An idea inspired by a friend regaling me with a story about a charming practice that the great state of Virginia has: they apparently consider your car property and tax accordingly.
Yes, that’s right - the rapidly depreciating chunk of metal that sits unused ~20+ of the hours of the day, yet you are required to have in order to work and take place in US society - that car.
Reflecting on the relative injustice of somebody being told that their 4-wheeled liability is an asset and being taxed on it, I got to thinking about values that are appraised for tax purposes generally. I may be wrong, but it seems to me there’s no backstop to it - if a county or municipal government wanted to raise money, they have two levers they can pull: increase tax rates, or increase appraised values, and either one ends with more money in the coffers. And if they raise appraised values, what recourse does any property owner have? Or if they tell you your crappy car / property is actually worth twice what you think it’s worth, what recourse do you have?
So I propose that anyone paying taxes on appraised assets should have the option to force a sale to the taxing / governing entity at 80% of the appraised value, and that should keep everyone honest on both ends. If the government ends with a bunch of lemon cars and properties on their hands, well that’s on them, they should have been more honest and accurate to true market values in their appraisals.
If a macro-economic crash hits, they’d better adjust the tax values and tax payments quickly, or they’re going to be bailing the crash out via lots of individual property owners instead of bailing out giant banks that have aggregated the ownership of all the associated debts (which honestly seems win/win to me).
I’m sure there’s tons I haven’t thought through, so what say you, O Dopers? Would you buy property in the “forced buyback” municipality? Why or why not?
That sounds like a new way for crooked appraisers to make millions! All they have to do is be bribed to make an absurdly high appraisal!
Note that crooked appraisers did (do?) exactly this for mortgages, with multiple sales at inflated prices, with all the intermediate buyers making a bundle and the final sale to a fall guy or designated bankruptcy declarer.
A car is an asset, not a liability. This is such a basic misrepresentation of the definition of “asset” and “liability” that it might be hard to have a rational discussion about it.
Also, this isn’t uncommon. California does this too. Sure, they call it a “registration fee”, or something, but that fee scales with the value of your car.
I’d say it’s as valid as taxing other property. The nice thing (from an economic perspective) about property taxes is that they incentivize effective use of assets.
Is this solving an actual problem of incorrect appraisals, or just a “stick it to the man” plan? I mean, the market for most cars is pretty liquid, so it shouldn’t be that hard to get a reasonably accurate appraisal.
Ah. “Stick it to the man” it is. How are you going to like living in this city when they can’t provide the services you depend on because the budget just went to buying a bunch of cars and shit that the city doesn’t need?
Hope you don’t own property that can’t be driven beyond the city limits, because it’s going to be a lot harder to sell your house in this failed municipality that can’t keep the lights on.
Well, except for the obvious losers above, which is anyone who wants the government to remain functional.
One way to think about your plan is that it’s effectively an asset price insurance scheme. If the real value of your taxable asset ever drops more than 20%, you have “city insurance” against any further price drops.
Given that you are complaining about taxation, my assumption (I may be wrong, feel free to correct me) is that you are probably believe in limited government. The government should tax less and do less. Stay out of people’s business.
So, is insuring the value of everyone’s property a legitimate function of a limited government? I would say that it is not.
Personal property taxes have been around quite a while. The rates and calculations are often determined by statute, so the recourse would be voting, as with many things.
Businesses also pay this personal property tax, on everything including desks and other furniture. There are rules for estimates, de minimis amounts, etc. but generally a business will pay tax every year on every single thing it owns. Unsecured property tax is what it’s called.
I disagree, it isn’t intended as a way to screw a just government, it’s intended as a way for the tax you pay on your property to be at least 80% “fair.” Because as I said, I see really nothing stopping any given government entity from deciding your property is worth more than it is, and forcing you to pay taxes on that inflated price, and this problem is greatly compounded with cars vs real estate (individual variation in car values being much higher than for real-estate, which has underlying land value as a floor).
Likewise, if a macro crash in house values hit, why should you pay taxes on a value based on much better years, rather than the more fair current market value?
Its intended as a way to ensure that the government works hard to create honest and fair appraisals of taxed property, with the forced buyback the “stick” part punishing unfair or over-inflated valuations.
I don’t think your proposed global municipal collapse WOULD happen in most cases if this were true, because most municipalities would see the high cost of getting it wrong and would really vet their appraisers and would err on the side of being closer to fair market values.
And to the remark from Some Call Me…Tim that this incentivizes crooked appraisers, I really only see that working once when your victim is literally the only entity that can exercise the full force of the law, which incidentally also knows everything about you.
Again, not intended that way. It’s intended that if the government is making you pay an unfair amount due to an inflated appraised value, you have recourse.
if your asset drops in value more than 20%, shouldn’t you then pay less in taxes on it?? Why isn’t that fair?
I mean, if you’re worried about gaming, set up a process where before you can exercise a forced purchase, you can call your current appraised value into question first, and they have 90 days to respond with a new appraised value.
Not really where I’m at, although I certainly feel at least federally that our spending priorities are woefully misaligned, and would be happier to see much less going to “let’s make sure we can blow the whole world up 100 times over while maintaining an active war on 10 different fronts with the next 10 biggest militaries combined” and more to science, education, R&D, and healthcare. But I imagine that is true of the majority of people on this board.
Missouri also has personal property tax. You are taxed on farm animals, farm equipment, ATVs, cars & trucks, airplanes, boats etc. It used to include your furniture as well, but that went away years back. IIRC you are taxed at 1/3 of appraised value.
Hearing all this makes me very glad I don’t live in any of these states.
