Knapp, a public finance expert with UVA's Cooper Center warns that Virginia's proposed "homestead" constitutional amendment, currently being considered in the General Assembly, will pose problems for local communities if it ultimately becomes part of the state constitution. The legislation would allow localities the option to exempt up to 20 percent of a home's value from real estate taxes. Knapp writes that the proposed amendment's impact on local governments is uncertain since local governing bodies have the option to adopt an exemption of up to 20 percent. Knapp writes, "The most probable outcome is that many local governments would provide an exemption, although not necessarily the full 20 percent. This would not occur immediately, but would be phased in over a number of years as governing bodies accede to homeowner pressure and emulate tax relief provided by neighboring jurisdictions." According to the author, if the amendment does result in the shifting of tax burden to business, it would convey an unwanted message about the tax friendliness of Virginia's local tax system, especially if such differential treatment is supplemented with special surtaxes on commercial and industrial property for funding transportation projects. Knapp says that homeowner taxpayer frustration is understandable because of increasing property taxes. But he contends that a simpler solution would be restraint on spending by local government instead of using market-driven increases in assessed values to bring in significant amounts of new revenue. One alternative to the proposed amendment, writes Knapp, would be a device known as a "circuit breaker," which provides state-financed relief for homeowners and renters whose property tax burden exceeds a prescribed portion of income.
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The Virginia News Letter