Over at Zero Hedge there’s a post that points out something interesting and dismaying. Although property values for houses have fallen 30% since their peak in 2006, property taxes haven’t fallen along with them:
You might think that with home prices off by 30% or more since the housing/credit bubble popped in 2006, property taxes would have declined by a similar percentage. But you’d be wrong: they’ve gone up. As if the massive reduction in home equity wasn’t enough of a blow to the Middle Class, they’re also paying higher property taxes.
Though house prices have declined roughly 30% nationally since the 2006 peak of the housing bubble, property taxes have continued their decade-long rise, jumping $45 billion (over 10%) since 2008.
Read it and weep. State, country, and city governments are responding to the economic downturn very much as they did during the Depression of the 1930s. When housing values declined rather than reduce property taxes (and decrease their revenues) they maintained or even increased them. This resulted in more defaults and foreclosures than would otherwise occurred.
For many people much of their wealth is tied up in their homes. A property tax based on valuation is in fact a wealth tax. That stings particularly when it’s a levy of taxes on wealth that may never be realized.
You may recall that my mom died last year. Over the course of the year I’ve had her house appraised, found that it was worth less than the county thought it was, and also determined that it was mischaracterized on the property rolls (fewer bedrooms than claims, less square footage than claimed, story and a half rather than two stories). I appealed the property tax assessment. My appeal was denied (at least the taxes weren’t increased). I put out a few feelers and determined that the county was awarding very, very few property tax appeals, if any.
Could this be a time lag issue?
I know I’m in crazy California, but here is my situation: I bought my condo years ago, and prices have been rising, but prop13 limits the rate at which appraised value increases. So while I pay more each year, my appraised value is still have the (crashed) current market value.
Surely (a) other states have controls on rates of increase, but (b) even if they don’t they probably hadn’t been keeping up with the bull market in real estate.
(While post, say, 2005 buyers are probably applying for re-assessment, earlier buyers may know they are still “getting a good deal.”)
(and of course to the extent that California weights these numbers, prop13 has a direct effect.)
I agree with John’s comment — there’s likely nothing nefarious going on here, just that property taxes were artificially low throughout the bubble due to limits on tax increases.
My house in Oregon has increased in value over the last 10 years from about $200,000 to $450,000. But the Oregon constitution limits the increase in taxable value to 3% per year. So even now I’m only being taxed on about $270K of value, instead of the (alleged) market value of $450,000.
Very few states have limits as California does. California, Oregon, Massachusetts. That’s about it. Here in Illinois real estate is appraised triennially (every three years) for tax purposes and in general taxes go up automatically. There are some restriction on how fast rates can rise but not taxes.
I did not say that something nefarious was going on. I merely think that it will prove to be unfortunate.
We have been in our house for about 20 years. It has never been appraised since our initial purchase. The rate has increased.
Steve
At least we can take some small comfort in the knowledge that jp, recognizing his tax advantage, and always vigilant about tax fairness and observant about our undertaxation – and being a model citizen – cuts an extra check every year to make up for his property tax underpayment. Right? Right??
Maybe Michael Reynolds has a similarly undervalued property. No matter. If he does I’m sure he, too, cuts that extra check.
Since 1995 Florida has also imposed limits on increases to property taxes.
Here’s the link for the info mentioned above.
http://dor.myflorida.com/dor/property/taxpayers/#4
The filter seems to have dumped my comment from last night with a live URL.
Here’s data on how the above limitations have impacted the annual increase.
Sorry for the lousy formating but these comment sections really don’t like charts. Here’s the URL for that
http://dor.myflorida.com/dor/property/resources/limitations.html
Incidentally, my wife and I went shopping for houses in Orlando in the summer of 2005. We quit when we realized that house we liked best had been going up at a annual growth rate of 24.8% for the previous five years. There was nothing particularly special about it.
That was pretty obviously an unsustainable pattern. You will note that the increase in property taxes was much lower than 24.8% for those years. That at least explains why our government down here hasn’t been completely crippled by the bursting of the property bubble.
Also note the growth in rates over the last four years, as the bubble burst. It occurs to me NOW that such limits on property tax increases give the government some defense against bubbles as well, but only a little. Those caps above only apply to primary residences, and they get bumped to “fair market” value at resale. Given the number of speculators and the amount of property flipping going on in Florida in the decade before the collapse, we must have seen huge gains in property taxes.
