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January 2, 2010

Property tax and assessments: Your thoughts

There's been more chatter about property taxes, in the comments here and elsewhere, since the state sent out notices to the one-third of homeowners whose properties were reassessed. Here's a taste:

Adam Meister, Reservoir Hill activist and blogger, is a fan of the "constant yield tax rate" -- the rate your local jurisdiction would have to charge to bring in exactly as much money next fiscal year as it's getting from property taxes now. When a local government leaves the rate alone, it typically gets more money thanks to rising assessment values. But as Meister notes, assessment values have been falling:

It is theoretically possible that in 2011 the city may be faced with a situation where they will have to RAISE property taxes to make up for a decrease in assessments. It is highly likely that such a situation will occur in 2012.  ...

This is why we must cut government programs, fire government workers, and lower the property tax rate to the CYTR [constant yield tax rate] in 2010. If we manage our expenses correctly now, then lower assessment will not be a major issue in the future.

One interesting question -- and I don't know the answer to it -- is what percentage of residents with lowered assessments will still get annual tax-bill increases for some years to come, courtesy of the homestead tax credit.

As I've noted, and as columnist Jay Hancock spelled out, some number of residents are paying taxes on a lesser amount than even their soon-to-be reduced assessment value. That's because the homestead credit limits the assessment increase owner-occupiers pay taxes on in any one year. (In Baltimore, the cap is 4 percent.)

A Wonk reader named John commented here recently that the whole assessment and taxation system seems unfair to him:

Income tax is based on income, sales tax based on what you buy. Property tax is based on some bureaucrat's made-up assessment. It is a tax that has nothing to do with the income and ability of the person who must pay it. ... Property taxes should not change unless the property is changed or is sold.

Maryland assessors would of course argue that they're not making up numbers from whole cloth, they're comparing sales of nearby homes. But John's main point is one that others have made as well, namely: Why not just tax properties on their actual sale price?

California has a system that's sort of a cross between that idea and what Maryland currently does with its homestead tax credit. California begins taxing a homeowner at his or her property's "fair market value" at the time of purchase and then increases that amount every year to try to account for inflation -- but no more than 2 percent. In November the state announced a first-ever decrease (link opens a PDF).

Most systems strike some as unfair. Whenever you protect longer-term homeowners from increases, for instance, newer buyers pick up more of the slack (or rather taxes). Any suggestions for a fair-for-all system?

BigDragon, meanwhile, has a can-you-believe-it tale to share since his move from Pennsylvania into newly built digs in the region:

I got a property assessment notice in the mail just yesterday. It went up! They were just taxing the land, but now they claim someone built a townhouse here. I guess I don't have tall enough bushes outside! Darn, that always worked in Pennsylvania.
Posted by Jamie Smith Hopkins at 7:00 AM | | Comments (16)
Categories: Homestead Property Tax Credit, Property taxes
        

Comments

Do you actually believe an owner is someone who must pay another for what belongs to them? This is precisely what property tax makes you, yet we still call people subject to this tax homeowners. Of course this is an absurd contradiction and outrageous lie that should be obvious to every one (especially those in our highly educated media, you did take logic in college, didn’t you???) so why do you persist in this lie?

Property tax PROHIBITS home ownership. There are no homeowners!! In America you can own your pants and shirt but no one is allowed to own their home.

For society to evolve it must move in the direction of individual freedom and liberty.
You would think in a modern industrial society governments would have done away with the medieval practice of throwing people out of their homes if they are unable to pay the authorities. The fact that governments still practice this primitive, inhumane and immoral method of collecting revenue shows how incapable they are of evolving.

At least medieval serfs could pay with chickens, some other farm product or manual labor; we modern day serfs are forced to pay with cash. From a sociological stand point we are stuck in the Middle Ages and the reason is property tax. If it were not for science, technology and cheap energy this would be obvious. Quit calling people homeowners its an outrageous lie!!!

It might be worth trying to specify *why* the state taxes property. My understanding is that we pay property taxes TO the state because the state, in an ideal world, is doing all sorts of things to protect and increase the value of our property, which is an asset. Therefore, since the state's services and infrastructure and all the rest help my property hold and increase its value over time, it is fair for me to have to pay the state a tax to help them fund all the things they do. And one can argue that when property values go up, the state has to do even more to preserve those values.

