Missouri’s property tax system works best when the assessments are accurate, the tax base is wide, and the rates are low. That combination will help grow Missouri’s economy for everyone while properly funding the necessary functions of local government. However, a radical change in the system is being put before voters in Webster, Christian, Lawrence, and Dade counties in April. These four counties will vote on whether to prohibit any property tax increases due to reassessments. Current law requires local governments to roll back tax rates as assessments increase, but we all know that taxes still go up, sometimes substantially.

At the Show-Me Institute, we support low taxes, and I am well-aware of how tempting this will be to voters. But using market valuations in reassessment to set tax levels is a good system. While our property tax system needs reforms, eliminating any and all tax increases from reassessments will make Missouri more dependent on other taxes that hurt our economy far more than property taxes do. Hate them as much as you wish, but property taxes indisputably harm economic growth less than other taxes do.

These property tax limitations would reduce the ability of school districts to fund themselves and would make them more dependent on state aid. Consider the following: school districts in St. Louis County regularly receive at least 80% of their funding from local sources, primarily property taxes, and some are over 90%. It is nowhere near that level in Southwest Missouri. Nixa school district in Christian County is only 54% locally funded, while Marshfield school district in Webster is only 46% locally funded. Even Springfield school district, the largest school district in Greene County, where no property taxes changes are proposed, is only 58% locally funded. These changes would make school districts in these counties more dependent on state aid, not less. Again, I’m aware that many voters may view that as a benefit, but it is anything but.

Numerous other harmful effects would come from diluting the market forces (in the form of assessments based on market values) that form the basis of property taxation. California provides us with an example of the harms of these types of property tax caps with its famous Proposition 13, passed in 1978, which dramatically limited increases in property assessments and taxes. Proposition 13 certainly had its intended effect of lowering property taxes for California homeowners. However, it also reduced mobility, significantly increased alternative taxes, limited homeownership opportunities, and caused substantial tax disparities for similar properties receiving similar services. These negative consequences are exactly what these four counties would experience over the long run.

There are also significant constitutional concerns with this legislation. Missouri Constitution Chapter X, Section 3 states that “taxes . . . shall be uniform upon the same class or subclass of subjects within the territorial limits of the authority levying the tax.” So, consider the issue of the Logan-Rogersville R-VIII school district. This school district serves families in three counties. If voters approve these tax changes, the property tax system in one of those three counties would remain unchanged (Greene), while in the other two (Webster and Christian) it would be illegal to have a tax increase from reassessment. It would certainly seem unconstitutional for property owners within the same taxing district who own the same type of property (single-family homes) to face different tax and assessment systems for the same services.

We need property tax reform in Missouri, but this total limitation is too severe. If enacted, the property tax proposals before the voters in these four fast-growing counties would make the region’s overall tax system worse, not better. I hope voters will look past the easy appeal of a tax limit to think about the long-term harms.

The post The Wrong Way to Fix Property Taxes appeared first on Show-Me Institute.

Property tax relief has become a rallying cry for state policymakers across the country. Frustration over rising home values and the cost of living has driven lawmakers in states including Indiana, Ohio, and Wyoming to enact sweeping property tax cuts in recent sessions. But while these measures may look attractive on the campaign trail, they are already putting real strain on local governments that depend on property taxes to fund schools, public safety, and other essential services.

An article in the publication Governing titled “State Property Tax Relief Pushes Local Budgets to the Brink” highlights this emerging dynamic. Lawmakers in several states have pursued homeowner tax credits, rate caps, or other limitations without fully compensating counties, cities, and school districts for the revenue they lose. The result? Significant budget shortfalls, belt-tightening by local governments, and even more political pressure from local leaders to revisit state legislation cutting their revenue.

These developments matter to Missouri because they illustrate the unintended consequences of well-meaning tax cuts. As my colleague David Stokes has written in testimony before the Missouri Legislature, Missouri depends on property taxes to fund local services efficiently, and ill-designed state interventions can do more harm than good. Stokes emphasized that “Missouri’s property assessment and tax system needs reforms, but efforts to reduce it dramatically or eliminate it entirely go too far,” and that the state should not trade one revenue problem for another by hollowing out the tax base localities rely on.

