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  • Print publication year: 1995
  • Online publication date: March 2010

7 - Revenue projections and policy alternatives

Summary

An effective tax-limitation movement decreases the revenue raised from the property tax. Under most tax-limitation measures, it is not particularly difficult to estimate tax revenue. For example, if the property tax rate is fixed at 1%, the growth of property tax revenue is determined solely by the growth in assessed value. Alternatively, tax revenue could be controlled directly with a maximum growth rate for property tax revenue.

Under an acquisition-value tax system, however, the projection of tax revenue is more complex. As discussed in Chapter 3 in the context of renewal theory, the revenue generated by an acquisition-value tax system will depend on both the turnover and appreciation rates of property. Unlike a market-value system, the pattern of turnover affects the growth of assessed value, and hence property tax revenue.

Faced with continuing budget crises, citizens and policymakers in California are interested in revenue projections for the current acquisition-value tax system and potential alternative systems. In this chapter, we present two sets of revenue projections for alternative property tax systems in California. The first is a set of statewide revenue projections for several variations on the conventional property tax. Specifically, we project statewide property tax revenue for the period 1992–2008 under the following systems: (1) the current acquisition- value tax system, (2) a market-value system (all property is assessed at current market value), (3) a split-roll system under which all property except single-family residential property is assessed at market value, and (4) a split-roll system under which all property except owner-occupied single-family residential property is assessed at market value.