Eds: NOTE time element in 1st graf. For Tuesday, Oct. 15, and thereafter; Those running after Tuesday should change first graf to say "The deadline was Tuesday" or something similar.
While much of the nation is preoccupied by the federal government shutdown and a possible default on the nation’s debt, most Arkansas citizens this week must pay their property taxes. The deadline is today.
Actually, Oct. 15 is a reprieve of sorts, for which we can thank the state Legislature. The deadline had been Oct. 10 for many years.
That doesn’t make it much easier for the thousands of people who must pay property taxes once a year. As county officials point out, you can pay them in installments, as we must do with income taxes, but it’s not required so few people do.
That makes Oct. 15 a dreaded day for taxpayers, especially those of us who own homes.
The saving grace of the property tax system in Arkansas is that it funds local government services, the level that’s closest to us and from which we’re most likely to receive direct benefits.
Few people understand the property tax system, but the Research and Extension Section of the University of Arkansas Division of Agriculture has an excellent primer on property taxes. Just go to its website at http://ppc.uaex.edu, click on the Public Policy Center tab and look for "Arkansas Property Tax: A Local Tax Supporting Local Services."
Four types of property are taxed in Arkansas. According to the UAEX publication, about 70 percent of all property taxes collected in Arkansas in 2010 came from real property — houses, buildings and land. Another 21 percent came from personal property. For individuals that’s mostly automobiles, but for businesses and industries that means equipment and inventories.
Property taxes on minerals accounted for 2 percent. Property owned by utilities and carriers is assessed separately and provided 7 percent of the tax base in 2010.
The primary beneficiary of property taxes is the public school system, which receives three out of every four dollars collected. About 15 percent goes to county governments and the remaining 8 percent to city government.
How to figure your tax is the real mystery in the system, but it’s worthwhile to understand it.
The basis for the system is the mill, which is an imaginary coin equal to one-tenth of a penny. Your tax rate is expressed in mills, and rates vary from one location to another. You might even pay a different rate from your neighbor down the street if you’re in a different school district or one of you is inside a city’s limits and the other isn’t.
For example, I live in the Valley View School District and inside the Jonesboro city limits. My total tax rate is 51.6 mills, highest in Craighead County. That’s because the Valley View school system has the highest property tax rate, 42.5 mills, which ranks among the top 25 in Arkansas.
One thing that dramatically affects property tax revenue for a school district is how much commercial property lies within the district. A school may be surrounded by affluent neighborhoods and yet not have a high tax base because of the lack of businesses and industries. Valley View is in that situation, and yet residents of the district have been willing to pay a higher tax rate to have a fine school system, raising the rate as recently as 2011.
I don’t have children in school, but I support the tax because I know the value of education to my community. Every school district must have a minimum tax of 25 mills for maintenance and operations and then may pass additional taxes called dedicated M&O and debt service.
The state supplements local school revenue to guarantee an "adequate and equal" education. However, the taxes above the 25-mill minimum can be used to build and operate a better-than-average school system. The total millages in Arkansas go as high as 49.
The millage rate is applied to the property you own to determine the tax. Your house(s) and vehicle(s) are assessed at their market values, but only 20 percent of the total value is taxed.
That means if you own a house worth $100,000, it has an assessed valuation of $20,000. So you multiply your tax rate by $20,000 to get the tax you owe. But if you live in the house, you qualify for a $350 homestead credit, thus reducing your tax by that amount.
Another complication is that your property is assessed one year, and you don’t have to pay taxes on it until Oct. 15 of the following year. Thus, some people who move out of state, especially those who own only personal property, may "escape" the tax because local collectors are not likely to go after them.
One other thing to remember about the property tax system is that we have relatively low rates in Arkansas, ranking 46th among all states in median property taxes paid ($532) on owner-occupied housing in 2009, according to a Tax Foundation report.
Occasionally, we hear politicians arguing for a lower state income tax rate by pointing out that Texas has no income tax. They neglect to tell you that Texas’ median property tax bill of $2,275 is 14th highest in the nation. The national average is $1,917.
Imagine paying four times what you pay now on Oct. 15.
Roy Ockert is editor emeritus of The Jonesboro Sun. He may be reached by e-mail at email@example.com.