What’s happening outside of Missouri mirrors Stokes’ concerns. In Indiana, a roughly $1.2 billion homeowner tax relief package enacted in 2025 will cost local governments an estimated $1.5 billion over three years, forcing many towns and counties to cut services or revise budgets mid-cycle. Wyoming’s 25 percent cut on assessed home value for tax purposes similarly leaves schools—which receive roughly 70 percent of property tax revenue—scrambling to balance their books.

Stokes has warned that limiting property tax growth without careful policy design reduces the property tax base, shifting the burden to other, more distortionary taxes. He argues that property taxes—particularly on land and real estate—are among the least harmful taxes to economic growth compared with income or sales taxes. Wholesale caps or freezes discourage local fiscal responsibility.

Missouri’s recent property tax changes—including the creation of “zero percent” and “five percent” counties where valuations can’t drive tax increases without voter approval—reflect a similar temptation to cut taxes without addressing the broader revenue implications. Stokes has noted that such approaches may do little to improve fairness while shrinking the tax base that supports schools and local services.

If policymakers in the Show-Me State pay attention to the experience of other states, they’ll proceed with caution. Cutting property taxes without sustainable alternate revenue exacerbates budget stress for counties and schools and shifts costs to taxes that are more damaging to growth, such as income or sales taxes. Ensuring that relief targets those most in need—as opposed to broad caps that change how local governments fund core services—preserves local autonomy and avoids the fiscal cliff other states are now confronting.

Missouri’s leaders should focus on reforms that improve fairness and economic efficiency—not simply reducing bills at the expense of services Missourians value.

The post David Stokes Was Right: Property Tax Caps Are Squeezing Local Budgets Nationwide appeared first on Show-Me Institute.

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The post Testimony on Property Tax Reform appeared first on Show-Me Institute.

The new state law creates three types of counties for property taxes:

1)        Five percent counties: These counties are made up primarily of Missouri’s smaller, rural counties. In these counties, upon local voter approval, a homeowner’s property tax liability can go up by no more than the lower of five percent or the national inflation rate during reassessment, unless voters approve tax rate increases or the homeowner improves their property. There are 75 counties in this category.

2)         Zero percent counties: These counties are made up primarily of mid-sized and suburban Missouri counties. In these counties, upon local voter approval, a homeowner’s property tax liability cannot increase at all during reassessment unless voters approve tax rate increases or the homeowner improves their property. There are 22 different listings for counties in this category.

3)         “Unaffected” counties (my term, not language from the bill): These counties are primarily Missouri’s large urban counties or counties in central Missouri, including the Lake of the Ozarks area. These 17 counties and the City of St. Louis are not included in this legislation and their tax and reassessment system will continue unchanged. It is worth noting that Jackson County, which has had by far the worst administration of assessment and tax collection in recent years of any Missouri county, is unaffected.

There are many reasons why these substantial changes to the system are bad, but the first one is that, in general, property taxes are the least harmful tax for economic growth. So, if you want to create a tax system that encourages greater economic opportunity for all Missourians, the property tax is the last tax you should focus on. Furthermore, these changes will almost certainly lead to greater governmental reliance on income taxes (mostly through the state’s foundation formula for school funding), which is exactly the wrong way to go about this.

Here is a chart I like to share. It includes four major economic studies of tax policy. The conclusions are obvious. Property taxes, in general, are the least harmful for economic growth and income taxes are the most harmful. Why Missouri would be severely limiting property taxes in many counties in a manner that will increase dependency on income taxes is beyond me. It may make for good politics. It is not good tax or economic policy.

Not all property taxes are the same, of course. Property taxes focused on the value of the land are the best, and we need to expand that (i.e., land taxation) in Missouri. Property taxes focused on homes and buildings are next best. Missouri makes heavy use of personal property taxes on cars, boats, etc., and those taxes on mobile assets are less beneficial and should be phased out. Finally, personal property taxes on business and farm equipment are harmful, and should be ended. (The final category makes up a very small part of the property tax base, so ending it would not be difficult.)

Future posts will discuss the constitutional problems with this bill, the harmful effects of favoring current homeowners over future homeowners, a discussion of Charles Tiebout and his theories, and more. For more information, please see my testimony from the special session, these policy studies on this issue of property taxes and assessments, and related commentaries.

The post Why the New Property Tax Rules in Missouri Are Bad, Part 1 appeared first on Show-Me Institute.

