State and Local Fiscal Fortunes

For an interesting blog post on state/local revenue volatility by two economists at the Federal Reserve Bank of Atlanta, see here.  Altig and Robertson provide a brief discussion of my recent paper, "The Federal Role in State Tax Reform" in which I note the following: "Through various inducements and limitations embedded in federal law, the federal government has stacked the deck in favor of state revenue volatility, unwittingly exacerbating the subnational fiscal crises that it is then called upon to mitigate through bailouts and general fiscal relief."

Gauging the Revenue Effects of a Split-Roll Property Tax

One of the most common proposals for reforming California's Proposition 13 is the introduction of a "split-roll" property tax.  The term "split-roll" means different things to different people, but in the context of reforming Prop 13 the term is typically used to describe a system in which commercial/industrial property (but not residential property) is periodically reassessed at market value.  A useful source of data for evaluating the revenue effects of such a change is the annual memorandum prepared by the California Board of Equalization in order to determine compliance with 4-R Act requirements.  These memos show (1) the total statewide assessed valuation of commercial/industrial property, and (2) the total statewide fair market value of commercial/industrial property.  It is interesting (though not particularly surprising) to show how much the latter figure has changed over the past three years, while the former has stayed pretty much the same.  These are the figures (in 000s) from the three most recent memos, with links to each year's memo:

2007-08 Roll: $1,215,997,953 (assessed value) and $2,250,986,523 (market value)
2008-09 Roll: $1,275,373,832 (assessed value) and $2,075,614,788 (market value)
2009-10 Roll: $1,280,309,309 (assessed value) and $1,627,633,442 (market value)

Notice the sharp downward trend in market values and the steady (but modest) upward climb in assessed values--this is the operation of Prop 13 in a down real estate market.  As market value approaches assessed value, not only do the revenue consequences of moving to a split-roll change, but the politics of such proposals could change as well.  Food for thought...