AAC
LEGAL CORNER
The critical role of property taxes in Arkansas and why we should leave them alone
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et’s be honest: no one likes taxes. No one wants the Department of Education Elto pay taxes. Taxpayers hold a particular disdain ementary and Secondary Education for property taxes because you must pay taxes on Division. real and personal property you own every year. That is a lot of numbers and inforBut it’s important to look at what property taxes actually mation, but I promise there’s a point. LINDSEY FRENCH fund in Arkansas and how much in property taxes Arkan- While property taxes are not loved by General Counsel sans pay compared with taxpayers in other states. anyone and detested by many, propFirst, there is no state property tax in Arkansas. Property erty taxes in Arkansas are necessary taxes are levied by local school districts and approved by the for the secure and stable funding of quorum court. Seventy-nine percent of property taxes paid our public school system. The current administration has go to fund Arkansas’ public schools, 13 percent of property worked with the General Assembly to responsibly lower taxes collected go to counties, 7 percent to municipalities, income taxes for Arkansans, and Governor-hopeful Sarah and 1 percent to other entities. For school districts, there Huckabee-Sanders has said she will take those cuts even is a minimum uniform rate of taxation (URT) of 25 mills further if elected. Elementary and secondary education is set by state constitution and statute (Ark. Const. Article already a huge chunk out of the state’s general revenues, in 14, §3; Ark. Code Ann. § 26-80-101), but any millage over fact it is one of the state’s greatest annual expenditures. If that must be voted on by local taxpayers (Ark. Const. Ar- Arkansas begins to move toward no income tax, property ticle 14, §3; Ark. Code Ann. §26-80-102). In 2021, the taxes will be more important than ever for the funding of statewide average millage rate was 38.48, only 65.7 per- our public schools. With the state already supplementing cent of which is covered public school funding by the URT. This is imby over $2 billion per portant because, pursuyear, it is easy to conant to Ark. Code Ann. clude that property taxes irst, there is no state property tax in Arkansas. §6-20-2305, if a school alone, as currently addistrict’s net property ministered and assessed, Property taxes are levied by local school distax revenues collected are not enough to fund are less than 98 percent the schools. tricts and approved by the quorum court. of the URT, the DepartArticle 16, §5 of the ment of Education shall Arkansas Constitution distribute to the school mandates that all real district the difference and personal property between 98 percent of subject to taxation shall the URT and what was actually collected. However, the be taxed. It gives the General Assembly the latitude to state is not required to supplement any revenues not col- amend the methodology of assessment by a three-fourths lected in excess of the URT (25 mills). vote of each chamber. Additionally, it sets forth the propActual millage rates for school districts vary from around erty that is exempt from taxation. In recent legislative ses28 mills to 48 mills, with the statewide average millage sions, there have been bills presented that would reduce around 38.5 mills in 2021. The total taxable property and eventually eliminate personal property taxes in Arkanvalue for all real, personal, minerals, and utility property sas. Personal property tax assessments make up nearly onein Arkansas in 2021 was $57,213,455,655. In each school quarter of the total property taxes assessed in Arkansas. The district, the total taxable property assessments are multi- state’s public schools certainly cannot afford to lose half a plied by its levied millage rate (times 0.01) to determine billion in property tax dollars without some way to make the actual assessed value of property in the district. In up for it — and it doesn’t look like greater supplementation 2021, the statewide average collection rate for school dis- from state general revenues is a popular option. tricts was 95.73 percent. In the same year, about $2.09 Furthermore, Arkansas has one of the lowest real propbillion in property taxes were collected for school districts erty taxes in the country. According to a 2021 publication statewide. Comparatively, for the State’s Fiscal Year 2021, by the Tax Foundation, Arkansas homeowners pay a smaller $2.28 billion in state general revenues were expended by percentage of their home’s value in property taxes than in
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COUNTY LINES, SPRING 2022
