Editorial: No Time Like Now To Ground Tax Lightning

Like those medical tests doctors order for patients of a certain age, there will never be a time when homeowners look forward to having their residential property valuations brought closer to market prices.

But just as those tests are routine for safeguarding patients’ health, getting New Mexico’s valuations closer to reality and eliminating the penalty on buyers (and thus real estate agents and builders) is essential to restoring economic health to our communities.

About one-third of New Mexico homes are valued at less than 80 percent of the market rate. A recovering economy with depressed market prices presents a good time to get equity back into the valuation equation and ensure all homeowners pay their fair share.

Since 2001, New Mexico homebuyers have been hit with the phenomenon dubbed “tax lightning,” the unintended consequence of a well-intentioned law to keep older folks from being taxed out of their longtime homes by capping valuations at 3 percent, unless the home changes hands. Upon sale, the property is brought up to near market value. The unintended victims are homebuyers who decide to downsize, upsize or relocate — as well as those just fulfilling the American dream of home ownership for the first time. Those folks don’t get a cap and are hit with property taxes sometimes two or three times higher than those paid by the old owners — and everyone else on the block who has stayed put.

Three state District Court rulings have declared the law unconstitutional, but the state Court of Appeals upheld it. And though several fixes have been proposed in the Legislature in recent years — extending the cap to all residential properties, rolling back property values statewide and then adding what amounts to a 3 percent per-year increase to the current year, including a ratio that enters new home construction on the tax rolls at a value on par with other homes in a county — none has made it out.

Now the Legislature’s Revenue Stabilization and Tax Policy Committee is considering a proposal from a task force that includes county officials, a state lawmaker and state budget and tax agency employees. It would take advantage of depressed values to bring most properties up to around market value, with scaled-back valuations for seniors and folks who have been in their home 10 years or longer. The current “freezes” allowed for disabled and low-income elderly homeowners would still apply.

While it could be argued the different rates replace one inequity with another, the plan appears to eliminate the potential for wide variations in valuations by establishing a percentage increase window tied to recent market values for most residential properties.

San Juan County Assessor Clyde Ward says “it’s not a win-win situation. We’re going to have a near-win, near-win situation because there is no way we can rip this off after so many years of the cap being in place. We have to have some sort of adjustment.”

It is important for the 2013 Legislature to take advantage of decreases in property values to ease the financial hit and seriously consider proposals to finally address and ground tax lightning. Like those routine medical tests it will not be fun, but it is important to the health of the economy.

This editorial first appeared in the Albuquerque Journal. It was written by members of the editorial board and is unsigned as it represents the opinion of the newspaper rather than the writers.