The distribution of property taxes is as follows:

Schools – 55%

Counties – 17%

Cities & towns – 14%

Other 6.4 % -  Other includes regional libraries, parks and recreation, emergency medical and hospital districts. (Distribution of 2005 Levies)

Fire – 5%

Ports – 1.9%

(Source: Washington State Department of Revenue)

Property values, levy rates and taxes

Over the past two years, homeowners across the state have seen increases in their property tax bills. Understandably, this has led to the widespread belief that property tax levy rates are increasing.

Senate Democrats are mindful of taxpayers’ concerns over ever-larger property tax bills, and we’re exploring a number of solutions for the 2007 legislative session. However, it isn’t as simple are merely cutting property tax levy rates, which are set not by the state but by your local taxing district.

To illustrate the nature of the problem, regular levy rates — rates before any voter-approved levy increases — are actually going down in many jurisdictions.

This is possible because property taxes — the amount you pay — are a function of two numbers: the assessed value of the property and the levy rate. Your local levy rate is multiplied by the valuation of your property to determine your tax. The hot real estate market has pushed valuations up significantly. Some counties report as much as a 30 percent increase in home sales prices over the last year alone.

In 2000, the voters approved Initiative 747, which capped total annual property tax revenue increases for each local taxing district at 1 percent over the previous year. Because values are increasing by more than 1 percent, property tax levy rates are decreasing in order to keep total revenues under the cap. However, even with declining levy rates, property taxes on a particular piece of property may go up because the increase in value has been so large.

In 2006, taxes on existing properties increased 2.5 percent. This means increased values, combined with the district-by-district patchwork of voter-approved levy rate increases and decreasing regular levy rates, made the average increase on a home only 2.5 percent.

Many states have programs designed specifically to curb this trend. They include putting a cap on valuation increases, providing an income-related exemption or providing an exemption for some portion of a home’s value. Because Washington’s property tax is provided for by the state constitution, any remedy would likely require a constitutional amendment, which requires voter approval.

We’ll be exploring these and other options in the next session. In the meantime, if you believe your valuation is in error, you can appeal to your county’s Board of Equalization.