The new year has begun. There will be many new faces in the state legislature that will soon convene to enact and amend laws that will impact our lives. This is also a year in which the state constitution requires that all residential and commercial properties must be reassessed to determine their current values for property tax purposes. The quadrennial reassessment ritual always coincides with the arrival of new legislators. That invariably leads to attempts to lower residential property taxes in Louisiana. Before those bills get filed again, it would be good for everyone concerned to see just how much Louisiana is “out of sync” with the rest of the states when it comes to residential property taxes.
The Tax Foundation has calculated from the American Community Survey a multi-level comparison of residential property taxes in the 50 states and the District of Columbia. The three comparisons are based upon the median value of the homes, the median household income of the occupants, and the median amount of residential property taxes paid. Our new policymakers should take a good look at that data.
In the category of residential property taxes paid as a percentage of median home value, Louisiana ranks 51st—dead last. Louisiana residents’ property taxes come to only 0.14 percent of the value of their homes. Likewise in the category of residential property taxes as a percentage of household income, Louisiana ranks 51st again. Property taxes consume only 0.35 percent of households income, half the amount of the next closest state—Alabama. The results follow true to form in the category of the median amount of actual property taxes paid. Louisiana is again dead last with a median amount of $183, almost half the amount of Alabama—again the next lowest.
Louisiana’s homeowners pay only a fraction of the amount of property taxes paid by homeowners in every other state. Louisiana makes up for the small percentage of property taxes paid by residential homeowners by shoving the burden on to business and commercial properties. Residents are assessed at 10 percent of the value of the property for taxation purposes. Businesses are assessed at either 15 percent or 25 percent depending on the category they fall into. The major reason residential property taxes are so low in Louisiana is due to the extremely high homestead exemption. Once the 10 percent of the value of the residential property is determined to establish the taxable base, $7,500 is then subtracted from that base.
Every four years when reassessments are done, there is a hue and cry for an increase in the homestead exemption. The proponents call it a tax cut. They are wrong. Taxes are not decreased if the homestead exemption is increased—they are transferred. They go from residential property that is already taxed at the lowest levels in the country to business and commercial interests that are already paying the lion’s share of the property taxes.
Some folks think that the only way their property taxes can go up is if they are raised by the voters. That is not true. Our state constitution requires that when there is an overall increase in assessed property values in a taxing district, the tax millages must be adjusted downward so that there is no net increase in property taxation due to increased assessments. What most property taxpayers don’t realize however is that the constitution also allows those taxing agencies to then roll up the millages to their prior levels with a two-thirds vote of the governmental body and without approval of the voters. Those millages are then applied to the higher assessed values and taxes go up. Look for those millage roll ups coming your way at the end of this year.
There is a lot of confusion and controversy about property taxes in reassessment years. Our new lawmakers should take a cold, hard look at the facts before engaging in any knee-jerk reactions regarding property taxation in Louisiana.