A yawning gap between surging home values and stagnant commercial assessments has fueled a significant shift in the Kansas property tax burden, forcing homeowners to shoulder a larger share of government needs, state and local officials say.
Driven by an overheated residential market and decades of commercial exemptions, a flip in the tax base has left families paying the lion’s share for schools, roads and emergency services.
Despite commercial property being taxed at more than double the rate of residential property, Rep. Adam Smith, a Weskan Republican and chair of the House Taxation Committee, said the “sheer velocity” of home price increases has outpaced the higher commercial rate.
“Value is whatever you are willing to pay for it,” Smith said.
How did we get here?
Sean Robertson, Saline County appraiser and legislative liaison for the Kansas County Appraisers Association, said that residential and commercial property tax burdens shifted toward businesses after changes that began 40 years ago.
In 1985, the Legislature authorized a statewide reappraisal of all real estate properties. New valuations were set for 1989.
“Most properties at that time had not been revalued for many years, and sometimes decades, which created horrible inequities between similar properties in terms of valuation and taxes,” Robertson said.
Kansans passed a constitutional amendment by popular vote in 1990 that set the tax rate for residential properties at 11.5% of appraised value and the rate for commercial properties at 25%.
Although there are other property classifications — including agricultural, nonprofit, vacant and utility — residential and commercial are the largest revenue drivers by a wide margin.
“Once the dust settled” from these changes, Robertson said, residential property owners in 1997 paid 38% of total statewide property taxes while other classifications, primarily commercial, accounted for the remaining 62%.
“Over the past 30-plus years, though, those percentages have changed dramatically,” Robertson said.
In 2024, residential property owners paid 57% of all property taxes while commercial and other property owners paid 43%.
What caused the flip?
Three factors caused this shift, Robertson said.
“First, exempting properties from paying taxes does not simply absolve those properties from paying taxes,” he said. “Exemptions cause a shift of property tax responsibility onto other properties which are not exempted.”
In 2006, any newly acquired commercial or industrial machinery and equipment was exempted from property tax. This pushed commercial property owners to purchase new equipment that would then be exempt going forward.
Barton County Commissioner Barb Esfeld, the county’s former appraiser of 30 years, said the Kansas Legislature has systematically removed items from tax rolls, including certain business machinery, boats and personal property, often to attract new business.
“What they’ve done is taken that pie and put more of it on real estate and residential,” Esfeld said. “Residential feels it the most because it’s not income-generating.”
Commercial properties built with Industrial Revenue Bonds or given economic development exemptions by local boards can be avoid property taxes for up to 10 years.
“Although these exemptions are useful economic incentive tools that can be beneficial to a community in the long run, they remove possible revenue streams that pay for public services and transfer the tax burden to other property types for a period,” Robertson said.
Second, commercial properties are often given special considerations. For example, he said, if a commercial property has its value reduced as part of a hearing with the county appraiser or the Kansas Board of Tax Appeals, that value is maintained for an additional two years.
“This does not apply to residential properties that get a valuation reduced through the same process,” Robertson said. “That combination results in a wide swath of statutorily stagnant commercial values.”
Finally, home sale prices — driven by low supply, high demand, increased cost of building materials and low interest rates — have increased nearly 100% in the past eight years, from a median sale price of $159,000 in 2016 to $305,000 in 2024.
At the same time, commercial loan values (a measure of commercial sales activity) have increased by half that margin.
“The short version is that the market value of residential properties is rising at a much faster rate than the market value of commercial properties,” Robertson said.
What about the future?
“There have been two things in recent years that have kept the disparity between residential and commercial taxes at a relative minimum,” Robertson said.
In 2024, the median appraised valuation of residential properties for taxation purposes was lower than the median sale price in all 105 Kansas counties. So, despite still rising values, counties in Kansas are undervaluing residential properties, on the whole, compared to sale prices.
Additionally, there is an exemption of up to $172.50 currently taken off the property tax bill for every residential property in Kansas. This is an increase of the $46 exemption taken off each residential tax bill as recently as 2021.
