Why is Property Tax So Complicated?
This “Property Tax 101” addresses one topic - the limits on regular property taxes. The equally complex issues of how assessed valuation relates to the amount paid was clarified by Glen Olson in his property tax calculation examples and the topics of excess levies, levy lid lifts, and banked capacity can be found in MRSC’s City Revenue Guide and County Revenue Guide. This column will only scratch the surface of this complex topic and point the reader to helpful sources of more detailed information.
Limits on Property Taxes are complicated because there are so many different types of taxing districts and there have been a number of initiative and legislative actions over the years. There are at least 30 types of taxing districts subject to different maximum levies individually and in aggregate.
The Property Tax Levies Operations Manual provides a comprehensive list of the individual levy types and regular levy rate limits. In addition to the individual rate limits by levy type, there is an individual statutory limit that was imposed initially through the initiative process (Initiative 747) and subsequently by the State Legislature (RCW 84.55) in 2007 after the initiative was found unconstitutional. In a nutshell, it limits the increase in the dollar amount of the regular levy to one percent of the prior year’s levy (for cities less than 10,000) or the lesser of one percent or the implicit price deflator (IPD) for larger agencies. New construction value and other adjustments are added after the application of the one percent.
There are two main aggregate limits that apply to property taxes, one of which is statutory and the other constitutional.
- The statutory limit applies to most local regular levies, which taken together, cannot exceed $5.90 per $1,000 of assessed valuation. It is a shorter list to provide the list of those not subject to this limit (State, Ports, PUD, EMS, Affordable Housing, Conservation Futures, County Ferry Districts, Criminal Justice, and County Transit). What this limit means is that if the sum of the applicable levies exceeds $5.90, the taxes of the “junior” taxing districts will be reduced based on the hierarchy in the sidebar. Again, the list of “senior” taxing districts is shorter at State, County, City/Town, County Road, Port, PUD; everything else is junior. Note that the proration as it relates to Metropolitan Park Districts (MPD) is especially complex; more information can be found at MRSC’s website.
- The constitutional limit adopted in 1972 limits the amount of property taxes that may be imposed on an individual parcel without voter approval to one percent of its true and fair value. The tax proration order if the aggregate is greater than one percent is more complex as it applies to all taxing authorities, except Port and PUD district levies, including those subject to the $5.90 limit.
- The table that follows summarizes the hierarchy for applying the limits.
* Represents the portion subject to the 1% limit
In summary, property taxes are very complex, but there are resources available that can help:
- Washington State Department of Revenue (DOR) Property Tax Levies Operations Manual
- DOR Prorationing Worksheets (REV 64 0096 for 1% and REV 64 0097 for $5.90) Prorationing Worksheet for the 1% Constitutional Limit, Prorationing Worksheet for the $5.90 Aggregate Limit
- Links to MRSC website:
It is also advisable to consult your agency’s attorney or bond counsel with questions pertinent to your jurisdiction.
Image courtesy of Emmett Anderson.
MRSC is a private nonprofit organization serving local governments in Washington State. Eligible government agencies in Washington State may use our free, one-on-one Ask MRSC service to get answers to legal, policy, or financial questions.