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Show (ii) There is a specific limit on the tax that can be imposed for ay service provided. (iii) If there is any proposed increase in the property tax, Kpaym must be notified, and a public hearing held. b. Limitations proposed under Initiative A Initiative A limits property taxes regardless of the amount and Pt of services received. For all property, except residential operty, Initiative A limits the property tax to 1 of the fair market feotthe property. For residential property, the tax limit would be I of ISi of fair market value. However, these limitations do not rclude taxes used to pay: 0) existing debt; or (ii) debt approved at a general election, t Legal issues Initiative A limitations are based on "fair market value ... as ed in Section of the Utah Code. However, that section not define fair market value. It establishes the 25 residential lemption. fair market value is actually defined in Section That WW includes the 20 reduction for intangible assets from the full of homes and small businesses. Using this correct definition of "'market value, Initiative A means: 0) the tax on a typical small business property would be limited "'WW of the property's full value; (") 'he tax on residential property would be limited to 34 of 1 "of full value; and (') the tax on other property would be limited to 1 of full There are other interpretations of the meaning of the limitation. of these alternatives would require a special session of the Bslature t0 address problems with them. For example, one JWation would not recognize the 20 reduction for intangible r0" homes and small businesses. It would limit the tax on all presidential property to 1 of full value and the tax on residential :tWtJto34 of 1 of full value. This means the tax reduction would :uci smaller for homes and small businesses than for large !Msses a"d personal property. Mother part of Initiative A requires tax cuts to be divided 8 Programs "as provided by law." Since no such law currently ;j is, the Legislature or local governments, or both, would by law 'o decide how budgets are cut. Fiscal Impact In 1987, $724 million of property taxes were levied. Initiative A limitations would initially lower this amount to $470 million. This is a gross reduction of revenue for education and local governments of $254 million, but with the following adjustments: (1) The Utah Constitution requires that property be taxed at a uniform and equal rate. This will add at least $20 million to the loss in revenue, according to the State Tax Commission. (2) Initiative A exempts from the limitation all taxes estab-lished to pay interest and principal on debt. Based on different interpretations of the meaning of debt, the amount of debt exempt from the limitation varies between $90 - $144 million. This must be subtracted from the gross reduction in revenues. Given these and other complications, an accurate projection of revenue loss cannot be made unless Initiative A passes and final decisions are made on: (1) the impact of the uniform and equal rate of taxation principle; and (2) the kind of debt exempt from the limitation. Even then, the revenue loss will change yearly because of increases and decreases in fair market value of property, payments on debt, and the application of the uniform tax rate principle. 3. Requirement that new taxes or increases in taxes for local government be approved by voters Local governments have only that taxing power given to them by the Legislature. For example, the Legislature allows the business franchise tax and the local option sales tax to be charged. Initiative A would prohibit local governments from imposing any new tax, or increasing an existing tax, without approval of the voters. These taxes could be voted on at special elections. Debt could only be approved at general elections. Fiscal Impact The cost of an election on tax proposals depends on the size of the government holding the election. Forexample, the current cost of an election in Salt Lake City is about $90,000. Effective Date Initiative A would take effect five days after the date of the official proclamation of the vote by the governor. Page 17 |