Most Spokane homeowners would pay less tax under reform proposal. Here's who would pay more

Some Spokane politicians want to replace the existing property tax system with one that shifts tax burden from homes, apartments and many commercial properties and place it instead onto parking lots and vacant land.

An analysis published Wednesday by the Center for Land Economics shows the proposed reforms would save the median Spokane single-family homeowner roughly 4% compared to their current property taxes, while taxes for vacant land and surface parking lots would more than double.

Denser development like duplexes and apartments would get an even larger tax break on average, with a reduction of 9.5% for a median building with 2-4 units and more than a 14% decrease for buildings with five or more units.

The proposal wouldn't change the total collected by the city, just change who pays it , with roughly $6.8 million shifted from homes and $4.1 million placed on just vacant lots in city limits, according to the Wednesday report.

Most property taxes in the United States are calculated based on how much a property is worth, with higher assessed properties paying more for taxes.

Reformers, like Spokane Councilwoman Kitty Klitzke, argue that the current property tax system punishes those who build and rewards speculators and landowners who sit on undeveloped property or parking lots until the price is right to sell.

"A property tax that exempts buildings and shifts the burden onto land would give us a new and powerful tool to fill in our gaps while keeping Spokane affordable," Klitzke argued. "We've done all we can to incentivize infill development with the tools we currently have."

On nearly any developed plot of land in the city, most of the taxes are coming from the value of the building, not the land underneath it. The value of the parking lot's land increases with every new building that rises up around it, but its property taxes remain relatively low - low enough, some local leaders worry, that property owners can sit on under- or undeveloped land until surrounding development and the changing real estate market makes it sufficiently profitable to sell.

This system, Klitzke argues, has contributed to the proliferation of surface parking lots downtown and vacant land in neighborhoods with owners with little incentive to develop.

Land-value taxes, a 150-year-old idea that has been adopted in few places in the U.S., flip this concept, putting all or at least more of the tax burden on the value of the land while taking it off of productive development. Pure land-value taxes place all of the tax burden on land, meaning a luxury hotel may pay just as much in taxes as the neighboring parking lot. Split-rate taxes shift some but not all of the tax burden.

The state Constitution allows neither type of tax reform, at least directly, leading Klitzke and other supporters to focus on a workaround that accomplishes similar reforms through tax exemptions, which the state allows in limited cases. As with all existing tax exemptions in the state, such as those for multifamily housing or for farmland, for instance, the exempted taxes are still paid, just by someone else.

State law still does not allow for this type of use of property tax exemptions, but the Spokane City Council last year voted to add the "Universal Building Exemption," to its list of legislative priorities, asking lawmakers to allow the cities to try the reforms and choose how far to go. Klitzke is eyeing a "50+50" program that would subtract $50,000 from a building's value and then further cut it by half.

The same exemptions would be applied to every property in the city, softening the impact on tax bills - the Center for Land Economics reports that the median impact would be an $82 reduction in the tax bill for a single-family home. Not every homeowner would benefit either, particularly if they have a lower-value home in an area with high land values. The Center for Land Economics projects that lower-income neighborhoods would get the largest tax breaks on average.

The vast majority of single-family homes wouldn't have their tax bill shifted by more than 10% in either direction. But for the properties with disproportionately high or low building value - think the Davenport hotels or the Diamond-managed surface parking lots - the difference could be thousands of dollars a year or more.

Coupled with other programs the city has pursued in recent years - significantly relaxing zoning that had restricted dense residential construction, or implementing incentives to encourage the redevelopment of parking lots - proponents argue tax reform would add new pressure to develop high-value land.

"This is another tool we have to update our tax code in order to incentivize development and disincentivize prospecting, or holding undeveloped or underdeveloped land for tax write offs," wrote state Rep. Natasha Hill, D-Spokane. "Spokane's Division corridor is the perfect example of how this speculation depresses economic development. We can and must change the system to remove burdens for development and increase land value, which benefits all property owners."

Wednesday's report comes with a number of caveats, as its figures are based on a particular exemption formula which the city might not adopt as currently devised. It also assumes that the city - including the library and park system that run their own levies - as well as the Spokane Public Schools district would adopt the reforms. It would not change the way other local governments within city limits, like Spokane County, calculate tax bills.

And it remains unclear whether the Legislature will allow the pilot to commence. There was little traction during the last session - Klitzke has previously noted that lawmakers and state officials tend to come into those discussions confused about how the policy works - though the Center for Land Economics' Greg Miller, who authored Wednesday's report, believes 2027 may be the year it moves forward.

He pointed to recent successes in Virginia and Kentucky, whose Legislatures both passed laws allowing some of their larger cities to try a split-rate tax system, overcoming a veto in Kentucky.

"We're seeing significant momentum," Miller said.

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This story was originally published June 4, 2026 at 8:16 AM.