Lower-Income Americans Get Cheated on Property Taxes
nytimes.com
nytimes.com
From this perspective, there are massive inequities in tax cost:benefit across asset classes. Some of the most expensive assets pay nothing, and the cheapest pay the most. But I don’t think it goes in the direction the author wants it to.
[1] https://www.nobelprize.org/prizes/economic-sciences/1991/pre...
At least in Illinois, the way property taxes work is, you add up the cost of all the functions of local government. You offset those costs with non-tax revenue, like permit fees. Whatever's left is the levy, and it's divided through the assessed value of all the property in the area to work out the tax rate.
Which means that as areas become economically troubled, their tax rates can go up; the same basic services need to be payed more and more from property taxes on residents because there's less and less permit revenue from investment. As property taxes increase, the value of homes drops; people have a fixed amount they can spend on housing. Fewer residents, less investment, vicious cycle.
In Illinois’ case, the taxes especially go up in an economically distressed area because they local and state governments are heavily indebted so there’s less room for local governments to cut expenses. As I understand they try to remedy this by increasing various sales taxes and tried for marginal income tax rates last year, but didn’t succeed.
Since then they've lobbied to slash California state pensions on the basis of balancing the budget. If Grandma was a teacher she can go f*k herself, apparently.
But honestly if you're happy living in California ignorance is bliss on this one
Heck, our whole system is set up this way. For example why is it even taken as some given that property taxes need to continually go up in the first place?! The setup has been made big enough such that most people won't work to understand the whole thing to critique it, instead giving up to focus on the individual actors they most strongly perceive. The overall situation becomes "nobody's fault" and just the way things are - oppression by construction while us plebs fight over scraps.
How do you propose governments address rising materials and labor costs? It’s obvious some geographical areas are more desirable than others, causing prices to rise. How could a government pay employees sufficiently so that employees can then pay for increased land/rent costs without raising taxes?
I won't convince anyone about the larger topic in a comment thread, so I'll just point out that we're living in the most productive time in history and yet we're still churning as hard as ever.
This how we have private golf courses in the middle of Los Angeles and dilapidated shacks adjacent to Google's global HQ.
I don't know quite how to analyze this data. But an average is an oversimplification of a series of years during which the properties' values were changing. What if they started at 200k at the beginning and then eventually sold for 100k at the end? Not necessarily unreasonable or unfair that they were assessed higher than 100k in that case. And because of differences among the properties it might at least be sane to do a median of each property's average-over-years.
NYT is probably right that there's an issue but '07 to '16 is probably not the best time period to sample.
It's not a goal, it's a secondary consequence that happens often enough to be commented upon.
>>If the neighborhood is indeed more desirable, wouldn’t the higher value of the houses themselves (which would also result in higher prop taxes anyway) serve the same function?
Yes and no. Some people can save enough money to purchase a house from a middle class job or making it big in short-term/seasonal high-risk, high-reward activities (e.g. professional gambling, oil drilling, undersea welding, etc.) if there is only a large (but not untenable) one-time cost. However a property tax is a subscription fee on the basis of an invented metric that is as elastic as what the tax assessor can get away with. Paying thousands of dollars every year for the "privilege" of living in your own property would make doing the kinds of jobs that were adequate for purchaser, insufficient or unsustainable for a resident. The result, at best, is being house rich and cash poor.
>>In fact, the artificially high property tax must have a depressive effect on the house values in that neighborhood.
Sometimes they do, sometimes they don't. High property taxes can be seen as a form of economic signaling in areas like Manhattan or Beverly Hills. They can also be a result of local politics run amok. The former creates self-sustaining bubbles that will take a long time to (but will eventually) burst. The second will cause residential flight to lower cost areas as is currently happening with San Franciscans moving to Austin at first sight of a downturn.
>>I can’t think of why relatively well off people would voluntarily move into such a neighborhood. If anything, the high tax rate sounds punitive toward those who live there.
It's not that people want to move to higher property tax areas because they want higher taxes. These areas tend to be much safer and family-friendly, have better schools and amenities, are (in some cases) closer to one's workplace, and look aesthetically pleasing. A property tax, just like purchase price, is one factor in the equation of "is it worth it?". It's just not the factor, punitiveness notwithstanding.
This source of the author's gall is completely unsupported here. There is no data on what reassessment costs. Maybe leaving sticky assessments in place and adding a universal exemption would work better, like the federal income tax.
Of course, taxing illiquid wealth which a body relies on for shelter is itself problematic, but the author doesn't seem to consider that.
HELOC is a loan and doesn't have anything to do with how liquid the asset is.
Banks have lending limits. You're assuming the $2mm house isn't leveraged to begin with.
I’m sure you can find some obscure edge case somewhere but by and large people that own things that are worth a lot of money are rich and don’t especially need our sympathy. Let’s save that for all the actual poor people out there that don’t own houses, much less multi-million dollar houses.