Like these other ongoing sagas, Jackson County’s assessment practices have been getting worse, though they were never great to being with. As bad as the situation was in 2019 and earlier, in 2023 it hit bottom.

The Missouri State Tax Commission (STC) has taken the unprecedented step of ordering Jackson County to essentially ditch the 2023 reassessment and move every change in assessed valuation (AV) that was over a 15 percent increase down to 15 percent. The total AV increase for Jackson County was almost 25 percent, which is enormous. Obviously, if the total increase was 25 percent, a substantial number of individual properties had to go up more than that 15 percent number. (The 15 percent level is key because that is where additional taxpayer notification laws come into play.)

This change lowers the assessed valuation for tens of thousands of properties and involves hundreds of millions in AV. According to Jackson County, the total amount of tax revenue disputed here for various local governments is $117 million. (The AV would be significantly higher than the tax revenues.)

Jackson County has been underassessed for decades. Jackson County has been attempting to correct that in recent years (under direction from the STC), and that is a good thing. More accurate assessments don’t have to lead to higher taxes, except in the Kansas City 33 school district, but’s that another issue. However, Jackson County officials seem to think that their attempts to correct prior errors somehow exempt them from following the current laws. As a county official admits in the just-filed lawsuit against the STC order :

This filing is not just about the legalities—it’s about safeguarding the resources that support our schools, public safety and community programs. [emphasis mine]

Fortunately for taxpayers, good intent does not exempt you from following the laws in reassessment. As the STC order states, the Jackson County assessors made all sorts of mistakes in 2023:

9. The Commission finds and determines that in conducting its biennial reassessment for 2023, Jackson County assessing officials failed to give proper notice to property owners and failed to perform physical inspections as required by Section 137.115 RSMo. where the assessed valuation of residential real property increased by more than fifteen percent since the last assessment, resulting in mistaken or erroneous assessments and taxes that were mistakenly or erroneously levied or paid in 2023 . . .

The STC order goes into more detail on a number of failures by the assessor’s office.

The order may well impose a major burden on taxing agencies in Jackson County that must now redo their valuations and property tax rates. But just because it’s a major burden doesn’t mean taxpayers should have to accept having their rights violated.

I hope the Jackson County lawsuit fails and the STC order is upheld. The county assessor should not be allowed to ignore the very clear rules—rules that every other county assessor had managed to follow in recent years—that protect the rights of property owners. This may be a mess in Jackson County, but it is a mess of the county’s own creation.

The post Jackson County Assessment Facts, Part Four appeared first on Show-Me Institute.

Well, it does. Stick with me on this.

Last year, Missouri’s budget included an appropriation increasing the minimum Missouri starting teacher salary to $38,000, funded primarily by state tax dollars and not local school taxes. This year, officials are proposing legislation to raise it even higher, with the same primary funding from the state. Where do you think those state tax dollars are going to come from, and where is this new fund to increase starting teacher salaries going to be spent?

It is more difficult for rural school districts to fund themselves with property taxes because of the high percentage of agricultural property in those areas. (I’m not saying it’s impossible, just more difficult.) Whether you like it or not, farmland is underassessed in Missouri(most farmers presumably like it). It is hard to raise the revenue necessary for a small school district with a tax base starting out so low. Since tax rates are the same for various classes of property (except in St. Louis County), setting a rate high enough to raise enough funds from farmland would mean incredibly high taxes on the more accurately assessed homes and businesses in those communities.

Urban and suburban school districts, for the most part, aren’t starting their teachers out at $25,000. At Indeed.com, every job opening I saw for City of St. Louis public schools started at $46,000. In this blog post, James Shuls goes into more detail on this discrepancy. (James goes into even further detail on the problems of funding rural school districts here.)

Where do the taxes that fund much of Missouri government and, by obvious extension, this new state teacher fund, come from? As this map shows, our larger urban counties produce an outsized percentage of Missouri’s economic activities. St. Louis County alone produces over 25% of the state’s GDP. State income and sales tax collections are going to largely align with those totals.

If you were a voter in rural Missouri, and you were told that you could vote for a local tax increase or have the state pay for salary increases for your school district, what would you pick? We would all pick the latter.

