Widening the Gap: New Legislation Would Further Skew Dc’s Property Tax Benefits To High Value Homeowners And Creates Tremendous Disparities In Dc’s Property Tax System

by Jenny Reed and Wes Rivers | December 19th, 2012 | PDF of this report

Legislation before the DC Council would reduce DC’s property taxes for homeowners in two ways, but for several reasons, these should not be the priorities for providing property tax assistance to DC households. The legislation would lower the property tax assessment cap — which limits the yearly growth in a homeowner’s taxable assessments — from its current 10 percent limit to 5 percent. The proposal also would eliminate the requirement that every home be taxed at least at 40 percent of its value, regardless of deductions or caps. 

This legislation raises two major concerns: 

  • The proposal would disproportionately benefit owners of higher-value homes and lead to tremendous disparities in DC’s tax system. For example, homes worth more than $550,000 represent 31 percent of DC homes but would get 65 percent of the benefits of lowering the annual tax cap to 5 percent. 
  • The proposal would result in great variations in tax bills for homes with the same value. DC’s assessment floor ensures that all homeowners pay a minimum, currently 40 percent, of their total assessed value in property taxes. Without it, homeowners living in homes of similar values could end up paying widely different property tax bills. 
  • The proposal would only provide property tax assistance to homeowners, despite the fact that most DC households are renters — and pay property tax through their rent — and that DC’s homeowner property taxes are already the lowest in the region. The District of Columbia’s low homeowner property taxes result from having the lowest property tax rate in the region and from other property tax relief mechanisms that limit DC homeowners’ property tax bills.  Given this, and the fact that most DC households are renters, further reducing taxes for homeowners should not be prioritized.

To read the full report, click here.