Thursday, Aug 21, 2008
In America, local taxes are based on the [plummeting] value of your property....
Mish's: Tax Assessors Nightmare
FOR LESS THAN the price of a decent used car, you can buy a home in Atlanta today. Real estate agents list hundreds of choices for $20,000 or less. Sadly tax assessors have not figured this out. Even worse, cities are counting on that tax revenue, spending like there's no tomorrow. One agent said when tax values and true values are way apart, it can keep properties from selling and further depress values. He said he'd had a $95,000 deal on a duplex fall through recently because it was being taxed at $300,000. The buyer didn't want to be saddled with taxes at that level. "The government are going to have to take a look at this," said the real estate agent. "Taxes are so high they drive down value." A taxpayer revolt and city budget crises are coming in mass. Is any city prepared for it?
4 Comments
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1. drewster said...
This spells further trouble for the 'monoline' insurers who guarantee municipal bonds.
2. mark wadsworth said...
"Taxes are so high they drive down value."
Well, obviously not high enough, or else values wouldn't have risen so high in the first place.
3. it_is_going_with_a_bang said...
I've always thought taxing a property on is value is unfair.
That is what income tax is for.
A local tax should be based on services used or amount of land used.
4. mark wadsworth said...
Itisgoingwithabang.
I agree, taxing land values is counter-intuitive. But it is the perfect local tax...
1. If the council takes money from you, you would like them to spend it wisely, i.e. on stuff that benefits you more than the cost of the tax.You don't care about the COST of services, you care about the VALUE it generates.
2. For example, If council takes money off you and spends it on (A) five a day advisors and climate change coordinators, it's clearly money down the toilet. If it spends the money on (B) bobbies on the beat, refuse collection etc, the local taxpayers (as a whole) benefit.
3. Now, the value of (B) to taxpayers far outweighs the value of (A). So all things being equal, houses in Borough B (with lots of coppers) will be worth more than houses in Borough A (with lots of community risk assesment coordinators).
4. Further, it stands to reason that a tax (to cover the COST of local services) on values depresses land values (like higher interest rates).
5. So a council can only take more money off you (via rising land values) if the VALUE of the services it provides exceeds the COST. Once it is doing everything it sensibly can, it reaches a marginal position where there is no point raising any more tax. i.e. 400 coppers might be twice as good as 200 coppers, but 800 coppers aren't necessarily twice as good as 400 coppers. So it will stop taking on new coppers once the optimum is reached.
Taxing AMOUNT of land is totally unfair. A hundred acres of agricultural land is worth less than one acre of residential, for example.