If you drive a car-car I'll tax the streetI posted earlier this week declaring that I was pleased that I-747 was struck down because capping property taxes at 1% seemed "ridiculously low." I was challenged on this and an interesting question came about. What did I-747 try to accomplish exactly? It appears that I-747 sought to keep regular property taxes from going up more than 1%. So if I paid $10,000 in property taxes in 2005, I-747 would make sure I would pay no more than $10,100 the next year. Ridiculously low. I maintain my position on that.
If you try to sit-sit I'll tax your seat
If you get too cold I'll tax the heat
If you take a walk I'll tax your feet
But after that, the state can still ask for "an additional dollar amount calculated by multiplying the increase in assessed value in that district resulting from new construction, improvements to property, [etc]." So if I paid $10,000 in property taxes in 2005, the state could add 1% plus count in all the added value on my house. I agree that this is a bad deal, especially with double digit housing price increases.
But I still don't like the idea of an initiative that limits assessed value to combat this problem. A cap on assessed value means that if houses increase in value 10% every year, while their assessed value only goes up 5% (let's say), a disconnect begins to happen. A house could sell for $1,000,000, but it's only "assessed" at $600,000. Now someone rich enough to afford a million dollar home is paying taxes on the property as if it were about half that. You could probably throw in an amendment that taxes re-adjust with every sale, but then no one would want to sell.
So what if property taxes were capped at 2% annually (slightly below the annual cost of living adjustment); and rather than creating an initiative that limits assessed value, why don't we allow assessed value to be factored in to property taxes at the time of a sale or every five years? (This way there is no incentive to keep a home just to avoid paying higher taxes when you purchase a new home). If we adjust property taxes to assessed value every five years, property owners won't face dramatic upswings in their assessed value every year or with every big housing price book. Their taxes go up 2% a year, and then re-set after five years before going up 2% a year again.
So if I paid $10,000 in 2005 on my house, I'd pay $10,200 the next year, $10,404 in 2007, $10,612 in 2008, $10,824 in 2009, and $11,040 in 2010. Let's say that over that 5 year period my house went up 30% in value. So in 2011, I would pay $13,000 in taxes (the original value in 2005 x 130%). It's 17% more than the year before, but the jump only hit me once instead of with every housing boom; presumably my own income has gone up, too; and if I'm on a fixed income I've built equity in the house in those 5 years that I could borrow against. Plus I know that the next year (2012) I owe just $260 more ($13,260), and in 2013 it will be $13,525.
I don't know how this would all actually work, but I think it would be a pretty fair way to keep taxes out of the chaos of the housing market, protecting owners from big booms, and also making sure that cities are getting their relative share of the wealth being re-distributed with every home sale.
If you wanted to make the idea even safer, you could make your 5 year adjustment based on the average of the assessed value over the 5 year period, which would keep each increase a little less painful.
Thoughts anyone? I especially want to hear from you if you know more about property taxes than I do. Mine are capped since I took advantage of the 10 year property tax abatement for living in downtown Tacoma. Come 2013 some one new is going to have to pay the piper because I'm not staying around for that tax increase. :)
Posts
2 comments:
*laugh*
Okay, but what if you really don't want to sell your home? My great, great grandparents homesteaded Fox Island and my great grandparents built the house my parents live in now, but Fox Island is becoming posh and property values are skyrocketing.
Our income can't possibly keep up with that, and if you borrow against the equity in your home you don't really own the home, the bank does.
Your plan wouldn't really solve the problem, it'd just put it off for a few years. Instead of getting hit with a large increase each year, homeowners would get hit with a gigantic increase every five years.
The attitude you've got toward your own cap is telling: enjoy it while you've got it then split before you've got to deal with the increase. Current property tax law encourages that sort of behavior.
I'd rather have stable communities. I want people to be able to buy a home when they're young and live there their whole life if they so choose. I don't want people forced to move because they can't afford to own their own homes any more.
There's got to be middle way. Perhaps an inflation-plus increase in the property value assessment--adjust the previous value of the home for inflation and then assess upward by a maximum of 2%. That way the real value of the property tax revenue won't fall.
Nathan,
I'd vote for your plan any day, if the state moved from our sales tax system to income tax. This would shift a lot of the tax burden from people with fixed incomes, who are unfairly taxed with the sales tax system.
I take your point on the problem of areas like Fox Island gentrifying. I know less about rural gentrification in a place like Fox Island; I might propose a tax exemption for property that hasn't been sold in 50 or 100 years. And the cap would help, certainly. A big help for suburban communities would be annexation, my hot button issue.
The less suburban communities are able to form their own municipal governments, the less they will be able to limit apartments and low income units, thus continuing to promote gentrification. I appreciate what's happening in my neighborhood, where low income homes are across the street from luxury condos. This keeps an area from gentrifying too much; I'd like to see more of it in Tacoma's suburbs.
Post a Comment