I'm not at all unsympathetic to wonk reader "John's" comments, but I think he might be missing this broader point. If the state puts in a light rail line near my neighborhood, and then my neighbor sells her home for an increased value, that's a GOOD indication that my home has gone up in value as well. It also seems fair to me that those folks with $500K homes would pay a higher tax than those with $100K homes. And if we look around it's pretty clear that in most places in the country the wealthy neighborhoods DO have better public services and infrastructure.

But don't get me wrong: the Baltimore City tax of 2.2% (which I now pay) is WAY TOO HIGH and creates all sorts of bad incentives. So I'm not defending the system we have here - just trying to provide a broader context of the idea of having tax go up as property values go up.

Harumph: "This is why we must cut government programs, fire government workers, and lower the property tax rate to the CYTR [constant yield tax rate] in 2010. If we manage our expenses correctly now, then lower assessment will not be a major issue in the future."

If the factions advocating draconian cuts in social services had not also been advocating the same thing when coffers were flush... their arguments based on the current tax revenue levels might have more credibility and merit more consideration.

Now it is just another chapter of "starve the beast". We need better thinking than to give in to them.

A fixed assessment percentage rate for known number of years after purchase (5yrs?) with the OPTION to increase that rate by X% for another known period (5yrs?), and so forth, multiplied against the fully agreed to purchase price. While fully half of all properties in most jurisdictions will change hand within ten years starting that process all over again we get to eliminate the assessment staffers as well.

Homeowners of long standing will get a benefit for their stability.

"It also seems fair to me that those folks with $500K homes would pay a higher tax than those with $100K homes. "

Why should people in Roland Park pay $12,000 per year when people in less expensive neighborhoods pay $2,400 per year? Why should they continue to subsidize others when they already (likely) pay higher income taxes as well?

A small percentage of tax payers--both federal, national, and local--foot the bill. Baltimore City seems to have decided on a militant form of redistribution of wealth ... so now they get nothing. I'd rather burn my money or shred it than keep people on welfare.

Two Things:
First, because of the Homestead Exemption, most people will see their tax bill unchanged. Increases are capped by the County and State. So anyone who has owned their home for 2 years or less, is much more likely to benefit from these reductions.

Second, States need money to run. Some have income taxes, some don't some have school taxes some don't. When you compare the total taxes from all the states, the totals seem to end up relatively close.

All taxes are just a contrivance to get money for the government. I pay tax on the equipment my business owns, but a non-business does not. Government needs to run, and that costs money. The trick is the perception of the taxed regarding the fairness of it all........

There will be some benefit to those who are selling their homes, when the buyers look at their potential tax liability, it will likely be a much smaller amount, making the home more affordable.

The reason the State taxes property, especially your home, is that it prohibits the individual from acquiring liberty and force every one into perpetual debt. By putting everyone into debt and forcing you to make money for the state the government has a reliable source of revenue and retains ownership of all the land. Every ones home becomes a government investment, and once the people accept this servitude we become motivated by greed and envy instead of being satisfied with what we have. This provides the fuel for the engine of slavery which will continually undermine all attempts for society to evolve.

The true value of the “ownership” of property is in the liberty it gives you, not in its potential to make money. My home is not an investment it is not for sale, and I resent the implication that anyone can even appraise the value of a home in monetary terms. It’s ludicrous to say that money which is created by the government can determine the value of the land that was made by God. To tax property based on this preposterous assumption destroys its true value. The true value of property is based on the mere fact that it is owned and that ownership of property givers you liberty.

You can’t tax ownership any more than you can make the earth flat by religious decree. Those that claim property tax is based on ownership are but members of the new “flat earth society”. Property tax is a knife in the heart of ownership, no matter how you justify it; you can’t bring ownership back from the dead.

It’s also absurd to say property tax is justified because of the protection government provides. All this does is make government into Organized Crime and organized crime into illegal government. How do you justify something by denying the people the essence of what you’re supposed to protect? It’s the governments confiscation of my home I fear not the other criminals.

