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SALT LAKE CITY — Five Utah counties are suing the state, contending that a law passed earlier this year is forcing homeowners and business owners to unfairly pay higher property taxes to compensate for tax discounts the state is giving to airline companies.
Salt Lake, Weber, Duchesne, Uintah and Washington counties filed the lawsuit Monday in 3rd District Court, aiming to overturn a law they claim gives the airline industry an unfair, 39 percent discount that's reducing tax revenues by about $5 million in 2017.
"The unfairness to individual and small-business taxpayers cannot be overstated," the lawsuit states, noting that because of Utah's "zero-sum game" tax system, if there are reductions in tax revenue, the gap is shifted to other taxpayers.
The counties contend that when the Legislature passed SB157 earlier this year, it caused "property tax assessments in the airline industry to fall well below fair market value," thus violating the Utah Constitution to tax assets fairly and shifting "tax burdens from airlines" to other taxpayers.
The lawsuit argues the "unreasonable and unconstitutional shift of tax burdens" gives a "windfall" to the airline industry while "unfairly penalizing the average" taxpayer.
Passed during this year's Legislative session, SB157 enacts a new method for determining the fair market value of centrally assessed aircraft, allowing an up-to-20-percent price reduction for aircraft when they're bought in bulk.
It also instructs the Utah Tax Commission to use the "airliner price guide" — a sort of Kelley Blue Book for airplanes — to determine the market value for aircraft, unless a better method exists.
According to the bill's fiscal note, legislative analysts predicted that the law "may shift some portion of the $12 million in property tax burden of airlines to other individuals and businesses."
The bill's sponsor, Sen. Curt Bramble, R-Provo, says the counties are "engaging in class warfare," and their claims shouldn't stand because the whole point of SB157 was to ensure fairness and avoid state constitution violations.
"The reason the bill was brought forward is there have been extraordinary inflations of valuations of airlines over the last few years," he said, noting that airlines have seen an at least 40 percent spike in valuations.
"There have been multiple appeals and multiple lawsuits over the last several years dealing with fair market value from airlines saying the assessments are too high," Bramble said. "The argument that this would shift taxes to other taxpayers begs the question: Was it an unconstitutional shift to begin with?"
But the five counties argue that SB157's bulk discount goes too far, violates the Utah Constitution and follows a flawed methodology by "carving out" a subset of taxpayers to be subject to a "different evidentiary standard" than any other property in the state.
"Taxation without representation takes on even greater urgency when it is taxation without transparency or uniformity, and when it occurs in contravention of recognized standards for measuring fair market value," said Salt Lake County District Attorney Sim Gill.
Gill added: "Citizens should be able not only to question this unfair and unjust shifting of tax burdens onto them but also to demand the rules be applied equally. If the counties do not defend the average taxpayer, it seems no one else will.”
Salt Lake County Mayor Ben McAdams said taxpayers "expect principles such as tax fairness and transparency to be followed," but that "isn't the case here."
"That is why Salt Lake County is joining in this lawsuit on behalf of homeowners and small-business owners to ensure that their voices are represented as well as those of large industries,” the county mayor said.
Bramble said he's not surprised by the counties' lawsuit.
Last month, he told the Deseret News that county officials had been "rattling their sabers on bringing a lawsuit." But he pointed out that county attorneys did not argue against SB157 when it was in Senate or House hearings.
Bramble added that he doesn't believe "counties should have standing" when determining centrally assessed property values because they're the "beneficiaries" of the tax revenue.
"Does that mean school districts should have standing with income taxes? Does that mean (the Utah Department of Transportation) should have standing on the gas tax?" he asked. "This is the responsibility of the state tax commission."