But it’s exactly chickenshit-level stuff like this that needs some sort of recourse. If you’re going to be taxed on different objects you own that are highly variable in value (what’s the price difference between a prize-winning stud and a feedlot animal with a broken leg? But they’re both bulls / cows and are probably taxed the same), why should they be able to arbitrarily announce “Your goods are worth X and I deem you pay Y” when you know they’re actually worth X/2?
I mean sure, vote, move, whatever. And thank god I don’t live there. But for the people stuck there, it sure seems like a raw deal.
It’s not that bad. I just paid the annual property tax on my car here in California. It came to $23. The registration fees, which aren’t property taxes (because they are not based on the value of the car) were much more: $102.
Then, why did you include the bit about it being “win/win” when a government is forced to buy up a bunch of property? Or rail about governments taxing assets like automobiles to begin with? The tone of your suggestion implied otherwise.
Generally, the law already protects that. If the law of Virginia says that they can tax personal vehicles at a rate of X% of the value of the vehicle, then they can’t just make up some arbitrary number for the value, and if they did, you could sue them and win.
Also, I’d disagree that the problem is worse for cars. The problem (if it exists), would be way worse for houses.
Cars are worth less than houses (in most instances), so any error is likely to be smaller.
It’s trivial to move your car outside a tax authority’s jurisdiction. It has wheels and propels itself! Very difficult to move a house.
Houses are all custom built, and no piece of land is the same. Cars are mass-produced and are generally pretty comparable to other cars of the same year/model/condition.
A little googling shows that Virginia uses a percentage of MSRP to estimate taxes for new vehicles, and the NADA guide to estimate value for older vehicles. In other words, they already use standard industry estimates of value. And you can appeal if your particular vehicle has damage or high mileage or something that would make those standard estimates inapplicable.
In other words, the system already works.
Again, that already exists in most places. If the value of your house goes down, you can generally get it reappraised for tax purposes. In many places this will be done automatically by the County Tax Assessor (or whoever), because they can look at property value statistics as well as anyone, and why bother making every property owner file paperwork every time the market goes down. Dealing with that paperwork is just a big hassle for the people at the Tax Assessor’s office.
Of course, if you think you can show that your particular property has declined more than the market trend, you can make that argument.
It is, and it already happens.
It sounded to me like your suggestion was that a forced sale was something that could be initiated unilaterally, rather than as the final result of a failed attempt at reassessment. If you want that as the final result to resolve disputes, sure. Seems probably mostly ok. Although it would probably have to be at lower than 80% to avoid the government crowding out used car dealers, which often take more than that in profit. Look at the difference between the “private party” and “dealer trade-in” estimates for used cars and it’s often quite large.
Fair enough. The tone of your posts suggests otherwise. You seem quite incensed at the possibility that someone’s taxes might be slightly miscalculated.
To some extent, the injustices that you’re worried about are small potatoes. They exist, for sure. And I guess hypothetically an unscrupulous city might try to take advantage of them for a little while (although they’d probably get crushed by both the courts and the voters pretty quickly). But mostly, they’re going to be pretty minor. Someone with a car that needs engine work is maybe going to be taxed at a valuation that’s a few thousand too high? And maybe pays $10 more in taxes than they should?
You just need to get a shittier car. I just paid mine, and it was only $4.
Oh, hell, even “Live Free or Die” New Hampshire does it. I’ve had to pay a car registration fee based on the value of my vehicle every year of my adult life. I’m almost as surprised that there are states that don’t do this as that there are states that don’t make you get your car inspected annually.
After the real estate crash, the appraisal on my house went down, but I appealed to the assessment board and got another 10% reduction. I see no problem that needs to be fixed, in my experience.
And if governments are going to risk being compelled to buy property because of tax rates, just think of three things: where is the government supposed to get the money to buy property is people randomly decide to walk away from their stuff? And what is the government going to do, auction all this stuff off? And if the intent is to moderate assessments, fine: I assess your house at $5,000 and my jurisdiction has a 100% tax rate.
So the total value of property in your city/county goes down by 30%, but the city/county still needs to cover the costs of doing business. Streets/parks/police/fire etc still need to be paid for. Guess what happens? Your mill rate goes up by 30%. So you’re being taxes based on a cheaper property, at a higher rate.
Around here, the city comes up with a budgets, figures the value of land being taxed, and divides the first by the second. Those bills still have to be paid.
No, that quite clearly did not happen to me. During the recession, my local government relied on a rainy day fund and stimulus funds to close the budget gap.
IIRC they use Kelly bluebook values and you can contest valuation. Its a few hundred dollars but you get a tax abatement on the first $x of the tax so it REALLY makes sense to buy used in Virginia.
You’re forgetting that there’s often more than one way of defining things.
“What defines whether something is an asset or a liability is cash flow, not some abstraction of value. In other words, is it generating money that goes into your pocket, or is it taking money out of your pocket? Everything will either make you money or cost you money. If it doesn’t make you money, it’s not an asset, it’s a liability.” – Robert Kiyosaki
I like this idea. Not because it can be used to prevent over taxing, but because it turns houses into essentially rental units that can gain equity.
I have had a house for nearly 20 years now, and there were a few times during that ownership that it would have been fiscally prudent for me to get rid of it. Trying to sell it was just about impossible, as there were no buyers for houses in general, and fewer for houses in my type of area.
Being able to force the city to buy my house for 80% of its market value would have allowed me to walk away from my obligations when they were inconvenient.
Of course, it has downsides. It means that now that I don’t want to get rid of my house, then I have to support with my taxes anyone else who walks away from their house.