Tax property if it is sold, tax property that it is specified as an investment. There are an endless number of alternatives to property tax as we know it, all of which would allow the true ownership of our homes and the acquisition of liberty. Why have we chosen the way that makes us into the servants of government?

"Why should people in Roland Park pay $12,000 per year when people in less expensive neighborhoods pay $2,400 per year?"

I already answered that question: because the people in Roland Park have a half a million dollar asset, that would not be worth what it's worth if the City didn't provide streets, stop lights, police officers, fire departments, and all the rest to protect the value of that asset. They don't "subsidize others"; the state subsidizes everybody, but its subsidies to wealthier Americans are very important for them to STAY wealthy.

As for your preference for "burning money" rather than letting it go to "welfare" programs.

1. I'm assuming you don't mean middle class welfare like the mortgage interest deduction, pre-tax 401k deductions and all the rest that mean wealthier Americans actually have a lower TAX BURDEN (% of their income that they pay in taxes) than poorer Americans.

2. I'm guessing that with your welfare reference you DO mean programs like food stamps, but I hope you also realize that 1 in every 9 Americans are on food stamps at the moment, so if you COULD get your way and defund all those programs, be prepared to have 12% of the population literally starving.

I feel that the taxes are astronomical and need to be lowered according to income especially during this extremely tight economical time. This is a area of good possible support funding by the government. It holds a wonderful return in continuing habitats for future funding to the government instead of tearing down abandoned homes. Many city services, like the street sweeping is totally unneccessary.

taxation without representation lives and breathes in modern day Amerika

People forget that in caveman times, it was not possible to be obscenely rich. You would've been murdered and robbed. Only in a society with a rule of law (not Darwinian animalism) can one be "free to pursue his/her happiness". It's absurd to think that you can have freedom and live in isolation in the woods.

With the rule of law, ones enforcing the law need resources. That's the purpose taxation. In America, we can live anywhere we want, we are free to choose jurisdictions where we feel that provide the best of everything. It just so happens that in addition to enforcing the law, we also want our kids to be educated, have utilities, and have nice parks. But these things are not free. You're paying for it by your taxes.

That being said, Baltimore city does not provide the level of "service" that justifies its taxation level. That's problem of management. So if you choose to live in Baltimore, then work towards better management. In the next election, instead of buying into party propaganda, listen to what the candidates say, decide for yourself if it's good for your bottom line. Select the best managers not in the form of someone that tell you what you want to hear, but someone that can get things done.

""Why should people in Roland Park pay $12,000 per year when people in less expensive neighborhoods pay $2,400 per year?"

I already answered that question: because the people in Roland Park have a half a million dollar asset, that would not be worth what it's worth if the City didn't provide streets, stop lights, police officers, fire departments, and all the rest to protect the value of that asset"

Do you think it is fair for them to pay 5 times as much?

LD, fair is the exactly correct word.

If they want to pay less in RE taxes all they have to do is move on down to lower Charles Village.

Defending Property Rights

The property tax has got to be the most immoral tax on earth.

How can a vital essential to life--particularly in cold northern climates--be considered taxable when food and some clothing is not?

The logic of taxing the home or primary domicile is one of 'they got you by the balls' and the homeowner has no option NOT to pay, otherwise he faces a cabal of armed storm troopers bent on murdering him if he resists and chooses to protect his home for him and his family.
In effect, the property tax criminalizes low incomes and creates legalized slavery.

The right to life is the source of all rights—and the right to property is their only implementation. Without property rights, no other rights are possible. Since man has to sustain his life by his own effort, the man who has no right to the product of his effort has no means to sustain his life. The man who produces while others dispose of his product, is a slave.

Bear in mind that the right to property is a right to action, like all the others: it is not the right to an object, but to the action and the consequences of producing or earning that object. It is not a guarantee that a man will earn any property, but only a guarantee that he will own it if he earns it. It is the right to gain, to keep, to use and to dispose of material values.

