Haven’t seen this one mentioned on the other local real estate blogs, but it’s definitely of interest to anyone out there that already owns a home (or a home loan, as the case may be). Depending on who you believe, a new bill floating around down in Olympia may either help home owners reduce their property taxes, or saddle them with hundreds of millions more.
It’s an election-year, no-new-taxes, fiscal-responsibility legislative session, but that’s not stopping lawmakers from contemplating a bill that could ultimately saddle homeowners with the largest property tax increase in state history.
House Bill 2977 and Senate Bill 6517 would make it easier to dispute local property tax assessments — an easy sell in a region that has seen property taxes increase as real estate values have gone through the roof.
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But King County Assessor Scott Noble said the real impact is buried beneath the stated good intentions, and it would amount to a tax break for big business paid for by the state’s homeowners, because the burden would simply shift.
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“In our budget-based property tax system, reductions of valuations will produce tax shifts onto other taxpayers, and my experience with advocates from our large commercial taxpayers suggests a large increase of appeals and lawsuits from these property owners who have sizable resources,” Noble said in the e-mail.Homeowners have historically been much less likely to appeal property value assessments because they have less to gain, he said.
If you’re a home buyer in Washington State, or intend to become one in the not-too-distant future, it would be to your benefit to pay attention to issues like this. Despite the supposed benefits of home buyers having “fixed payments” (vs. increasing rent), the ‘T’ in the PITI increases rather steadily, and is at the mercy of new legislation such as this, written by politicians that rarely have your budget in mind when making their decisions.
(Chris McGann, Seattle P-I, 01.21.2008)
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“In our budget-based property tax system, reductions of valuations will produce tax shifts onto other taxpayers”
I.E. don’t expect government to cut its budget just because the price of RE is tanking.
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Thanks The Tim. I mentioned the nearly the same thing in a posting a few days ago.
The tax authority (school districts for example) collect a certain dollar amount of taxes and that amount is split between all of the parcels in its district. The tax rate is the revenue taxed by the authority divided by the total value of all of the property.
Decreasing the total value of the property in a tax district means the rate goes up since the district collects the same number of dollars in tax regardless of the land value.
So – evenly decreasing assessments don’t mean less taxes! (On the flip side – increasing assessments don’t mean tax increases. But often the tax authority will increase the rates since property owners don’t mind paying more taxes if their parcel is worth more).
I’m glad to see you bring this article forward.
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My inner cynic is telling me that retirees will be forced to sell a lot of homes as the regressive tax burden on housing increases.
I just think it would be nice if the state used some of this wealth for infrastructure.
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The rule is: if assessments are rising, then property taxes are rising, because, well, assessments are going up. If assessments are falling, then property taxes stay where they are, because governmental agencies need to collect money for their fixed budgets.
Governmental budgets are set as part of a political process, and it is much easier to increase budgets when the tax rate is held constant, and the increase is coming out of increased assessments.
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Big business continuously looks for ways to shift costs to the little guy. I remember one vote in another state, for a tax increase to improve roads. Sounded reasonable, until you read the fine print and realized it was just a shift of payment from businesses to individuals. A favorite for big business is changes that sound harmless until you factor in their greater ability to win in court, at which point the change greatly benefits them. The voters have to be vigilant.
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The Tim said:
If you’re a home buyer in Washington State, or intend to become one in the not-too-distant future, it would be to your benefit to pay attention to issues like this.
I’m glad you posted this article… I caught it the other day and it gave me a bit of the heebie geebies. This is certainly an issue that we need to keep an eye on. The more awareness that is shared the more power us little guys gain in order to remain vigilant, to Markor’s point.
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This bill isn’t “floating around Olympia.” It’s been introduced by the Association of Washington Businesses. Similar bills have been introduced in other states by the AWB’s sister lobbying organizations. It’s part of a national strategy to push more of the local property tax burden onto residential payers. The same kind of law was passed in California, and business property owners were able to shift apx. $6 Billion in taxes onto residential properties.
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This is an important issue to the groups that I represent – the private sector landlords who provide affordable housing to low-income, disabled and elderly residents. And it is an important issue to me as a homeowner. I support HB 2917. Washington is one of the few states in the nation that requires the little guys like us to prove by “Clear, Cogent and Convincing Evidence” that the assessor is wrong. This bill merely changes the burden of proof to the same as we have in civil cases, “Presponderance of Evidence.” Big business already hires lawyers and consultants to get their tax bills to a minimum. This bill will actually allow our residential homeowners (and affordable housing landlords) to appeal their cases without hiring the big guns. The undocumented “possible shift” is a scare tactic. Give the people a level playing field so when these house values fall, we can go in and get our tax burden reduced to the level it should be.
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Tax reform for a competitive America
America can solve three major problems with one measure: Reducing property taxation on the local level and instead taxing energy consumption.
Compared to other countries like Germany, real estate property in the US is much more heavily taxed. Still, in poorer neighbourhoods, where a relatively large part of the pupils grow up, local taxes are insufficient to provide for adequate schools, as the value of property and thus the tax base is lower there.
In the US, energy is taxed much less than in other industrial states, with the consequence of high carbon emissions and more waste of energy. This waste of energy is now impacting the competitiveness of American economy, since energy prices have increased tremendously.
The simplest measure would be a flat and uniform tax rate on all primary energy consumption, except for renewables. Alternatively, a carbon tax could be introduced, though a rate based on primary energy would lead to less changes in energy markets and avoid windfall profits for nuclear power.
The income at the federal level shall be redistributed to the local level. For this redistribution, the number of school-age kids shall be a major criteria. Other population groups with special impact on public expenditures like infants or very old people also can be part of the formulae. Local tax districts shall be obliged to refund much of the income by reductions of property tax rates. Only in poorer neighbourhoods, with little property tax to reduce, an increase of expenditure for schools shall be part of the game.
The large tax relief for homeowners would have the consequence that house prices would fall less.
The second result would be more huge investments in energy saving measures, with particular impact in the building industry. As a result, expenses for energy and also oil imports from the Middle east would be reduced – not to speak of the climate change issue.
The third result would be a better education of pupils with parents that can only afford to live in poor neighbourhoods, which would improve human resources in the long run.
Congress should act now, so that property taxes are reduced from 2009 onwards, and shall not wait for presidential elections.
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