How Measure 5 Changed the Tax System

Pre-Measure 5

Oregon had a pure levy-based property tax system until 1991-92. Each taxing district calculated its own tax levy based on its budget needs. County assessors estimated the real market values of all property in the state. Generally speaking, the full value of property was taxable; there was no separate definition of the assessed value. The levy for each taxing district was then divided by the total real market value in the district to arrive at a district tax rate. The taxes imposed by each district equaled its tax rate multiplied by its real market value. Consequently there was no difference between taxes imposed and tax levies under this system, so taxes imposed grew with levies. Most levies were limited to an annual growth rate of 6 percent, and levies above that required voter-approval.

Under this system, the tax rate faced by an individual property depended on the combination of taxing districts from which it received services. Taxes for each property were calculated by first summing the tax rates for the relevant taxing districts to arrive at a consolidated tax rate. Then that tax rate was multiplied by the assessed value of the property to determine the taxes imposed on that property. The annual growth in taxes on an individual property depended on the interaction of a number of factors, including the growth in levies and the amount of new construction within the district. for example, if there were no new construction, then any growth in levies meant a growth in taxes for individual properties whose value did not decline. On the other hand, new construction within the district meant that the levies were distributed across more properties, causing the tax rate to fall. this growth could translate into lower taxes for some individuals.

Measure 5

Measure 5 introduced limits, starting in 1991-92, on the taxes paid by individual properties. The limit for schools was $15 per $1,000 assessed value in 1991-92 and reduced by $2.50 each year until it reached a rate of $5 per $1,000 assessed value in 1995-96. The limits of $5 per $1,000 real market value for schools and $10 per $1,000 real market for general government taxes applied only to operating taxes, not bonds. If either the school or general government taxes exceeded its limit, then each corresponding taxing district had its tax rate reduced proportionately until the tax limit was reached.

Measure 5 resulted in a system that was a hybrid of levy-based and rate-based systems. For properties where the school and general government taxes were below the limits, the process resembled a levy-based system; taxes imposed depended on levies. For properties where the calculated taxes exceeded the limits, and hence the tax rates were fixed at the limits, the process more closely resembled a rate-based system; taxes imposed depended on assessed values.

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