Millions of homeowners paying property taxes based on home value before bubble burst

[Amerigo Vespucci]

Overtaxed homeowners start to fight back
Millions paying property taxes based on value of home before bubble burst

http://www.msnbc.msn.com/id/36193041/ns/business-real_estate/

Now that the housing bubble has burst, up to 60 percent of the nation's taxable property may be overassessed, meaning owners are paying thousands of dollars more in taxes than they need to, experts say.

That is leading to a flood of appeals in many markets from homeowners eager to cut their taxes and speed the process of aligning tax valuations with reality.

While home prices have fallen by 30 percent on average since their 2007 peak, according to the Case-Shiller Home Price Index, many counties only reassess every three to five years and have little incentive to move faster considering how important property taxes are to funding local government operations.

So homeowners are increasingly appealing the valuations, although the number is still a tiny fraction of the total — 2 to 4 percent, according to the National Taxpayers Union.

[Lance_Boyle]

1. Regardless of what these people think their houses are worth,

the funding needs of the municipality collecting those taxes likely has not changed. Municipalities either need to reassess values and hike tax rates accordingly, or leave things as they are with inflated values and misleadingly low rates. The city/town doesn't magically need less cops or firefighters because some people paid too much for their houses.

[DJ13]

4. That would mean effectively an increase in the tax rate, which needs a vote

Doesnt it?

[Lance_Boyle]

8. depends on municipality

If it's hard to raise the rate, they'll stick with artificially high values and artificially low rates. If it's simple to raise rates, they might opt for that route. But one way or the other they will make sure that the $$$ coming in stays the same. Or lay off lots of police and firefighters.

[Zenlitened]

21. Yep. Trying to lower property taxes is like trying to empty half a bathtub...

... by pouring water taken out of one half into the other.

[John Q. Citizen]

5. I'm thinking that some municipalities probably paid too much for their fire and police depts.

Perhaps they need to be re-aligned to face reality?

If CA legalizes cannabis, that will cut the crime rate in half in the state, and they can lay off half the cops and the prison guards.

Then they will need less money for police. Almost magically.

[Lance_Boyle]

11. Municipalities would need new tax-collecting infrastructure to collect pot tax.

Most legalization schemes I've come across have taxation at the state level. Like tobacco and alcohol.

I'm not saying a city or town couldn't try it, but you seem to be conflating local and state government and taxation.

[John Q. Citizen]

15. In CA, prop 13 was passed by the State (initiative) and it only applies to property taxes.

And most states apportion much of the sales tax back to the general funds of the counties they come out of. Also, where there are sales taxes, there are often local sales taxes as well that go directly to cities and counties.

Oakland CA has proposed taxing medical marijuana locally, since MMJ is administered county by county in CA.

The crime rate will fall by at least 50% and since local cops (police/sheriffs) account for far more than 50% of pot arrests, that will mean that cities and counties will see their law enforcement costs slashed.

So even if they didn't get a dime of sales tax, they would still see a huge drop in overhead.

So, no, I'm not conflating local and state government and taxation.


Though, in fact, local and state government and taxation are quite intertwined in many ways.

For example, Here in MT the State (under the Repos) kept cutting their contributions to K-12 for about 12 years running. That resulted in huge increases in local property taxes to make up the difference.

Also, tobacco and alcohol are federally taxed, as well as taxed by states. And most states apportion some of that money back to local governments based on sales.

There is already sales tax collection infrastructure in place in all but 2 or 3 states, so no need to re-invent the wheel.

[county worker]

12. No, they cut services. Our budget is 6 million short for 10-11 fiscal year.

We are only one department in the county I work for. We cannot have a deficit by law. They will lay us off and cut our benefits next after they cut services to the needy.

[bunny planet]

19. sometimes it isn't that you paid too much for your house

I bought my house when it was very inexpensive. Now my town had a reassessment just before the housing bubble burst (they knew it was coming too and rushed it through before the pop) and I'm paying an increase based on an inflated value on my house that is no longer representative of what I could feasibly sell it for. Trying to hang in there, but NJ has already got such high property taxes not sure if we'd be able to sell our houses for any price if the property taxes go much higher. And now, thanks to Governor Chrispy Creme, we'll retain the same high property taxes but kill off our fine public schools, which is really all we had to show for exorbitant taxes. Of course I know we need to keep our police and firefighters, just needed to correct your last statement about having paid too much for our houses. Most people in my town did not do that, just got stuck with the inflated reassessments.

[DJ13]

2. Just by coincedence I paid our property tax this morning

And yes, its actually a few dollars HIGHER than it was last year.

The adjustments in valuation should be automatic instead of forcing people to appeal it themselves.

[theoldman]

3. In the Fort Worth area you can get the assessment reduced.

All you need to do is show the reduced value of houses in your area that were sold during the past year. Most people are too lazy to take the time to argue their case.

[Silent3]

6. My town lowered valuations, but raised the tax rate

It's what I had expected. In fact, as I expected, I ended up paying a bit more in property taxes even though my valuation was lower, because those of us who can pay are forced by circumstances to cover the costs for those who are out of work and/or have abandoned their homes.

