Property Taxes More Burdensome on Those with Less

As if a recession was not straining our pocketbooks enough while government continues to spend more. According to the Tax Foundation, infrequent reassessments of property values, plus increases in the tax rate, always tends to shift the burden onto those whose homes have been depreciating in value. Below is more from the Tax Foundation. Click here for more.

State Provisions for Property Reassessment

Fiscal Fact No. 223

Property taxes represent the lion’s share of local government tax revenue, with local governments raising nearly $400 billion per year from this source to fund services. Property taxes are a type of ad valorem tax, calculated as a percentage of the assessed value of the taxed property. Generally an assessment of the property is made by determining how much similar property can be sold for on the market at that time, with some states discounting the market value by a certain percentage.

But property values—such as home prices—are not static. Over time the market value of property will change, and not in a uniform pattern. That is, even in the same county, some property will appreciate rapidly while values elsewhere may stagnate or even drop. These variations in market value necessitate regular reassessment of the property in order to levy an equitable property tax. Usually assessors hired by local governments do the work.

Infrequent reassessments can result in significant over- or underpayment of property taxes. If one’s property has decreased dramatically in value—which has been the case for many American homeowners since 2006—a property tax using the old higher value for the property would not be correct. Of course, governments have the choice to increase property tax rates as values decrease in order to maintain or increase revenue. Conversely, in good times, many governments keep property tax rates constant or cut tax rates as property values rise.

The combination of infrequent reassessment with rate increases shifts the property tax burden away from those whose property has been appreciating onto those whose property values have been declining.

States have different requirements for how frequently reassessments are conducted. Nine states do not have state provisions for when reassessments take place. Most states follow an annual to five-year schedule. A few states do not require reassessments for up to 10 years.

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