For the past several days, there has been a movement at the House of Representatives to try and pass SB 1086, a bill to remove the exemption on Capital Gains. A lot of attention has been given the issue because the consultant hired to evaluate the exemption recommended its demise. The Incentive Evaluation Commission instead voted to retain it.
I would like to submit another reason this exemption should remain in place. It is from my experience as the former Oklahoma County Assessor.
The way ad valorem (property) taxes work is this. A piece of property is assessed according to market value each year. Most of the time, this reassessment causes the property value to rise. This increased assessment results in higher property taxes.
Yet this resultant increase in property taxes is on unrealized gain. The property in question has not necessarily increased your cash flow and in many instances not at all. Nevertheless, a person pays property taxes on that unrealized gain.
As most of us know, the largest portion of property taxes goes to Education.
So I submit, the gain on real property has already been taxed for education. To do so again due to loss of the capital gains exemption will result in double taxation.
SB 1086 is a bad idea. Let’s hope the House of Representatives does not bring it up for a vote.
Mike Means, Executive Officer
Oklahoma State Home Builders Assn