It sucks, but I count myself lucky to be one of the people who still has a good job, a nice house, and can afford the taxes.

[louis-t]

7. I am very fortunate. My taxes have gone down

and my assessment is in line with current value. MI has sort of a two-tier system. Taxable value vs. state equalized value. Taxable value is capped. SEV is not. Taxable value can still go up as SEV is coming down. Until the two meet, taxes can still go up. Frustrates a lot of people.

[Ysabel]

9. empty condos...

out of state buyers bought up a whole slew of new condos here back during the bubble and are trying to sell them they were over-assessed from the start and have not been reduced and altho the sale prices of the condos have come down (somewhat tho still not enough / the tax assessments have NOT come down at all) so most just sit here empty because almost nobody can afford them...

- edit: replaced the word "owners" with "buyers" (who are now owners / pls. excuse my little quibble with myself)...

[Juneboarder]

10. San Diego County (California)

We have the option here to appeal the value in which our property taxes are based on.
http://www.sdcounty.ca.gov/cob/aab/index.html

I have successfully reduced my property taxes for the last two years in a row. Since the taxes are based on the assessed value, I have no guilt as to having my taxes reduced. This is a measley chunk of change in comparison with the amount of taxes the top 1% avoid. If you have a problem, go after the 1% and not the struggling citizens trying to simply keep a roof over their head.

[Liberal_in_LA]

17. Los Angeles county recently closed the reduction appeal, only allowed during short period

at end of year. Glad I got mine done in time.

[Juneboarder]

23. Quick Question...

Do you know if the Prop 13 protects those like us that had our values reduced, so that it can only increase by a certain percentage each year?

[ProgressiveProfessor]

25. Most likely not

Current CA law as I understand it is that the assessing agency can recover all reduced value in one year and the 2% per year limitation does not kick in until the prior value is reached. If the house sells or for any other reason establishes a new baseline price, its 2% per year from there.

I have a friend that is in the process of effectively selling his home to himself at current market prices to lock in low tax basis. It makes a great deal of sense.

[Juneboarder]

26. I'm in real estate...

how is your friend selling his house to himself? There must be another party involved, like a spouse that wasn't originally on title, or something different perhaps?

[ProgressiveProfessor]

27. There is, its going through a another legal entity he controls

Family trust is going to buy it, then sell it back to him. IN CA there are no taxes on the deal, just fees. Going to do wonders for his tax bill. LA County is being a real pain about reassessments and is fighting a rear guard action on anyone trying hard to lower them.

[Juneboarder]

28. Thanks for the info

:hi:

[DesertFlower]

13. our taxes are a little over $3200 a year.

our house is 2800 sq. ft. and sits on 2-1/2 acres. we're in the county so we don't get any services. we pay for our trash collection, have our own well and septic. my sister in law who lives on Long island, new york pays over $9,000 a year for a 1400 sq. ft. house. so i'm not complaining.

[Liberal_in_LA]

18. You have a good deal. You'd pay $10K or more in LA.

[DesertFlower]

24. exactly. we never could have

afforded this house in california. that's why i said "i'm not complaining".

[OneTenthofOnePercent]

14. My income tax went UP... they cited "inflation".

My property taxes went UP and when I called to question the fact the value of my home MUST have decreased, they stated that while the "value" of the home had decreased... the numerical price rose due to inflation. No property tax hikes either (to my knowlege).

Ain't that a bitch.

[Liberal_in_LA]

16. I bought home AFTER the bubble burst, they started taxing me based on prior

owners value. I applied for reduction to my purchase price and got it. Shortly after that, the county shut off applications for reduction... now you have to wait for a short window to open at the end of the year.

[Missy Vixen]

20. This will be the thing that brings down the house of cards re: government

I used to be a city councilperson in our hometown. We are now seeing the effects of 1. less new construction (those developers pay taxes; the revenues kept many cities around the country booming during the 90's and the first part of the '00's,) 2. reduced property taxes via foreclosures, short sales, etcetera.

Cities around the country depend on those property taxes to keep their doors open. When they dry up, the jobs dry up, and then the cities themselves struggle with reduced revenue. In states passing anti-tax legislation, it's already started. (Look what's going on in California, for instance.)

The "frills" like police and fire protection are expensive, let alone maintenance of things like parks, community swimming pools, etcetera. It's hard to explain to people who just don't get it that the maintenance on an item is more expensive in the long run than building it in the first place. It's even harder to explain to people that the choices in the future will be painful at best.

-MV

p.s. My favorite example of how people in any city think: We live in a rural farming community. There are cows in the valley year-round. Sometimes, the eau de cow can be a bit -- strong. Someone actually called our city hall and demanded to know why nobody could seem to do something about "the cow smell".

I wish I were kidding.

[JuniperLea]

22. Mine were lowered...

And I never asked for it to happen, never applied for it, nothing. I felt badly because California is in bad shape, so is Los Angeles County... this isn't going to help. I can't be the only one who had their property reassessed like this.

They didn't reassess it to a realistic property value, however, as it it still a good $150k on the high side... and tax assessment is generally lower than market value.