...Governments are instituted among Men, deriving their just powers from the consent of the governed,...
This line from the preamble to the Declaration of Independence, spells out exactly why this country was founded. Taxation and religious freedom were the two main reasons the colonists wanted to break free of British rule, and to establish a representative republic form of government instead of a top-down monarchy. The people choose their lawmakers and grant them certain authority, but they are to exercise only the authority given by the citizenry.
Taxes are a necessary evil resulting from that decision to establish a government. In theory, the people have chosen, through those elected representatives, to publicly fund certain programs and projects.
But did the people really ever expect that one arm of government could challenge a decision by another arm of government that could materially and financially affect them? That's exactly what happened in Grant County, where the school board has challenged the property valuation administrator's assessment of the worth of the Ark Encounter park and exhibit.
Forget for a moment the Ark Encounter's controversial nature. The gist of this story was lost on many who weighed in when the news came out earlier this week. Tax breaks granted by the state for the facility's construction have nothing to do with the controversy at hand.
In Kentucky, an elected county official called the property valuation administrator has the responsibility of assessing the value of all real property for taxation purposes. Kentucky property owners have always had the ability to challenge the assessed value of their property if they feel it's been set too high. Gov. Matt Bevin's challenge of the value of his Louisville home has been in the news. He followed the procedure spelled out in law when he felt the taxable value of his home was more than it was really worth on the open market.
But unbeknownst to me, and probably most everyone else, taxing agencies can challenge individual property assessments if they feel they're too low. That's what's happening in Grant County.
The PVA assessed the Ark Encounter's property at around $48 million in 2017. The school board there challenged the assessment to a local appeals board but lost, then also lost a challenge before a state board. Thus the lawsuit.
Nevermind that prior to the Ark Encounter's construction, the property was vacant woodland worth probably not more than a couple of hundred thousand dollars, if that much. A $48 million addition to the county's tax rolls means an increase in tax revenue to all local agencies that levy property taxes. News reports indicate that the school board received nearly $276,000 from the Ark Encounter in 2017. That's more than a quarter of a million dollars that they didn't get before the park was built. But it's apparently not enough.
While this appears to be nothing more than a blatant money grab from the Grant County school board, the implications of this are scary. What if someone has a confrontation with an official from an agency that has the power to levy taxes? Will they become a target? What if the agency decides its critic's home or business is assessed too low? Will they have to hire a lawyer and defend themselves in court?
It's a misconception that businesses pay taxes. Taxes are an expense that are either passed along to customers, or recouped through cuts in other places. If a prominent business owner finds their assessment increased through a taxing body's challenge, what if they increase prices or lay off employees to make up the difference? Doesn't that hurt, rather than help, the community at large?
Of course, Grant County is the same place where earlier this year, the high school refused to place an empty chair at graduation to honor the memory of a student who would have been graduating had she not died. So that gives you an idea of the mentality of school officials there.
What will probably come as a bigger shock to most, though, is that a PVA actually undervalued someone's property. In most cases, he exact opposite happens. Property is supposed to be valued for tax purposes as the amount that its sale would bring in a voluntary transaction between a willing buyer and a willing seller. Most property owners wish they could sell their real estate for what the PVA says it's worth. I know that in three recent property sales, I wish I could have gotten the taxable value out of them.
Kentucky legislators need to take steps to prevent this type of thing from happening. If the PVA is undervaluing property, there are mechanisms in place to deal with that. The state took over management of a number of PVA offices back in the 1980s. But if a taxing body has an issue with a specific taxpayer, then this process opens up a whole lot of potential for abuse.
This specific issue is far from over. The suit was filed in Grant Circuit Court. No doubt, the losing party will appeal to the Court of Appeals, and a Supreme Court appeal is likely given the sum of money in question. No matter your opinion on the Ark Encounter, tax breaks for industrial development, or Christianity in general, this bears watching. The ability of a government taxing authority to single out an individual taxpayer is scary, and is something anyone who's concerned about an increasing government overreach and abuse of authority should be concerned about.