["Man's Rights," The Virtue of Selfishness]

It is only on the basis of property rights that the sphere and application of individual rights can be defined in any given social situation. Without property rights, there is no way to solve or to avoid a hopeless chaos of clashing views, interests, demands, desires, and whims.
["The Cashing-In: The Student 'Rebellion,'" Capitalism: The Unknown Ideal]

The source of property rights is the law of causality. All property and all forms of wealth are produced by man's mind and labor. As you cannot have effects without causes, so you cannot have wealth without its source: without intelligence. You cannot force intelligence to work: those who're able to think, will not work under compulsion; those who will, won't produce much more than the price of the whip needed to keep them enslaved.
["This Is John Galt Speaking," Atlas Shrugged]


The above statements form the foundation of a free nation. Without property rights, there IS no freedom.
The property tax is partly based on stale, Marxist class-envy politics. Karl Marx and Friedrich Engels were so eager to destroy the successful upper and middle-class "bourgeoisie." Ever since the passage of the 16th Amendment, which granted the federal government the power to directly confiscate our income -- our property -- we can own nothing to which the government cannot also lay claim, at least in part. If there is a valid argument justifying taxes levied on voluntary transactions, there is absolutely no justification for a tax that is nothing less than State-sponsored theft.

Though I would be incarcerated -- and rightly so -- for walking next door and taking money out of my neighbor's wallet without his permission, the government makes this very act routine.

The property tax is immoral and oppressive and deprives citizens of their necessities of warmth and shelter.
It is with these facts that I propose that no law enforcement agent take part in the aiding and abetting of theft of homes from people who owe no voluntary mortgage, but who may be unable, due to the expanding greed of local government, to pay the extortionist and confiscatory taxes. No moral law enforcement officer should obey an order to remove an otherwise moral and law-abiding family from their rightfully owned home for inability to pay property taxes. This should be a fundamental part of the Oath Keeper’s pledge. Property and security in one’s home is a FUNDAMENTAL American right.

Mark,

Who is going to provide our city with essential services (police, fire, etc.) if we do away with property taxes altogether? Santa Claus?

For MCG

To begin with a service is something voluntarily contracted, like with the power company or pizza hut. The use of property tax, which is extortion, to pay for (police, fire, etc) makes what they provide an extortionary benefit and not a service. Threatening to murder (by throwing you and your family out of your home into an hostile environment) if you don’t pay for someone’s employment and lavish retirement benefits is nothing less than a criminal syndicate collecting extortion. Property tax makes government into organized crime and other organized crime becomes but illegal government. With property tax government is denying the people the essence of what it is supposed to protect.

I take it from your comments you feel the extortionary benefits of property tax are justified. No doubt if you would have been alive during the discussions on slavery you would have been on the side of slave owners, issuing statements like: “If we free the slaves who will pick the cotton? Santa Claus? Slavery was abolished and somehow the cotton got picked and likewise if we abolished property tax, somehow government would continue to function.

Slavery occurs because, someone, government, or other criminal organization is capable of forcing you to make payments to them because of what belongs to you. All slavery is based on the belief you can tax ownership, although in fact this prohibits ownership. In every case this boils down to some form of property tax or extortion. The worse case is when they prohibit the ownership of our bodies and our tax must be paid with our day to day labor. The next worse case is when they prohibit the ownership of our homes. We have moved past the worst case scenario but homestead property tax clearly makes the ownership of our homes impossible.

When Jefferson originally drafted the Declaration of Independence it stated that men had certain unalienable rights, among which were life, liberty and property. The reason "property" was changed to "the pursuit of happiness" is that those states opposed to slavery did not want to give the states that allowed slavery an argument that the Constitution gave them the right to hold slaves, which were considered to be property. Unfortunately the inability of our founding fathers to abolish slavery and the resulting change of “property” to the “pursuit of happiness” in the Declaration of Independence has help lead to the enslaving of our entire society with property tax.

Jamie --
This might be a topic for a different thread, but thought I would start by asking the question here:
How, if at all, should the new tax assessment values affect a buyer's offering price on a home for sale? (In Howard County, I am often seeing list prices over $100K higher than the 2010 tax assessed value.)

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About Jamie Smith Hopkins
Jamie Smith Hopkins, a Baltimore Sun reporter since 1999, writes about the regional economy. Her reporting on the housing market has won national and local awards. Hopkins is a Columbia native and has lived in Maryland all her life, save for 10 months spent covering schools in Ames, Iowa.
She trained to become a wonk by spending large chunks of time as a geek and an insufferable know-it-all.
Baltimore Sun articles by Jamie
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