Property Tax Proposal (Guest Post)
l3wis South Dakota values fairness, family, and freedom. However, the current property tax system, is broken and threatens these core principles. While assessing property based on its potential sale price may seem logical in theory, its real-world application disproportionately impacts residents.
Consider the case of “Janet,” an elderly South Dakotan on fixed income. Janet and her late husband built their home 60 years ago, where she raised three children independently after her husband’s unexpected passing. For decades, Janet diligently maintained her home, paid her mortgage, taxes, and lived within her means. However, in her 80s, she was forced to sell her beloved home because her property taxes nearly doubled when she missed the elderly tax freeze deadline, becoming unaffordable. Mary’s situation highlights a systemic failure, not an individual one.
Currently, properties valued under $250,000 have experienced the most significant assessment increases, often doubling their tax burden. In contrast, some multi-million dollar properties have been assessed as low as 60% of their recent sales price. This discrepancy often arises when local assessors claim insufficient data to support recent sales/purchase prices, despite state law clearly stating properties must be assessed at fair market value (FMV). According to Cornell Law School, FMV is the price an informed and unpressured buyer would pay to an informed, unpressured seller in an arm’s length transaction, where the price is based solely on the property’s value and not by a subjective individual (assessor).
While well intended, SB216 missed the mark both on property owner relief and placed significant burdens on vastly growing cities/townships and a reform to the property tax law is still necessary. The best laws are simple laws and I propose basing assessed value on the purchase price of the property established in an arm’s length transaction, rather than an assessor’s determination for residential and agricultural properties. Additionally, I would recommend capping annual increases in assessed value at 2%. Upon the sale of a home, the assessed value would reset to the new purchase price.
This approach offers several benefits:
- Stability for Property Owners: It provides predictability for families, and retirees allowing them to plan their finances without the risk of sudden, substantial tax increases.
- Reduced Administrative Burden: By tying assessed value to transaction prices, the need for extensive assessor and/or County Board of Equalization interventions may decrease, potentially leading to budgetary efficiencies.
- Predictability for Local Governments: With a predictable assessment increase, municipalities can better forecast revenue, enabling more stable budget planning.
Given that South Dakotans reside in their homes for an average of eight years, this proposed system offers a reliable and steady path forward for both homeowners and municipalities. This solution applies to residential and agricultural, emphasizing fairness and stability and could be easily implemented towards commercial properties.
By implementing these changes, we help can prevent our neighbors from being displaced by uncontrollable tax hikes and protect working families striving to build their futures. This straightforward and equitable approach will ensure that South Dakotans can remain in their homes.
*This post was provided by a Sioux Falls Real Estate Company