When we were looking for houses we came across at least one of the speculators. A young woman from England was trying to unload some of the houses she had bought due to an impending divorce. I forget how many she said she had owned at the peak, but I bleieved she owned about 8 to 10 when we met her. Flipping houses was the ONLY source of income she had, and at most she was 35. (I’d peg her age closer to 30 myself.)
As for how easy houses wewre flipped in that market, there was a house down the street from us. It took very heavy damage from the hurricanes in 2004. Not only did the entire roof get replaced, but they had to gut the interior and rebuild that as well. Within a year of Charley hitting us in 2004 the house had been flipped three times! At no time did anyone actually live in the house.
And of course a lot of people aren’t paying property taxes any more because they’ve lost their homes. Something like 16% of the homes in Osceola County are supposed to be sitting empty now. Thank God for the recovery….
What a brilliant argument from Drew!
Moderates should give up all tax advantages, because they are not libertarian nutsos!
Moderates should give up all tax advantages, because they are not libertarian nutsos!
Well, if you think the tax rates you’re paying should be higher, why don’t you pay a higher rate? I’m not aware of any government turning down free money.
I’ll tell you what, if I could pay off the state and national debts, by myself, I’d do it.
Given that I can’t, it’s both logically flawed and infantile to demand that I try.
(See also “the free rider problem.”)
Well, I’m one that thinks taxes generally, including mine, should go up. I’m more concerned about getting value for money though.
We might be OK with taxes being “different,” if that is we could manage to make spending different as well.
(Merry Christmas!)
Jesus H Christ, jp. It was a wisecrack. A joke. Get a life.
I’ll tell you what, if I could pay off the state and national debts, by myself, I’d do it.
Given that I can’t, it’s both logically flawed and infantile to demand that I try.
I’m not asking you to pay off the state and national debt. I’m suggesting that if you think YOUR individual taxes are too low that you pay what you think is a fair rate. Why wait for the government to fix the problem at your level when you can do so yourself?
Jesus H Christ, jp. It was a wisecrack. A joke. Get a life.
Damn it Drew, don’t spoil my fun!
I like commentors pitching in with their local experience. I sometimes wonder if things I’m reading or writing are lost in translation with different state and local rules and expectations.
Stay away from jokes that match “starter arguments” by young and foolish conservatives.
You don’t want “can he be this stupid?” to be the question foremost in the mind of your reader.
John, after telling me that you spent thousands of dollars to avoid being stuck for a quarter per gallon on gasoline I have not bothered to worry about your opinion of my intellect. Actually I hadn’t before that, either.
And I’d be careful casting the “can he be this stupid” argument. For one thing, are you really assuming that Drew and I are using starter arguments for conservatives? You couldn’t spot an obvious joke. Please don’t ask anyone else to limit themselves because you can’t keep up.
It is totally inaccurate to say that I paid thousands to save a quarter per gallon.
But perhaps you are in deep enough a hole that you have to be inaccurate, at this point.
As undeserving as you are ;-), I’ll share some of the history with you.
Out here in California gas prices were a buck and change for a long time. Looking back, prices ranged between a buck and a buck seventy-five from 1995 to 2003. That was when they broke $2 for the first time. They were heading for $3 in 2005 when I bought my Prius.
So my logic was “if not Peak Oil then at least Global Warming. if not Global Warming then at least I’ll save a few bucks.”
Really, saving a few bucks was the third justification. For a while it looked pretty good. Gas broke $4 in 2008, and actually peaked in Orange County at $4.58 per gallon.
At that point it was pretty easy for an SUV to have a $100 fill-up. Of course, $100 isn’t what it used to be. That might be the real key.
Prius drivers tend to be older, and part of their brain is amazed that you can put that kind of money (dollars, money illusion) into a gas tank in one shot. I mean, I remember when paying 30 cents a gallon was too much.
Now, going forward, I think the amazing thing is how well people have accepted $3 gas as “the price.” IMO all it takes is an economic recovery to put us back at $4.
(Gas prices are still a buck above where they were when I bought the car, confirming my price expectation, if not my social expectation that the rest of us were ready for a happy, efficient, future.)
In Oklahoma, the taxable value of real property cannot by law increase more than 5 percent a year, unless there is a change in ownership or sufficient improvement to warrant another assessment. (Properties must be assessed yearly.)
Tax rates, on the other hand, are not subject to the cap law.
(My own tax bill went up this year, albeit by less than $20.)