Kansas Property Tax Reform Analysis: SCR 1616 and HB 2745

This legislative session, Kansas policymakers remain focused on property tax A property tax is primarily levied on immovable property like land and buildings, as well as on tangible personal property that is movable, like vehicles and equipment. Property taxes are the single largest source of state and local revenue in the U.S. and help fund schools, roads, police, and other services. reform and relief, with the Senate and House passing an assessment limit and a levy limit, respectively, in late February.

SCR 1616 would limit increases in the assessed value of all classes of real property and residential mobile homes to no more than 3 percent per year. HB 2745 would create a 3 percent property tax A tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. levy limit that would restrict the growth in property tax revenues that can be raised by local taxing subdivisions other than school districts.

While well-intentioned, the assessment limit in SCR 1616 would create wide gaps between assessed value and market value, distorting the real estate market and disadvantaging those purchasing newer homes (and other newer real estate). A levy limit is a more neutral and structurally sound solution, but the House-passed version of HB 2745 is more permissive than the levy limits in many states, especially given its exemption for schools and its reliance on a protest petition.

SCR 1616’s Assessment Limit Would Distort Real Estate Market and Disadvantage Those Purchasing Newer Properties

The Senate-passed resolution, SCR 1616, would amend the Kansas constitution to impose a 3 percent limit on the amount by which the assessed value of a parcel of real property or a mobile home used for residential purposes can increase from year to year. The assessment limit would not apply when the property includes new construction or improvements, nor in other less common circumstances.

However, the limit would remain in place even when the property changes ownership (unless the legislature creates exceptions to this policy). This provision is highly unusual, as it means the reduced assessment would run with the property, rather than with the owner (which is more typically seen in the portability provisions in some states’ assessment limits). In states without portability provisions, changes in property ownership trigger a new, often higher, assessment, but under SCR 1616, a homebuyer purchasing an existing home would benefit from a reduced assessment that would not reset upon ownership transfer. However, a homebuyer purchasing a newly built home would pay full freight.

This favorable assessment of older homes (and other properties, including commercial properties) would increase their market value, yielding higher sales prices. These higher sales prices would benefit incumbent property owners but would create an additional affordability hurdle for prospective first-time homebuyers. At the same time, preferential tax treatment of previously constructed properties would make new construction less desirable, thereby discouraging the development of new housing stock and new commercial properties.

Over time, limiting assessed values in this manner would substantially distort the real estate market by creating an incentive for taxpayers to purchase older properties whose assessed values have been artificially capped for many years or decades. SCR 1616 would also create an incentive for owners to avoid renovations to avoid triggering a reassessment. This would discourage some property owners from making value-enhancing investments they would otherwise pursue, and deferred renovations could even lead to negative health or safety outcomes for owners or tenants.

It is also worth noting that if this constitutional amendment is approved by voters, the legislature would have the authority to adopt a lower assessment limit with a simple statutory change. For example, policymakers could restrict valuation increases to 1 percent—or even cap assessments at their current levels—with a simple act of the legislature, further exacerbating market distortions.

In the first year SCR 1616 is in effect (tax year 2027), the assessment limit would prohibit taxable assessed value increases of more than 3 percent (or a lesser percentage as provided by law), compared to the property’s tax year 2022 assessed value. As a result, the assessed value of many properties would be substantially reduced in the first year they are assessed under this provision, which would lead to property tax liabilities being reduced if mill levies are held constant. Notably, however, there is nothing in SCR 1616 to prevent local taxing authorities from increasing mill levies, countering the effects of adopting an assessment limit in the first place. Furthermore, over time, higher mill levies would disproportionately burden those whose assessments are closer to market value (those with newer properties).

While well-intentioned, an assessment limit is not an ideal solution for Kansas, even if paired with a levy limit. Over time, an assessment limit like the one in SCR 1616 would create wide gaps between a property’s assessed value and its market value, while creating market distortions and shifting property tax burdens in nonneutral ways.

