Luján created cap to ease burden on homeowners.
Ben Luján, the late speaker of the state House of Representatives, was the patron saint of property tax relief for longtime homeowners in neighborhoods like Santa Fe’s east side.
In 2000, Republican Gov. Gary Johnson signed into law a bill sponsored by Luján that placed a 3 percent cap on annual increases in market values for residential properties. The law took effect the following year.
“It shouldn’t be a burden to own a home,” Luján, a Democrat from Nambé, said when Johnson signed the bill. He added that housing prices and property taxes also were rising quickly in Taos, San Juan and Sandoval counties.
For the working-class Luján, the property tax law was a major part of his legacy. He died in 2012.
Under the law, the market value of a residential property for tax purposes cannot increase more than 3 percent a year as long as the property doesn’t change hands. Newly purchased homes are taxed at full market value.
Luján had fought for nearly a decade to provide the tax relief, but there were concerns about the law’s fairness even before it was enacted.
“A partial freeze on some New Mexico property values introduces inequities in valuation among properties,” the state Taxation and Revenue Department said in an analysis of a 1995 bill that was similar to the legislation signed by Johnson in 2000.
Since the law was enacted, much of the controversy surrounding it has centered on the inequity created when a home is sold. New homebuyers often pay substantially more in taxes than longer-term residents of the same neighborhoods.
Luján opposed attempts in the Legislature to deal with the inequities. In 2011, he spoke against a bill that would have rolled back market values of homes that were sold after 2004 in an attempt to deal with the unfairness of new homebuyers paying more in taxes than their neighbors. That would have placed more of the tax burden on residential properties bought prior to 2004.
“I would really love to find a solution,” Luján said. “But I don’t think this is the solution. You are just shifting the tax burden to another group.”
He also said most homeowners in his district were benefiting from the law because property in rural areas tends to change hands less frequently.
The state Supreme Court, in a lawsuit brought by several Bernalillo County homeowners, ruled in 2014 that the 3 percent cap on annual market valuations for residential properties was constitutional.
“We hold that [the 3 percent cap] rationally furthers the state’s interests in fostering neighborhood preservation and stability by ‘permitting older owners to pay progressively less in taxes than new owners,’ ” the court’s decision said.
The 3 percent cap applies only to residential properties. Commercial property is taxed based on full market value.