed. In Gary, Ind., a poor city fighting for survival, United States Steel's property was underassessed by as much as $100 million.
Homeowners are becoming aware that they have been victimized. For years, the thought of allowing public schools to close was unthinkable. Now it is commonplace as voters, tired of an unfair system and unable to absorb more increases, defeat school bonds based on the property tax. Schools in Independence, Mo.; Dayton, Ohio; Kalamazoo, Mich.; and Chicago, Ill., have all closed down for a day and even weeks due to a lack of funds.
The property tax's severest impact is on the poor and those living on fixed incomes such as the elderly. Of 14 million Americans earning less than $5,000 a year, over 10 million pay property taxes in excess of 6 percent of their total incomes. Close to 70 percent of the elderly own homes, but only half had incomes of over $5,000. That means that millions of our senior citizens are finding it increasingly difficult to meet their tax payments and are being forced to sell their most valuable possession.
Despite the uproar about the property tax, it is not going to disappear. It raises over $40 billion for our schools and local governments and no other tax can replace it.
The property tax must, therefore, be reformed and made more equitable. The States and localities should be responsible for making the necessary changes, but the Federal Government can help. For that reason we introduce today the Property Tax Relief and Reform Act of 1973.
This bill has two basic purposes – to provide immediate relief for those homeowners and renters paying an inordinately high share of their income in property taxes and to provide an incentive to State and local governments to reform their present systems.
Under our proposal, the Federal Government would pay half the relief provided by qualifying State programs, with a limitation based on a State's population. For example Connecticut could receive as much as $18 million. To qualify for Federal cost sharing, State programs would have to offer relief in the form of cash payments, tax credits or refunds to homeowners and renters, regardless of age. The State relief program would rebate the excess of property taxes on a principal place of residence when the excess was over 3 percent of household incomes up to $7,000, over 5 percent on household incomes up to $10,000, and over 6 percent on incomes up to $15,000. States would have flexibility in setting the relationship between rent and property taxes, computing property taxes at between 15 and 30 percent of rent depending on local circumstances.
In addition a program of interest-free loans and grants would be available to States to encourage needed property tax reforms.
I am hopeful that Congress will act quickly on this legislation and that the States will take advantage of it to help make the property tax fair again.