KY's flawed property tax system allows silent increases

Homeowners across the commonwealth are waking up to shocking tax bills.

In Louisville, property assessments jumped at least 30% in reassessed neighborhoods. Daviess County has seen six consecutive years of assessment increases exceeding 5%. In Shelby County, where activists fought a property tax hike, school authorities handed themselves millions in new property tax revenue while simultaneously touting no change in tax rates. The enabler in all of these cases is a structural flaw in Kentucky's property tax system that allows silent tax increases to happen virtually automatically.

In short, when home values rise, property taxes can soar even when rates stay flat or fall slightly.

Gov. Andy Beshear correctly highlights lower property tax rates of 10.6 cents per $100 of assessed value, touting that fact obscures some basic problematic math.

A homeowner whose property value increased from $150,000 to $180,000 will pay more in taxes even if the rate drops from 11 cents to 10.6 cents. The math is simple: 10.6% of $180,000 is more than 11% of $150,000.

Kentucky should consider other property tax models

Utah solved this problem 40 years ago with Truth in Taxation legislation. Before 1985, Utahns faced punishing property taxes and demanded relief. Rather than imposing rigid caps that would cripple local governments or merely shifting burdens, they created a system that combines transparency with accountability.

Here's how it works: Each year, taxing authorities calculate the rate needed to generate the same revenue as the previous year based on new property values, known as "certified rate." This prevents the automatic revenue windfall that occurs when assessments climb.

If local officials determine they need more revenue for schools, roads or public safety, they can still raise taxes — but only after ample public notice and buy-in. This process doesn't handcuff local government; it simply requires transparency and accountability to their constituents.

Once among the highest-taxed states for property, Utah is now among the lowest in the nation. Kansas and Nebraska have followed Utah's lead in recent years, adopting their own Truth in Taxation laws to combat rising property tax burdens. Kentuckians should join them.

Kentucky’s property tax legislation falls behind

Kentucky's current system fails the transparency and accountability tests. State law allows local governments to increase revenue up to 4% without voter involvement. There's no requirement for individualized taxpayer notices and no dedicated hearing focused on property tax increases specifically. The 4% automatic increase allowance — which compounds year after year — enables substantial tax hikes over time without meaningful public input. Five years of a 4% increase is a nearly 22% hike for taxpayers.

Truth in Taxation represents a transparent alternative that respects both taxpayers and local government autonomy. It acknowledges that local needs change and communities sometimes require additional revenue, but it ensures those decisions happen in the light of day with full public participation.

Property tax relief matters to constituents. Lawmakers have taken up bills addressing senior exemptions and assessment freezes for elderly homeowners. But these piecemeal approaches only treat the symptoms. What Kentucky needs is comprehensive structural reform that prevents silent tax hikes.

Kentucky needs property tax reform

The political moment is now. Property taxes consistently rank as Americans' most hated tax. After years of surging home prices driven by weak home construction, homeowners across Kentucky are feeling the squeeze. State legislators are clearly willing to tackle tax reform through income tax reductions implemented in recent years. Applying that same reform-minded approach to property taxes makes both political and policy sense.

The legislation should eliminate the automatic 4% increase allowance that currently exists. While some gradual growth allowance might be reasonable to account for population increases or inflation, the current 4% threshold is too generous and defeats the purpose of requiring transparency.

The choice is clear: Kentucky can continue down the path of silent tax increases, temporary relief measures and growing taxpayer frustration, or it can adopt Truth in Taxation and create a transparent, accountable property tax system that works for everyone. Decades of success in Utah suggests which path leads to better outcomes.

It's time for the Kentucky General Assembly to bring truth to Kentucky's taxation.

This piece first appeared in the Louisville Courier Journal.