Thousands of low-income property owners in Utah are being charged significant excess property taxes each year. Such overcharging is just one of many significant long-standing problems which exist in the state’s property tax system. Property tax operations are directed by the Utah State Property Tax Division, which is a division of the Utah State Tax Commission.
To illustrate this problem, let’s look at how “flipped” houses affect the real estate market and property taxes. Houses which are to be flipped are purchased in poor condition for a low price then completely remodeled and sold for up to twice the amount used to purchase the house. For example, a house in the past could have been purchased for $100,000 and then sold for $200,000.
In this example, in a correctly functioning property tax system, the assessed value of the property when it was in poor condition “should” have been approximately $100,000. The assessed value of the house in the year after the renovation and sale should have been $200,000. However, under the current tax process, the “actual” assessed value of the house before renovation was $140,000. Additionally, in the year after the house was sold, the assessed value continued to be near $140,000.
Obviously, based on the facts of this example, both assessed values were incorrect. The problem is also that at any given time there are hundreds of examples of this situation which can be identified from data which is available online.
You may be asking how the older house in poor condition could have received such an excessively high assessed value of $140,000 when it was only worth $100,000. You may also be wondering why the property’s assessed value was not changed to $200,000 after it sold for that amount?
The answer to why the original assessed value was set so high is that for many years there have been so many older houses being flipped each year that the flipped houses have cause the calculated “average sales price” (and assessed value) for these houses to be significantly inflated. The state and county assessors effectively do not track, nor take into account, the “actual” condition of any houses in the state for tax assessment purposes. Additionally the state and counties do not input the $200,000 sale price on the specific property that was sold, even though that information is often readily available online.
This valuation problem does not appear to affect affluent and well-maintained neighborhoods, because nearly all the houses in these areas are maintained in similar condition.
The findings of this research study have been provided to the Utah State Tax Commission. The commission, however, has not acknowledged or taken corrective action on any of reported deficiencies.
It appears that the only authority higher than the State Tax Commission is the governor. As a result, a report with this information has been sent to the governor’s and lieutenant governor’s offices. Upon receipt of that report, “staff personnel” from the governor’s office indicated that the report had been forwarded to the State Tax Commission. According to the governor’s staff personnel, the Tax Commission responded that “the allegations in the report were without merit.” (Apparently, no detailed response was requested or provided.)
Gov. Spencer Cox has often expressed his sincere, heartfelt concerns about the plight of all disadvantaged and marginalized individuals in our society. I very much believe the governor’s comments are genuine. Currently, however, there are thousands of low-income families in the state who are paying hundreds of dollars more in property taxes each year than they should be paying. The State Tax Commission’s procedures are literally taking food off the tables of needy families in the state simply because the Tax Commission is unwilling to fix the tax inequities that currently exist in the state and comply with the state’s existing tax laws.
If you, as a reader, want to help put a stop to the over taxation of low-income citizens in the state, please call or write the Governor’s Constituent Services Office (and your state representatives) and let them know that you want these inequities fixed.
Dean Whitby lives in Weber County. He retired after nearly 40 years in bank audit and regulatory management. The last eight years of his career he worked for one of the world’s largest banks.