The Perfect Property Tax Plan
Here's one columnist's proposal to promote stability while ensuring economic growth.
Over the last few years, we’ve seen unprecedented drops in property values and depletion of tax revenues generated from property taxes. I guess there are many reasons for this, including the crash of an over-inflated housing market, incredible foreclosure rates and a recovery that has never really happened.
So communities find themselves with millions of dollars of real estate without owners who are not paying income taxes AND a tax base that is literally shrinking before their very eyes.
Because communities are generally not allowed to run a deficit, many opt to simply raise taxes instead of cutting back on Government services. Many combine tax increases with cutbacks in services. Virtually all communities are scratching their heads wondering how to prevent such a disaster in the future.
Here’s a plan that I think would add jet fuel to our economy, boost economic growth and development, stabilize tax revenues and guarantee a healthy tax base for decades, if not forever:
GUARANTEE NO PROPERTY TAX INCREASES for as long as a person or company owns their property.
WHAT?! That’s right! As long as a piece of property never changes ownership, the tax on that property will NEVER go up. NEVER. In other words, if the tax on your home is currently $800 a year, you will never pay more than $800 in annual property tax.
The same would go for any business that invests in property, even if that property is bought as raw land and later has a 100,000 square-foot office building developed on the site.
Let me address the benefits, then the objections. Then, how to implement the policy.
BENEFITS: IF your property tax could NEVER be increased, what would happen?
First: The community would suddenly become a tax haven for folks looking to either live or invest here. Inventories of foreclosed homes would quickly dry up because of the demand for homes in this community. As vacant homes become occupied, taxes are paid.
Second: Current taxpayers would benefit from knowing their tax bill would never increase. They would want to stay current with their taxes and mortgage payments to keep the great deal they have.
Third: Economic development would BOOM as companies seek stable and predictable tax environments. And, the ability to acquire underperforming property and improve its value without being penalized for doing so would attract both investment and jobs. It would also encourage redevelopment of blighted areas for the same reason.
Fourth: Politics (relative to property taxes) are no longer an issue, ensuring a more stable local governing body.
Fifth: No elderly person ever needs to lose their home or property because they can’t pay their property taxes due to inflated real estate values.
OBJECTIONS: Mostly political myopia.
First: How would we fund needed Government services? It is assumed that the current rate of taxation is sufficient to cover the current level of Government spending. This program would impose a certain level of restraint on Government spending.
Second: How will taxes keep up with the increase in real estate values? Taxes are assessed on the REAL value of a piece of property determined by the Sales Price. As the market recovers, real estate prices eventually increase. As property is sold, taxes on those properties increase according to their price.
Wouldn’t the government be losing tax revenues if a company bought and redeveloped a piece of property? Maybe in the short run on THAT piece of property. Sure. But isn’t that better than having to GIVE tax incentives for a business to buy and invest in the community? This creates a predictable environment for ALL businesses to consider when contemplating relocation instead of politicians picking winners and losers.
Third: I can’t think of another reasonable objection to this plan.
IMPLEMENTATION: Obviously, this plan would require a buy-in at both the local and state level. It might require a Constitutional amendment codifying the plan. It should be made permanent and difficult to change.
It should be noted that with all concepts that limit the power of Government (especially in the matter of taxing and spending) significant reluctance can be expected. So, this would be an ideal political issue for someone seeking to change the status quo.
With the state of political discourse these days and the antipathy toward tax increases and runaway government spending, this issue should be a winning one.
What do you think of Tim's perfect property tax plan? Tell us in the comments.
C.J.
11:36 am on Thursday, June 21, 2012
Cobb County homeowners aged 62 and over are exempt from paying school property taxes, making Cobb a tax haven for seniors (yes, everybody benefits from our education system, not just parents of school-age children). As any homeowner under 62 in Cobb knows, school taxes are easily the largest component of our property tax bills.
