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Lawmakers bringing bills to cap property assessments, tax increases

Rep. Phillip Pettus, R-Green Hill, says he’s heard from constituents on one issue recently more than any other in his nearly 10 years in office: Property tax increases. 

“My personal property taxes went up 40% from last year to this year,” Pettus told Alabama Daily News. “I’ve had some people call me and say theirs has gone up more than 100% and they want to know who to vote out of office.” 

Alabama does not cap increases on annual assessments of property values or their resulting tax increases and now Pettus is proposing one.

According to a draft bill shared with ADN, increases in assessed value for Class III properties, which include single-family homes and land used for agricultural production, would be capped at 3% per year.

Increases on Class II properties, which include commercial and business properties, would be capped at 5% per year. 

The total assessed value for all Class III properties in the state was about $30.6 billion, according to the Alabama Department of Revenue’s 2023 annual report. It was $23.4 billion in the 2019 report. New construction factors into that increase. 

The caps wouldn’t apply to property never assessed, property with major improvements including new construction or changes in ownership. 

Pettus said he planned to pre-file the bill this week and is collecting co-sponsors’ signatures.

Sen. David Sessions, R-Grand Bay, is also working on a property tax increase cap bill to pre-file this week. He said he and Pettus would likely talk soon to compare their proposals. He’s considering a 5% cap, he told ADN on Monday.

“Some folks got sticker shock when their homes went up almost 50% this year,” Sessions said. 

Sonny Brasfield, executive director of the Association of County Commissions of Alabama said Monday the organization would be concerned about any attempt to change the ad valorem tax system “that is essential to funding education, the operation of county government and in many communities, hospitals, volunteer fire departments — essential government functions.”

Brasfield said Alabamians have seen property tax increases the past two years, driven at least in part by rising construction costs, which also drive up the values of existing homes.

Property taxes are designed to reflect the value of the property, he said. If that value goes up, people pay more.  

A recent Public Affairs Research Council of Alabama report said the per capita property tax collections are the lowest in the nation. While that’s good for home and property owners, “but creates a revenue deficit, leaving state and local governments with less to spend to provide government services such as education, health, and public safety.” 

Efforts to rein in property tax increases, or at least give payers a reprieve, have been seen in other states recently. Median home prices have more than tripled in the past 30 years, according to the National Conference of State Legislators. The COVID-19 pandemic further disrupted the housing market and drove up prices. 

In Georgia, where the legislative session is already underway, lawmakers are considering a 3% cap on increases for those who maintain homestead exemptions. 

Meanwhile, in Texas, voters in November approved a plan cutting property taxes by $18 billion, The Associated Press reported. Kansas’ Democratic governor and its Republican-majority legislature are both endorsing larger exemptions for homeowners to cut taxes by $100 million annually. Colorado lawmakers meeting in a November special session approved higher residential deductions and a lower assessment rate. Pennsylvania is using lottery proceeds to cut property taxes and subsidize rent for seniors and people with disabilities, the AP reported.

Florida has a 3% cap on annual assessment increases on homestead properties. Arkansas has a 5% cap.

With a cap in place, people could plan for the highest possible increase, Pettus said. 

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