Instead, policymakers should keep the focus on how much revenue is actually needed and desired to fund government services and limit overall property tax collections growth with a well-structured levy limit that avoids unnecessary exemptions.

HB 2745’s Levy Limit Is Preferable but May Prove Too Permissive

HB 2745 would create a new statewide property tax levy limit that would replace the current “revenue neutral” policy enacted under Kansas’ 2021 “Truth in Taxation” law, while retaining certain modified public notice and public hearing requirements. Under HB 2745, local political subdivisions (except school districts) would be subject to a potential protest petition if they adopt a resolution that raises property tax collections by more than 3 percent above the previous year’s collections. Notably, certain property tax increases would not be constrained by the cap, including those attributable to new construction, renovations, or improvements; the expiration of property tax abatements or tax increment financing (TIF) districts; or property tax increases used to repay bonds, state infrastructure loans, or interest payments on obligations entered into before July 1, 2026.

When a budget is adopted exceeding the limit, HB 2745 would give voters 30 days to file a protest petition. Under the House-passed version of the bill, a protest petition would be successful if 5 percent or more of the qualified electors of votes cast for Kansas Secretary of State sign the petition. In the event of a successful protest petition, the governing authorities of that jurisdiction would be required to adopt an alternative budget, within seven days, that keeps property tax collections within the limit’s constraints. If the protest petition is unsuccessful, the budget exceeding the levy limit would be permitted to take effect.

From a property tax collections standpoint, HB 2745 is more permissive than the current “revenue neutral” Truth in Taxation policy that, by default, holds collections constant year-over-year. However, the mechanism by which undesired property tax increases could be prevented is stronger, as a successful protest petition would nullify increases over the limit, while Truth in Taxation relies on procedural steps and the pressure of public opinion alone to prevent property tax increases.

HB 2745 would therefore give voters a stronger tool in their toolkits to overturn property tax increases they disagree with, but it would simultaneously give local taxing jurisdictions more flexibility to increase property taxes year-over-year, by default, than they have under current law. Therefore, while HB 2745 could have a stronger effect on constraining property tax revenue growth in jurisdictions that have increased property taxes despite Truth in Taxation, the policy may have a weaker effect on constraining collections growth in those jurisdictions that had previously held property tax collections constant.

It is also worth noting that a protest petition puts the onus on taxpayers to proactively act to prevent undesired property tax increases. Under HB 2745, a budget exceeding the limit would become law by default unless a protest petition is successful, whereas under most levy limits, a budget exceeding the limit by default cannot become law unless and until it is approved by voters at the ballot.

Additionally, exempting school districts from the levy limit would create a substantial carveout that would limit the tax relief that would be realized under this policy change, since a large portion of property taxes in Kansas are used to finance schools. Under current law, school districts are constrained by Truth in Taxation laws, but under HB 2745, they would no longer face the same constraints. This could result in many Kansans facing sharper property tax increases overall, even if HB 2745 does successfully limit the county, city, and special district portions of their property tax bills.

Overall, levy limits are a structurally sound way to limit property tax increases, as they focus on the root of the problem: local spending increases. Under a levy limit, when assessed values rise across a local political subdivision, taxing authorities by default must adjust the mill levy rate downward to keep overall collections from exceeding the specified limit. Importantly, however, property tax liability remains tied to a parcel’s assessed value (which for most classes of property is a percentage of market value), and property tax increases experienced by any one parcel will be limited by virtue of overall collections being constrained by the cap.

As such, levy limits are the simplest, most neutral, and most structurally sound mechanism for achieving property tax reform and relief, but they only work effectively if there are few exceptions and if the mechanism by which voters can disapprove of undesired tax increases is sufficiently strong.

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About the Author

Expert

Katherine Loughead

Director of State Tax Projects Katherine Loughead is the Director of State Tax Projects at the Tax Foundation, where she oversees the state tax policy team’s research agenda and serves as a resource to policymakers in their efforts to modernize and improve the structure of their state tax codes.