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Primary Residential Exemption Worth $230 million in 2005

In 2005, the 45% primary residential exemption shifted $230 million in property taxes from primary residences to other types of properties, primarily businesses, according to calculations by the Utah Taxpayers Association based on Utah State Tax Commission data.

This calculation assumes that removing the 45% exemption would be accompanied by a corresponding reduction in property tax rates to maintain revenue neutrality. However, if the 45% exemption were removed without a reduction in property tax rates, the impact on home owners would be $718 million.

In addition, residential non-vehicular personal property such as computers, washing machines, refrigerators, furniture, etc. are 100% exempt from property taxes while businesses pay property taxes on personal property ($111.5 million in 2005). We'll be talking more about business personal property taxes in a later post when discussing the constitutional amendment on the November ballot.

The spending lobby complains that businesses benefit from "loopholes", but in Utah home owners (and 501 (c) (3) non-profits) get the property tax breaks. In a couple of weeks, we'll let you know who's getting the sales tax breaks.

Note: The association will be releasing several reports on property taxes for 2006 in the next several days. Today's post is based on 2005 data due to data availability. Subsequent posts in the next several days will be based on 2006 data. Calculations are made by the Utah Taxpayers Association based on data from the Utah State Tax Commission unless otherwise noted.

Increasing the household exemption was a successful attempt to prevent a Prop 13 movement in Utah. Promoters of the exemption correctly reasoned that a Prop 13 in Utah would benefit homes and businesses. By granting an exemption to homes, the state avoided Prop 13. In the end, homes received a break but businesses did not. Half a loaf is better than none was the reasoning.

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