1. Right now around the country your home is taxed based on a percentage of what the value or home is worth based on what the county assessor thinks it is worth. As an example lets say your local county government has a property tax of 1% and your home was assessed at $300k. You would pay $300k x 1%= $3000 a year in property taxes.
2. This is a great system for the county when property values are going up because as your property value goes up the amount of money you pay in property taxes goes up. The county government does not look bad at all because they did not have to raise the percent to bring in more money, it was the market that did it.
3. For the most part people do not complain about paying a little more in property taxes because they have been told that the value of the property has gone up. Everybody likes hearing this news. Even to hear that it went up 10% in value in one year is pretty amazing. Using our $300k example would result in a new value of $330k and new property taxes of $3300. Not bad knowing that you could sell the house for $30k more and only had to shell out $300 more a year in taxes. Hopefully you played it safe and took out a 30 year fixed mortgage and are not worrying about a adjustable rate mortgage payment going up.
4. Never had property values gone up so fast as when they did during the refi boom of 2002-2006. Homes prices around the country went up anywhere from 30%-200%. This was just ridiculous. In a lot of cases new cities were created because of all of the home building going on. This resulted in a lot of new revenue for these cities to bring in to fund their police and fire departments. Let alone the Parks & Recreation, new government and school buildings and more spending.
5. This system seemed to be good for everybody because with the rising cost of real estate most people still felt ahead. What was really happening in the background was a real let down. Cities saw all of this new revenue coming in and decided to start investing in new buildings and spending on frivolous things just because they had the money.
6. Fast foward to the present and now home prices are dropping around 12% every quarter. This is erasing any or all of the gains each home owner has had in the appreciation of their real estate investments. Never mind the people that bought their home in the past two years because unless they put a large down payment on their home they are probably upside down on their mortgage. There has also been the matter of all of these homes going into foreclosure. With the homes being foreclosed upon the county government is losing out on the revenue it gets from the property taxes it collected. Now the county is in a real bind because they assumed that property values were going to keep on rising just like they were doing over the recorded history of real estate prices. Since they were spending all of the extra surplus money they received to go out and buy stuff many county governments are now in debt and have no way to pay it back unless they make major changes. These major changes are doing things like laying off teachers, firefighters, police officers, county assessors (bad karma), road repair workers, etc.
7. Now all of these home owners that were not complaining about paying a little more in taxes because of the previous values of their homes are trying to fight the county and city governments because the county assessor is not lowering what they think your property is worth. Even though you can go up and down your street and see homes selling for far more less than what you were assessed at. What a city assessor and an appraiser look at are similar and different in a number of ways. The appraiser is getting paid either way. The county assessor needs the property tax revenue to stay the same so he can still have his job.
8. Now the county needs to raise more revenue than what it was bringing in during the refi boom to make up for all of the homes in foreclosure and rising prices on things like gasoline to fuel all of the government vehicles, pay salaries, utility bills, etc. Would you believe that some counties are trying to raise property taxes on your declining property value? There argument is that you do want Police and Fire Departments, right? You do want a school around the corner for your kids, right? You want your kids to get picked up by a bus so you do not have to be late driving your kid to school, right? Looks like there is nothing you can do but play by the rules that do nothing but stick it to you. Many people were stuck in the whole taking cash out of the equity of the inflated value of their home to pay thinks and this included their property taxes and home owners insurance. Some sought out a home equity line of credit to help pay the increases in their tax bill.
9. Think about this for a second. How about instead of charging people what their homes are being assessed at, the county charges them by how much land you own? How many times have you seen homes that share a similar lay out and plot of land but one home owner really takes care of their home and wants to remodel their home with the newest kitchen cabinets, granite counter tops, etc? In the counties eyes the house that is better taken care of should pay more than the house that does not have all of the extras. But isn’t that really a shame. The people that do not put extra money in their house for new appliances or a new kitchen or bathroom should not be penalized. Its probably somebodys grandparents that have lived a certain way for the past 45 years and have not upgraded anything in the past 20 years. Their reason for it is if it ain’t broken don’t fix it. The house is probably clean and spotless, but just old in style. But they both own the same land. Do not penalize the people that upgrade and make them pay more just because. They should be getting the money they put into it when they sell the house for more than grandma and grandpa next door.
10. What needs to be done is the county governments around the country need to change the way they tax their residents. How it should be done is if you own a two acre parcel of land and your neighbor owns a one acre parcel than the person with two acres should pay twice as much. What needs to be done is the county government needs to actually follow a budget and say this is the amount of money we will need to provide the services we need. Each property owner will pay their property taxes based on how much land they own. Take the amount needed for the budget to be taken care of and divide it by the amount of acres the city owns. Then start breaking it down by .25 acre, .5 acre, 1 acre lots, and so on and so on. This way the value of the home is no longer a determination for the city to make. By doing this all county assessors would be let go of course, but this would free up one county job and save the tax payers money. I’m sure there are more jobs related to the assessor position but this is just a start. This will eliminate property owners having to go to a tax tribunal to argue that they should not be paying as much property taxes on their house because of the lowering values. I watched my dad had to go before the City of Eastpointe (in Michigan) Tax Tribunal to argue such a point on a couple rental properties he owns. He was able to get the taxes lowered by at least $100 on two of the three properties and none for the other. Eventhough the proeprty values declined in value over $7500 each on homes that are probably worth around $105k. That is around a 7% drop in one year. If the city would just base the taxes on what they need to make the budget work based on the percent of land you own in the city they would save themselves a lot of time and effort to do other things like I don’t know, find ways to lower taxes.