This issue will play out similarly to the sheriff salary issue of about 15 years ago. There, the state decided to increase sheriff’s deputy salaries by adding a fee to process service around the state. The problem was that St. Louis County, which has a county police department and a sheriff’s department that is not a law enforcement agency (trust me on this, I used to be a county sheriff), was ineligible for the funds even though it generated more fees from process service than any other county in the state. Yes, lawsuits were filed over it, but they failed (unfortunately).

I like low taxes. If rural Missourians want low taxes, I’m all for it. But we should not establish a system where rural teacher salaries are paid for (mostly) by taxpayers in urban and suburban areas. The combination of low assessed farm values and a desire for low tax rates in rural areas should not be addressed by taking money from urban areas. I recall signs along I-70 years ago on farm fences objecting to using state funds for sports stadiums in St. Louis. Those signs were correct then, and they still are now, but it works both ways.

The post The Connection Between Farmland Assessment and Teacher Pay Increases appeared first on Show-Me Institute.

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When you freeze assessments (or implement a similar plan), you create distortions in the system that have their own economic consequences. For example, people not taking a job because it would require moving, and moving would result in higher property taxes on a new home. The best way to deal with the problem of trying to reduce tax increases on property owners without creating harmful market distortions is through tax rates. That is what the Hancock Amendment has done with some success over the years.

To start the discussion, If there is one number I would suggest changing, it is the maximum five percent inflation adjustment. That number could be lowered to, perhaps, three percent, to allow for local governments to still address inflation at least in part. Yes, during this period of recent high inflation, lowering the number from five to three percent could affect the bottom lines of taxing agencies (by limiting that portion of their tax rate calculation to below inflation levels), but my interest has never been ensuring that taxing agencies get as much money as they can. My interest is in ensuring that we have a property tax system that funds local government while encouraging economic growth.

Don’t believe this constant canard that we aren’t funding our school districts, cities, etc. Local governments have more money than they know what to do with right now thanks to the various federal stimulus programs and assessment increases. They can all live with a lower inflationary adjustment in their annual rate-setting process just fine this year. If they have to make some budget adjustments, then so be it.

Another thing we should do in the next few years is phase out the personal property tax. Property taxes work best when the thing being taxed is immobile. That means taxing land and buildings, but not taxing cars, boats, and livestock. (Yes, livestock really is taxed.) Missouri taxes personal property more than most other states. Moving property taxes in a revenue-neutral way more toward land and buildings and away from mobile items like cars will create a more stable tax base. Yes, it would shrink the tax base some, which I am generally against, but in this case I think there is strong evidence that it would be a beneficial change.

Next up, what are some of the bigger, more complicated changes we can make to our property tax and assessment system?

The post So, What Exactly Should Missouri Do About Property Taxes and Assessments? Part Two appeared first on Show-Me Institute.

Wanting to do something to address higher property assessments and taxes should not mean doing the wrong thing, though, and doing the wrong thing is where we are headed. Giving one population group a tax or assessment freeze, as state law allows counties to do this year and which many are considering, is wrong for reasons you can read here. A more comprehensive limit on the rise in assessed valuations or taxes, similar to what California famously did with Prop 13 in 1978, is also the wrong thing to do. Proposition 13 has certainly had its intended effect of making it easier for California residents to stay in their own homes. However, it has also reduced mobility, dramatically increased alternative taxes, limited homeownership opportunities, and caused substantial tax disparities among similar properties receiving similar services. This is not what we need for Missouri.

The easiest way to address that—for local governments to voluntarily roll their tax rates back more than legally required (as St. Charles County did in 2022)—is unlikely to happen in most places and especially unlikely for school districts, which make up the bulk of your tax bill. So, what else can we do about property taxes and assessments?

There are things people and government can do in the short term to make the overall process better. Right now, people should be pressuring their local officials to roll tax rates back, especially the Kansas City school district which is the only taxing body in the state exempt from rate rollbacks. Removing that constitutional exemption for KCSD should also be a high priority. That would involve amending the state constitution, but it should be a high priority to get that on the ballot in the next legislative session.

While we are addressing short-term impacts and constitutional changes, adding personal property to the tax rate rollback requirements should absolutely be done. In 2021 and 2022, many local governments enjoyed a windfall from increased used car values. That is not how the system is supposed to work.

Finally, did you know that a few counties require certificates of value to be filed with the assessor when property is sold but most do not? We should require them statewide to help make assessments more accurate, especially in rural areas.

