Utah Town’s 225% Property Tax Spike Is Lesson on Fiscal Realism

A small Utah town’s proposed 225% property tax hike is an extreme example of what can happen when political leaders defer routine tax increases year after year. Eventually, the bill comes due with interest.

Cities should normalize small, regular tax increases—perhaps through bipartisan, independent bodies—or consider structural reforms such as land value taxation. The alternative is what you see in Wellington, Utah: a time bomb set by yesterday’s political choices, detonated in today’s municipal budget, to the detriment of taxpayers.

After years of flat tax rates and mounting costs, Wellington is now trying to fill a budget hole with one massive corrective. Most of the 1,600 residents are outraged, and understandably so. The town’s elected officials should have seen this coming.

Wellington didn’t end up staring down a fiscal cliff because it overspent in a single year. It’s in this position because the last time Wellington raised property taxes was 2017. Since then, the price of everything—asphalt, police cruisers, water treatment, and construction materials—has gone up, but not tax revenue.

In the short term, holding taxes flat looks like fiscal responsibility. There’s never a good time to hike rates or call for property reassessments, and they aren’t the kind of thing a politician wants associated with their name at a news conference.

When the local economy is humming along, officials don’t want to risk throwing it off the rails. When the economy is struggling, it hardly seems like an ideal time to demand more from taxpayers. So a city often coasts on the same tax rates and gets away with it, at least for a while.

Meanwhile, costs are compounding. Roads degrade, pipes corrode, and pensions inch closer to insolvency, whether or not property taxes are raised in a given year. By the time someone is politically forced to acknowledge the gap, the fiscal fissure is actually a crater.

Wellington’s projected revenue shortfall is nearly $400,000, even after accounting for some belt-tightening. The proposed 225% hike would barely bridge the gap. That’s what makes the town’s example so instructive. Despite the headline-inducing percentage, by all accounts the hike isn’t outsized relative to need. It’s only outsized relative to what voters have been conditioned to expect.

The real scandal isn’t the size of the tax increase but how long it was avoided. In local politics, there generally is no upside to raising taxes. Doing so spends a lot of political capital for comparatively little revenue return. The public gets angry, and the opposition runs attack ads with menacing voiceovers.

Simply normalizing small, predictable tax increases would do wonders. But it requires a bipartisan retreat from anti-tax rhetoric.

Photographer: George Frey/Bloomberg via Getty Images

The result is a municipal tax policy hot potato of sorts. Each administration holds it just long enough to get through their term, hoping the next mayor or council will be the ones that get burned. Eventually, someone does. The opposition then runs against them with a platform promising a return to tax rate stasis, setting up the entire process to repeat itself.

The irony is that the official or administration that moves to fix the revenue issue is usually the one acting responsibly. Residents still feel blindsided, and they aren’t wrong—but their anger is arriving years too late and often is directed at the wrong politicians.

The solution is self-evident: Raise taxes a little and do it often. A modest, predictable adjustment to property tax rates or reassessments every few years is the fiscal equivalent to flossing or exercising—easy to skip, but ultimately painful when neglected for long. Done regularly, it avoids the jarring hikes that cities such as Wellington now face.

There also is room for smarter design. Property taxes right now tend to punish improvement. If you build a better house or renovate your commercial property, for example, your tax bill might go up. Worse, property taxes are tied to market volatility. When property values surge, a homeowner’s bill can spike during reassessment—potentially pricing them out of their home.

A better alternative would be a land value tax. Under such a system, tax bills are based on the unimproved value of the land rather than whatever sits on it. This encourages productive use of land, tracks economic booms and busts more smoothly, and avoids distorting land use by preventing the punishment of development or maintenance.

But avoiding fiscal cliffs like Wellington’s needn’t require a radical reconsideration of local property tax policy. Simply normalizing small, predictable tax increases would do wonders. But it requires a bipartisan retreat from anti-tax rhetoric.

To insulate such tax adjustments from politics, cities could establish bipartisan, independent bodies that set long-range schedules for property tax rates and assessments. Much like how independent bodies draw electoral maps and set salary schedules for lawmakers, property tax groups could publish multiyear tax plans based on expected infrastructure need, inflation, and population growth patterns.

The plans can be revisited but getting something on the books shifts the political default from inaction to incrementalism. This would make modest, responsible hikes the new expected baseline, rather than holding rates steady and hoping that the math will work out—or that the fallout will hit someone else if it doesn’t.

A cycle of denial, collapse, and blame is politically and economically unsustainable. The bill always comes due. The only question is whether we want to pay it gradually or all at once and when we can least afford it.

Andrew Leahey is a tax and technology attorney, principal at Hunter Creek Consulting, and practice professor at Drexel Kline School of Law. Follow him on Mastodon at @andrew@esq.social

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