Tax Confusion
There was an excellent article on the front page of the Fort Scott Tribune published on Sunday, July 10, 2022 which reported on some thorough research performed by Bourbon County Finance Director, Susan Bancroft. So many people with whom I have private conversations did not fully appreciate the data because they do not understand basic taxation terms such as mill levy, appraised value, assessed value, etc. These and other concepts are important to grasp to be an informed participant in state and local government entities. Let’s take a look at some basic definitions and how it all comes together to determine how much each property owner in Kansas is taxed on their holdings.
Starting with appraised value, every county appraiser is responsible to determine an accurate value of every property in the county. State statutes set guidelines that are similar to what is used in private appraisal processes. The most important aspect of this process is to appraise a property in proportion to other values in the county. If a property owner believes there has been a mistake, an appeals process exists where data may be presented by the property owner which argues for an alternate conclusion.
Assessed valuation might be the most misunderstood term in this process, but it is a simple computation of multiplying the percentage determined by state statute for each property type, times the appraised value. For example, if a home is appraised for $100,000.00, the statutory assessment rate is 11.5%, which yields an assessed valuation of $11,500.00. Here are the assessment rates of all property types in Kansas: Homes: 11.5%, Vacant lots: 12%, Owned by non-profits: 12%, Commercial: 25% Agricultural land: 30%, Public utilities: 33%, Not classified: 30%. Properties owned by governments are not assessed.
The mill levy is the “tax rate” that is applied to the assessed value of a property. One mill is one dollar per $1,000 of assessed value. To continue the example above, if the mill levy is set at 65.00, the aforementioned homeowner would owe $747.50 in annual taxes computed as follows: $11,500 divided by 1,000 equals 11.5, times 65.00 equals $747.50.
A homeowner in a Kansas county will not only pay taxes to the county, but also cities and school districts. Some jurisdictions will also have other taxing entities, such as community colleges, libraries, fire districts, special improvement districts, etc. Each will set their own mill levy in order to fund operations.
As a practical example, if the aforementioned $100,000.00 house is located in Fort Scott, the property owner has an assessed value of $11,500.00 and will pay the following mill levies based on 2021 numbers: County: 62.51, City: 46.98, USD 234: 52.773, Community College: 29.30. These mill levies add up to 191.563; accordingly, the property owner can expect to pay $2,202.97 (191.563 times 11.5) in annual property taxes. There may be a few minor additions to the bill, depending on where they live in the city.
Our democracy depends on an informed electorate. If tax computations are a mystery to you, find a source that can answer your questions. We are better together when we are aware and active.
Economists have tried to convince the public and elected officials for a very long time that only the value of land should be subject to an annual property tax. Buildings are depreciating assets that require ongoing expenditures for maintenance and every decade or so require huge expenditures for system replacement and upgrading. The annual property tax on the current (i.e., depreciated) value of a housing unit or other building is an excess burden on the owner.
With respect to land parcels, an annual charge close to what the parcel would yield in ground rent under a leasehold arrangement provides a strong financial incentive to the owner to bring the land held to its highest, best use — or sell to someone who will. By increasing the supply of land brought to the market, land prices remain low enough for the construction of housing affordable to low- and middle-income households. Lower land prices also make locations attractive for businesses trying to compete in a global marketplace.
Early in the 20th century, Pennsylvania amended its state constitution to give its cities the local option to tax the assessed value of land at a higher rate than the rate imposed on buildings and other property improvements. More recently, boroughs and school districts were given the same option.
The state capital, Harrisburg, imposes a tax rate on land value 6 times higher than that imposed on buildings. One or two other cities have exempted buildings altogether with quite good outcomes for the community.