In my next post, I’ll discuss what we can do in the long run to make our property tax and assessment system better.

The post So, What Exactly Should Missouri Do about Property Taxes and Assessments? appeared first on Show-Me Institute.

The policy conversation around this question typically assumes a state solution. Read the newspapers or listen to testimony before the state legislature and you will hear a clear narrative—it is the state’s responsibility to raise salaries. This ignores the fact that local school districts set the starting salary. Assuming the state is responsible also ignores the important role of local school districts in raising funds for schools.

The Missouri funding formula is a complex partnership of state and local effort. When the Department of Elementary and Secondary Education (DESE) determines how much aid each school will receive, the state calculates how much money the district can raise locally. In doing so, the state assumes a tax rate, or performance levy, of $3.43 per $100 of assessed valuation.

Yet more than 30% of all school districts in Missouri do not even tax themselves at the rate DESE assumes in funding formula calculations. In 2022, 162 school districts taxed themselves at rates lower than $3.43.

School property tax rates are set locally. Changes to tax rates are proposed by local boards of education and local taxpayers vote on those changes. Though Missouri allows for tax rates to vary among school districts, the state has instituted a required minimum rate of $2.75 per $100 of assessed valuation.

In 2022, 55 school districts taxed themselves at the state minimum rate. On average, these districts raised just 38.4% of their funding from local sources.

Missouri could go a long way in raising teacher salaries if these low-tax school districts would simply tax themselves at the state’s assumed performance levy. That, of course, has rarely been mentioned in serious policy conversations.

The post Want Higher Teacher Salaries? Raise Property Taxes appeared first on Show-Me Institute.

The post Property Tax Assessment in St. Louis County appeared first on Show-Me Institute.

This November, Laclede County residents will vote on reducing an obscure tax that places the county at a competitive disadvantage compared to its neighboring communities.

In 1985 the State of Missouri changed the way local governments tax commercial and industrial property. It eliminated the tax on business merchandise and inventory and replaced it with a surtax on the value of commercial real estate. Every county that year calculated the new surtax (also known as the commercial surcharge) at a revenue-neutral replacement level for the lost business inventory taxes. The change, made by an amendment to the state’s constitution, was explicit that the replacement levy calculated by the counties could be lowered only by voters, not elected officials, and that the surtax would not adjust downward as assessed valuations increased. This provision puts the commercial surtax at odds with most other property taxes in Missouri, for which the tax rate is supposed to go down as assessed valuations go up.

When the rates were established in 1985, Missouri’s economy looked very different than it does today. Kansas City and the City of St. Louis played larger roles than they do today (especially St. Louis). But Laclede County, likely because of inventory taxes generated by its role as a regional manufacturing hub, bucked the trend toward low surtax rates in most counties. It set its surtax rate at $1.03 per $100 of assessed valuation. That is the 14th-highest rate among Missouri’s 115 counties, and much higher than those of its neighboring counties. By comparison, Texas County has a commercial surtax rate of $0.68, Wright’s is $0.66, Pulaski’s is $0.49, Webster’s is $0.37, Dallas’s is $0.31, and Camden’s surtax is a miniscule $0.03.

Assessed valuations have grown enormously since the tax was introduced. For example, the commercial assessments in Laclede County have gone up almost 400 percent between 1985 and 2021, from $23 million to $108 million, yet the surtax rate has never been reduced to offset that increase. The combination of a high tax rate and the difficulty of reducing it puts Laclede County at a competitive disadvantage compared to other counties in its area.

To address this problem, the Laclede County Commission decided in August to propose lowering Laclede County’s surtax rate from $1.03 to $0.51. If passed by voters, this notable reduction in the commercial surtax rate would both spur economic activity in Laclede County and reduce the perceived need for tax subsidies. In general, Laclede County and its municipalities have been hesitant to use tax subsidies to selectively benefit a small number of businesses. That is to be commended. If this surtax cut passes, the county and its cities can remain focused on setting good policies and low tax rates for everyone, not special deals for a few.

