How the Mortgage Bailout Could Affect Your Property Tax Bill
Will your tax bill increase because the federal government takes over
That could very well happen because of a unique provision in Arizona’s
current property tax laws.
The Tax Foundation (www.TaxFoundation.org) Tax Counsel Joseph
Henchman examined the impact that the federal bailout of lenders
could have on state and local property tax collections. He explained
that the bailout would transfer many mortgage-backed securities to
the federal government in some form, and many foreclosures would
give the federal government ownership until they could sell the
property. Because property owned by the federal government is
usually immune from state taxation, state and local officials might be
worried about their future tax revenues.
That is not the case in Arizona. By law, property tax revenue to any
government taxing entity only goes up, it doesn’t go down. Because
of this unique tax law, it’s the property owner that needs to be
worried, not the government.
Arizona’s system could best be described as a “share of the pie”
concept. Taxing districts decide how much money they want from
taxpayers. Then they divide that amount by the total value of
property in their district and the result is a tax rate. The tax rate is
applied to the assessed valuation of your particular property to
calculate your tax bill. If the total valuation of property in a district is
lowered, then the tax rate is automatically recalculated to maintain the
total revenue stream, and individual property tax bills go up also, to
supply the necessary revenue. The amount collected by the taxing
district doesn’t change. What does change is your “share of the pie”
that you have to pay.
For a more familiar example, if 10 people go to lunch together and 3
decide not to pay their bill, the amount due is the same and each of
the remaining 7 people have to pay more till the total bill is paid. In
this example the 3 people not paying represent properties owned by
the federal government and exempt from paying state and local
This concept works against the best interests of the taxpayer. When a
taxing district excuses a property owner from paying taxes, as we
frequently see with commercial properties seeking special treatment,
the taxing district suffers no revenue loss. The remaining property
owners are automatically hit with the tax rate increase necessary to
pick up the slack left by the properties which were taken off the rolls.
Again, by law, all this occurs automatically, without any need for a
vote of the people.
Prop 13 Arizona will protect us from these unpredictable increases that
are out of our control and which we can’t afford to absorb forever. If
the federal government buys properties and removes them from the
tax rolls, Prop 13 Arizona stops that tax burden from shifting to us.
Until we get Prop 13 Arizona on the ballot and passed into law, we
should be worried about significant increases in our property tax bills
as a result of foreclosures and federal government takeover of