Impact of Property Tax Extension Limit Law?
An economic development group has asked us to help them understand the "what if" scenario regarding potential application of a property tax extension limit law for taxing bodies in their county. The PTELL would have limited the increase in annual property tax extensions by the lesser of either 5% or the increase in CPI during the year preceding the levy. There are exceptions for increases due to new construction.
The group has estimated that had the PTELL been put in place in 2008, the property tax extensions among the taxing bodies within the county would have been reduced by $14 million. The group wants to know the economic impacts that might have been gained by the businesses and households in the county had they not had to pay the $14 million in property taxes.
Any ideas in how we could measure these economic gains?
I also communicated to the group that the $14 million in reduced public revenues could also be interpreted to have negative economic impacts since the local governments would not have those funds to pay salaries for local employees or purchase local goods and services. Their reply, "Hmmm. Hadn't thought of that." Don't you love it?
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IMPLAN SupportHi Robin, We would unfortunately have to make a lot of assumptions regarding how businesses and households would have acted differently had they not had to pay these taxes, and how government would have acted had they not received this tax revenue. This is better handled by a CGE model. You can model it in IMPLAN, stating your assumptions - for example, assuming that households would have spent X percent of those funds, they could run that through a household spending pattern, edited to remove the utilities, rent, etc. As the user noted, you would then have to run the full $14 million as a negative impact to State & Local Government, assuming the government doesn't just borrow the funds from the future or from some unused pot of funds. The hardest assumption to make may be what businesses would do - would they have just pocketed the money as profits or would they have hired more people, invested in more equipment, ...? Any of this can be modeled in IMPLAN but the results are only as good as the up-front assumptions, and unfortunately we don't have any way to predict behaviors within the software. Often in situations like this making several estimations to create a range of potential impacts can be beneficial, since there is no clear option on how the money might or might not have been spent. Hope this helps to answer you question. Please let us know if you have any additional questions. IMPLAN Support Team0
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