The Lebanon R-3 school district has come out in opposition to this tax reduction, projecting a loss of $275,000 from the tax cut out of total revenues of $58 million. That is just $60 per student in a district that spends over $12,500 per student and one that received over $4 million in federal stimulus funds for a now-past economic emergency. Beyond that, personal property taxes for the school district (e.g., car and boat taxes) are expected to come in significantly higher than ever before due to the dramatic increase in used car values. In short, Lebanon R-3, like many taxing districts around Missouri, has more money than it knows what to do with, yet the district is opposing a tax cut to help grow business and jobs in Laclede County.

As Laclede County continues to grow and commercial assessed valuations continue to increase, actual revenue reductions for local governments that receive the tax money will be small. That’s not voodoo economics; it simply reflects expected growth in population, business, and assessed valuation.

Laclede County leaders deserve credit for placing this surtax reduction proposal on the ballot this November so voters can have a say in making their community more economically competitive. If approved, this reasonable and beneficial tax cut will help grow Laclede County’s economy, and everyone benefits from that.

The post Laclede County Should Reduce Its Commercial Property Tax Surcharge appeared first on Show-Me Institute.

In November, voters in Clay County (and also Laclede County) will have the opportunity be the first counties in Missouri to reduce their commercial property surtax rate.

See a map of commercial surtax rates across Missouri here.

The commercial surtax is a property tax levied at the county level on commercial property only. Unlike other property taxes, it does not adjust downward as assessment value increases, and it cannot be lowered by elected officials. Per the Missouri Constitution, it cannot be raised, and only voters can lower it. To date, voters in Missouri have never lowered a surcharge tax rate, but in November, voters in Clay County will have the opportunity to be the first to do so. The modest reduction Clay County is proposing to equalize itself with Jackson County, in my opinion, is very good public policy, but more on that later.

The tax rate varies by county based on the amount of money the tax it replaced—a commercial inventory-based tax—raised in each county in 1985. If your county had many businesses that generated products subject to the inventory tax, such as Clay County with the Claycomo Ford Plant, you probably have a high replacement tax rate. If you are a county that had a lot of businesses that did not generate much taxable inventory, such as counties in the Lake of the Ozarks region with its tourism economy, you likely have a low commercial surtax rate. But the real issue is that because of the difficulty in adjusting the rate, counties still have the rate based on the economic conditions of 1985.

The post WATCH: Clay County Voters to Decide on Tax Reduction appeared first on Show-Me Institute.

The timing of this change is important. In 1985, Perry County set its rate at $1.06 per $100 of assessed commercial valuation. This is a much higher rate than other counties in the region. Perry County has long had a strong manufacturing base, and it is likely that those industrial companies generated substantial inventory taxes that necessitated—at the time—a high surcharge replacement tax rate. By comparison, Bollinger County’s rate is much lower, at $0.13, St. Francois’ rate is a mere $0.20, St. Genevieve is just above that at $0.21, Madison’s rate is $0.25, and Cape Girardeau tops out the rest of the area at $0.37. Perry County is almost triple the surcharge tax rate for its region.

Assessed valuations have grown enormously since the tax was introduced. For example, in 1986 (the first year after the current assessment system was implemented) the total assessed valuation of Perry County was $84 million and $11 million of that was commercial property. As of the most recent reassessment in 2021, the total assessed valuation of Perry County is $404 million, with $74 million being commercial (an increase in commercial valuation of more than 500 percent). The surcharge rate has never been reduced to offset that significant rise in commercial assessed valuation, as happens with other property taxes. The combination of a high tax rate and the difficulty involved with reducing it puts Perry County at a competitive disadvantage with the rest of the region in 2022.

This is a problem, but a problem without blame. These differences were probably not a big deal in 1985, when the tax alteration described earlier had a neutral effect for Missouri businesses. But it is a major problem now. Reducing rates as commercial assessments rise is simply an issue of fairness. It would not lead to a tax revenue decrease but would simply mean treating the commercial surcharge like other property taxes in Missouri.

Another issue with reducing the tax might be more complicated. Lowering the commercial surcharge rate could both spur economic activity and reduce the perceived need for tax incentives. Frankly, from a government revenue perspective, many of the dollars lost to the surcharge reduction could be replaced by a reduction in the tax incentives that have been given to select businesses. Perry County and Perryville have each engaged in harmful tax subsidies like tax-increment financing. Reducing the surcharge rate for all businesses while eliminating the use of tax subsidies for a few, select businesses would be a public policy win–win for Perry County.