Now given that Cobb is a tax haven for seniors, did this status prevent or slow down the foreclosure crisis in our county? Have inventories of foreclosures dried up? Has economic development boomed? Are elderly people losing their homes because they can't pay their property taxes, a pittance compared what homeowners younger than 62 have to pay (partially because they have to fill the hole left by seniors)?
I wish that Mr. Langley's predictions were true. I really do. Unfortunately, this kind of wishful thinking appears to be consistent with the "tax fairy" theory applied at the national and state levels that if we just lower all the tax rates, then collections will go up. Sadly, the application of such theories have only contributed to deficits and debt and, yes, continual education cuts that are leaving our schools floundering.
Nobody likes paying taxes. But we need to pay for our education system, our justice system, our transportation system, and our safety and security (fire/police) somehow. The sooner that we accept the fact that there are no gimmicks, the better off we'll all be.
Randy Smyrna realist
8:28 am on Friday, June 22, 2012
This proposal will do even better than the author realizes. Cobb real estate is doing better than most because of lower taxes. I saw my real estate taxes on my commercial properties in cobb reduced greatly as well as tenant demand increased. Cobbs real estate outlook is better than most because of its tax system. I brought my manufacturing business here from Fulton 2 years ago. I am not alone. Values of my re in Douglas co went down a lot but not real estate taxes on those properties. You can get better deals on real estate in Douglas, Fulton etc.. But I'm not going there because they do not adjust your taxes to the value of your investment property. They also prone to increase your taxes ( so that they can keep their big governments in place) and hold me property owner hostage. Will I consider buying there? No I do not do business with sicialists. Just look at all the people that moved to Cobb from other metro counties in last 3 years!
T Waybright
9:18 am on Friday, June 22, 2012
Granted - the best tax is the tax that someone else has to pay.
Reaility - there will be taxes.
Proposition - since the best tax usually doesn't exist then the next best tax is a fair tax.
Many anti-income tax proponents have championed the FAIR Tax. Simplified, everyone pays the same percentage sales tax on almost everything they purchase/consume and because they can control their spending they can control the tax they pay. Ironically, many of my friends/acquaintances who champion the FAIR Tax concept are, like others, always looking for ways to ditch the hated property tax.
But perhaps the current property tax is the original FAIR Tax. Everyone pays the same rate. By choosing the property you own or rent (renters pay the owner who pays the property tax) you can control the amount of taxes you pay.
When the value/price of the things you buy increase you either have to buy less (find cheaper or do without) to keep your gross sales tax the same. Once you are buying the fewest, cheapest things you can buy, inflation means your total tax bill will still increase each year with a FAIR Tax. If you pay the same property tax rate as your neighbors and your asessments fairly reflect the value of your property, inflation is simply doing its thing.
So the 3rd objection to the proposed plan - it is not a FAIR Tax because two people in similar circumstances would pay different amounts.
Larry Savage
8:56 pm on Saturday, June 23, 2012
As Chris commented, Cobb already exempts Seniors over 62 from school taxes. That's two-thirds of the property tax total for most homeowners.
Cobb also has a "floating" homestead exemption that does what the writer suggests. Your home value increases and you get reassessed to a higher value, but your homestead exemption is automatically increased the same amount so that your county general fund tax bill never changes (Fire Fund and debt service do increase with higher assessments but the General Fund is the bigget piece).
So we already have much of the proposal, but lotsa folks don't seem to realize it.
James Bell
9:35 pm on Sunday, June 24, 2012
The pit fall in the plan is the "buy-in". A better way to control your property tax is to appeal the value and encourage and educate your neighbors why they should. Many property values in Cobb are to high. With a little research you can save possibly hundreds of dollars each year. Lower assessments can off set any millage increase for most.
Cobb should consider a HOST sales tax to lower the property tax. Also a LOST sales tax is available.
As we know, Cobb does not have a revenue problem, it has a spending problem.
The economy has done more to check the size of government than any anti-tax group or movement. As revenue grow so goes the government.
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