“Without these two realities, residential property owners in Kansas would be paying an even greater share of taxes compared to commercial property owners than they already do,” he said. “This trend does not need to continue, though.”
Narrowing the gap
Most of the solutions for narrowing the disparity between residential and commercial property taxes require legislative or constitutional changes, Robertson said.
Raising the exemption for residential properties from $172.50 would help reduce residential taxes, and, therefore, narrow the difference. Targeted circuit breakers or means-testing could be introduced to provide residential property owners with rebates or refunds.
“Also, a lower assessment rate for residential properties could be applied,” Robertson said. “A cousin to that approach is the Gallagher Amendment, which was used in Colorado for many years.”
This method (before its repeal in 2020) made it a requirement for residential properties to pay no more than 45% of the total property taxes in the state. This required a recalculation of the residential assessment rate each year, but kept the balance between residential and commercial taxes even.
In an effort to curb the effect of rising market values, Kansas lawmakers have proposed the Cap Assessed Value Protection Amendment, Esfeld said. This constitutional change would limit annual property tax assessment increases to 3% for most real estate and residential mobile homes beginning in 2027.
To address recent market volatility, the measure includes a look-back provision that would cap 2027 assessments at no more than 3% above their 2022 levels, effectively rolling back significant valuation spikes seen during the COVID-19 pandemic.
While the cap would generally remain in place even after a property is sold, exceptions would be made for new construction, major improvements or assessment errors.
Critics like Esfeld argue the amendment is a superficial solution to a deeper systemic problem.
Because local government budgets for essential services are relatively fixed, Esfeld warns that capping valuations will simply force a mathematical spike in the mill levy to cover the funding gap. She said that the real issue is an eroding tax base caused by decades of state-level exemptions, which have steadily shifted the overall tax burden onto homeowners.
She said the cap acts as a “Band-Aid on a bleeding ulcer” that may offer temporary relief while potentially destabilizing local government funding and penalizing economic growth.
Also, by looking back to 2022 and its lower values for the 2027 tax year, it won’t take long before many properties are extremely undervalued, Smith said. That would lead to a painful correction for taxpayers, similar to the mass statewide reappraisal in the late 1980s.
This was a massive and costly undertaking designed to ensure all properties were valued at their fair market value. Today, state statute requires that appraisals remain within 10% of market value.
“We don’t want to go back to then,” Smith said.
What about lower property taxes for all?
Currently, the state collects 20 mills on each tax bill for school funding, Robertson said.
“It may be possible, depending on the courts’ interpretation of how a school funding plan is administered, to eliminate that portion of the property tax bill for Kansans and fund schools through some other mechanism” he said.
That would lower the tax rate on every property tax bill in Kansas by a significant amount.
“On the local level, budget equals tax. It is no more complicated than that; reducing a budget is the only way to reduce taxes,” Robertson said. But, here is the rub — reducing a budget at the local level likely means reducing or eliminating services.”
However, “citizens like police protection, fire protection, ambulance services, roads that are passable, parks that are clean, etc.,” he said. “What are citizens willing to forego in favor of lower taxes? That is a question that can only be answered by local taxing authority boards and their constituents.”
Ultimately, “it comes down to growth,” Smith said. “We have to grow our valuation. It’s a matter of economic development.”
Esfeld suggested that true relief would require a more drastic reduction in mill levies, perhaps supported by state-level sales tax transfers, rather than capping appraisals.
But she agreed with Smith overall,
“I keep thinking that is the answer,” Esfeld said. “The only thing that would keep this from being a problem is new construction.”
This would include homes, businesses and industrial expansion. Not only would such construction spread the property tax burden out, but it would also generate sales taxes and hospitality taxes, she said.
Esfeld noted that even though the proposed cap looks back to 2022, properties that saw improvements between then and now would not qualify. This would remove any incentive for new building.
“Economic development might as well go out the window,” she said. “It penalizes growth.”
This story was originally published by the Kansas Reflector.
