We Must Reset Property Tax at point of Sale

by Greg Peek

As our elected officials choose from a series of lesser evils to solve significant budget gaps, we have a perfect illustration of the fundamental unfairness of Nevada’s tax policy: we are too heavily reliant on business related taxes. A simple and fair way to raise millions in local revenue is to reset the assessed value of real property at the point of sale.

While sales tax, business tax, gaming tax, mineral tax, payroll tax, etc., are appropriate at some level, our reliance on business taxes has some nasty unintended consequences. Relying on single-industry taxes is akin to putting all your “eggs in one basket.” As we see today, if the industry slows, so does the tax revenue. Local governments are experiencing the whip-saw effect of our economic downturn. Continuing to raise business taxes and fees makes our state less attractive to out-of-state businesses considering relocation. We must make it easier to do business here, not more difficult. Lastly, the piling on of business tax and fees to pay for local governmental operations is fundamentally unfair.

Thirty years ago, the decision was made to depreciate homes 1.5% per year for 50 years (a maximum depreciation of 75 percent), reducing the property tax burden on the home owner and protecting long-time residents from being taxed out of their property. However, not resetting the depreciation schedule at the time the home is sold results in the new homeowner not paying his fair share by unfairly reaping the benefit given to the longtime homeowner. In essence, an individual purchasing a 50 year old home valued at $1 million is paying less property tax than a family living in a new $275,000 home.

Some have argued that resetting depreciation at point of sale violates the “uniform and equal rate of assessment and taxation” clause of the Nevada Constitution. The exact opposite is true: the current tax scheme violates the uniform and equal clause by treating homeowners differently. If the above owners are traveling the same roads, going to the same schools, being protected by the same police and fire departments, how is it fair that the owner of the $1 million mansion is paying less property tax than the family living the in the modest, starter home? Putting everyone on the same depreciation schedule from the time of purchase makes sense, is fair, and treats everyone equally.

Even California’s Proposition 13, on which Nevada’s tax cap was fashioned, includes a reset at point of sale. Resetting depreciation at point of sale would raise millions of dollars for local government. California got this one right. Why can’t we?

We urge our elected officials to seize the opportunity to institute fairness in real property taxation. Resetting real property deprecation at point of sale will protect existing homeowners from being taxed out of their home, raising much needed revenue in a fair and equitable manner. It is an easy solution to help bridge the gap in our governments’ budgets – a win-win action.

- Greg Peek is the Vice President of ERGS Properties and immediate past president of the Builders Association of Northern Nevada