Property 'tax lightning' raises ire
August 21, 2010
The Payne’s property taxes jumped 60 percent the year after they purchased their Curry County home.
James and Robbie Payne were victims of what is being called tax lightning.
Tax lightning is caused by a 2001 state law that put a 3 percent annual cap on how much assessed value could rise for residential properties. The law was driven by a desire to hold down property tax increases, particularly for residents of areas where prices and property values were soaring.
However, the cap does not apply to homes that change ownership, so people often see their assessed values jump significantly the year after they purchase a new residence.
James Payne said the retired couple’s property taxes went from $964.57 in 2005 to $1,576.71 in 2006.
“It’s a big problem,” he said. “When we bought the house, we didn’t know about it. I’ve lived in this state all my life. The Realtors didn’t know. It was a real shock.”
In 2006, the Payne’s protested the increase but the protest board ruled that the increase was correct because it was in line with the law. Payne says he plans to take it to the board again this year and if they claim the same thing, after two district judges ruled that parts of the law are unconstitutional, he plans to go to court.
“If I can scrounge up enough money,” he said, explaining that the couple’s fixed income is already being stretched thin. “It’s sad that an individual has to take it to court.”
Payne said he wants taxes to be equal.
“If they roll ours back, the county has to get its money somehow. I guess they can increase the mill levy or quit spending so much,” Payne said. “They could roll everyone up to market value. That’s gonna hurt some people but it’s going to help other people.”
New Mexico candidates for governor both say they support taking on the “tax lightning” phenomenon that has caused significant increases in the tax bills of new homeowners.
But Democrat Diane Denish and Republican Susana Martinez have different approaches to the problem — which requires a legislative solution. The governor’s role would be public support or opposition to various proposals, and deciding whether to sign or veto legislation.
While each approach would end future tax lightning cases, both candidates acknowledge the issue is complicated and say it needs further study to resolve all the complications tax lightning has raised.
Some recent homebuyers are paying up to three times more in property taxes than neighbors with similar homes because their property — unprotected by the cap — is now assessed near market value.
In addition to an unequal tax structure, tax lightning has other problems, such as holding down home sales.
The candidate positions are relatively simple, but each has ramifications.
Denish favors a rollback of property values for all homes to where they were at the time the 2001 law that created tax lightning took effect. That would provide relief for homeowners already paying the higher tax bills, but would likely mean higher property tax bills for everybody else.
That’s because something close to the same amount of revenue would still be needed for government bodies that rely on property tax, such as counties and public schools. The tax burden would just be distributed differently than it is now, and homeowner impact could be reduced some by shifting more of the burden to commercial properties.
Martinez would extend the 3 percent cap to include homes that change ownership from now on, but her plan would not roll back the assessed values — and higher taxes — for homeowners already hit by tax lightning.
Martinez’s proposal does not include a provision often associated with expanding the cap to include new purchases, which involves bring all home values up to near market levels before that happens.
Her plan provides more protection for longer term homeowners who have not been hit with tax lightning.