The elected officials in Perry County should place surcharge tax reduction proposals on the ballot so that voters can have a say in making their region more economically competitive. The state legislature should then authorize a vote on changing the Missouri Constitution to allow the commercial surcharge to be reduced as assessments increase, like other property taxes. These two changes would help grow the economies of both Perry County and Missouri, and everyone benefits from that.

The post Perry County Should Reduce Its Commercial Property Tax Surcharge appeared first on Show-Me Institute.

The tax rate varies by county based on the amount of money the tax it replaced—a commercial inventory-based tax—raised in each county in 1985. If your county had many businesses that generated products subject to the inventory tax, such as Clay County with the Claycomo Ford Plant, you probably have a high replacement tax rate. If you are a county that had a lot of businesses that did not generate much taxable inventory, such as counties in the Lake of the Ozarks region with its tourism economy, you likely have a low commercial surtax rate. But the real issue is that because of the difficulty in adjusting the rate, counties still have the rate based on the economic conditions of 1985.

That is why we built this map. The map below shows the commercial surtax rate for every county in Missouri. The redder the county, the higher the rate. The rate varies from $1.70 per $100 of assessed commercial valuation in St. Louis County to $0.01 in Reynolds County. The unweighted average rate is $0.53; the median rate is $0.41. Please check out the map (there is also a download link at the bottom of the post) and see where your county fits.

The post Map of Commercial Property Tax Surcharges in Missouri appeared first on Show-Me Institute.

According to information I have received, personal property tax revenues are expected to increase by more than 20 percent in the following counties: St Louis, Jackson, Warren, Lincoln, Cape Girardeau, St. Charles, and St. Louis City. St. Charles County is taking the lead here; the county council passed a resolution declaring its intention to reduce the personal property tax rate this fall (after final numbers are in) to a revenue-neutral level to offset the large increase in assessed valuations. Good for them. Many local governments in Missouri need to follow this example, especially school districts, which receive the bulk of your property tax payments. Increased used car valuations should not be a revenue windfall for local governments.

I commend the St. Charles County Council and the county executive for this move. Hopefully others will follow the example of St. Charles County. I would love to see Hancock Amendment rollback provisions extended to personal property in the future. (Now they only apply to land and buildings.)

On the other side of the state, Clay County is moving forward with the first commercial surcharge property tax reduction in Missouri history. The county commission approved placing it before the voters on the November ballot. Clay County has one of the highest commercial surcharges in the state, and this proposal for a modest reduction to match Jackson County’s level is a smart, reasonable one. (For the reasons why the rate can only be lowered by voters, why Clay County’s rate is so high, and more history of this special tax, please read this.)

I also commend the Clay County Commission and the rest of the Clay County leadership team for putting this proposal before the voters of their community. There are a few other counties that I think need to strongly consider reducing their commercial surcharge taxes—I’m looking at you, Perry County.

The post Good News on Property Taxes in St. Charles and Clay Counties appeared first on Show-Me Institute.

He also suggests that Jackson County elect its assessor, which I also think is a good idea. St. Louis County made that change about a decade ago, and I think the change has been beneficial. This way, voters can always bring back the crooked assessor (as happened in California) if they want to. However, the only way to really address property tax increases in Kansas City is to change the state constitution. Currently, an exemption in Missouri’s constitution allows the Kansas City school district to maintain its tax rates even as tax assessments rise significantly. That is the biggest part of the problem in Jackson County.

It is not a coincidence that Sen. Cierpiot, who represents Jackson County, wants to address this issue. Over the past several assessment cycles, Jackson County has been a hotbed of property assessment and tax disputes, within both Kansas City and its suburbs. SMI analysts have written about this issue before. There are two main factors at work. One is that, for whatever reason, Jackson County does appear to have been historically under-assessed.

My belief is that the under-assessment was a response, in part, to the large school desegregation tax increases ordered by Judge Clark in the 1980s. It doesn’t matter how high someone raises your property tax rates if the property is substantially under-assessed. The Missouri State Tax Commission instructed Jackson County a few cycles ago to correct the under-assessment, and that is primarily what led to such a large increase in assessments in Kansas City in 2019.

The second part is also related to Kansas City school desegregation. Per the Missouri Constitution, the Kansas City school district is the only taxing entity in Missouri exempt from property tax rate rollbacks. So, when the assessments increase dramatically, as they have in Kansas City, taxpayers in Kansas City school district see no rollback in the rates. That results in a very large and immediate tax increase, and that situation has to be addressed. If elected officials from the Kansas City area really want to make a major change that will address a big part of the problem, they need to propose amending the state constitution to make the Kansas City school district roll their rates back when assessments increase.

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But first, some history. One might have reasonably guessed that the historic underassessment of property (finally corrected, for better or worse, under orders from the state tax commission [STC] in 2019) was a response to the famous judicial-desegregation case tax increases from Judge Russell Clark. After all, the best way around a big property tax hike is to keep assessments low. The tax rate doesn’t matter much if the assessed value is low enough. But Jackson County assessments were low compared to St. Louis prior to Judge Clark’s order in 1987 that doubled the Kansas City school district tax rates.

In 1985, Jackson County had 44 percent of the population of St. Louis City and St. Louis County, but only 32 percent of the residential assessed valuation. That is a significant difference, especially when you consider that the Case-Schiller real estate value index ranked Kansas City’s housing values higher than St. Louis’s, both then and now. That difference in assessed values grew over time. In 2018 (before the STC ordered redo), Jackson County had 54 percent of the population but only 36 percent of the assessed value of St Louis City and County. What to make of this and how it relates to Judge Clark’s order? I make of it that Jackson County was under-assessed from the start of the current system in 1985, and that the judge’s tax increases gave Jackson County politicians, voters, and taxpayers an incentive to keep those assessments low instead of trying to make them more accurate until more than thirty years later.

That matters for a number of reasons. As Kansas City is within multiple counties, if homes in Jackson County are under-assessed, but similarly valued homes in Platte, Clay, or Cass county are properly assessed, then those taxpayers are paying more property taxes to Kansas City than their Jackson County neighbors based on the same municipal tax rate. That’s just one example. There are many taxing districts that affect your property tax bill; some cross county lines and some don’t.

I don’t think it is far-fetched to believe that something along these lines happened. Judge Clark’s tax increases were outrageous (and some were quickly overturned), and Jackson County officials stated they were going to oppose them at the time. Once the income tax aspect of the order was overturned, keeping assessed valuations low would help deal with the property tax increases.

Fast forward to 2019. Jackson County was compelled (properly) to make its assessments more accurate and property assessments jumped. However, one last holdover from the desegregation case is the Kansas City school district’s exemption from the property tax rollback rules. So, when the assessments increased substantially, the school district had no obligation to lower its tax rate. Final result? Very large tax increases for many people. That is not supposed to happen through reassessment, but it did. This is all a very complicated issue, but there is one change that should be made going forward. It is time to remove the Kansas City school district’s rollback exemption, which is turning assessment increases into a tax windfall for Kansas City schools.

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The recent spate of dramatic hikes in assessed value in Jackson County, in which Kansas City sits, is the reason for the renewed legislative interest. In addition to an excess of 14,000 formal appeals filed against Jackson County assessments by property owners, the county has drawn separate lawsuits from the ACLU and Legal Aid of Western Missouri.

As a result of this, there have been several bills introduced in the Missouri legislature that place caps on increases to a property’s assessed value. Several joint resolutions were introduced that would amend the Missouri Constitution along similar lines. One initiative petition would eliminate the ability of the state and localities to collect property taxes altogether.

Writers at the Show-Me Institute have written about problems with property tax assessments for years, going back at least a decade. There are many reasons for the situation at hand, including a determination by the State Tax Commission that assessments in Jackson County were too low. Another may be that taxing jurisdictions are struggling to provide services because economic development policies such as tax-increment financing and property tax abatements divert funds away from taxing jurisdictions and toward wealthy and well-connected developers. Kansas City area library systems have sought to increase their levies in recent years to address this. The Kansas City Public School district is uniquely exempt from having to reduce its levy when assessments go up—it will see an increase in revenue due to the new assessments.

Regardless of the cause for the increased assessments, cities and counties are likely to strongly object to any effort to curtail their ability to collect property taxes. They will talk about how doing so will harm their ability to fund basic services such as public safety and schools. Unfortunately, their practice of diverting tax dollars to private interests undercuts that claim. Local leaders must be dedicated to collecting public funds for public purposes or not collecting them at all—lest they face a Prop 13 of their own.

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