FWIW, Virginia values my 2010 Ford Escape at $8475, and my tax is $153, so about 2%. The county then tacks on another flat $33 fee.
The county also taxes me $10 every year on my dog, by the way. Talk about a depreciating liability…
“Asset” has a clear definition in financial terms, and that’s not it.
An asset is something that you own that has value. A liability is a debt that you owe. This is basic basic accounting.
Kiyosaki’s “definition” is just wrong. There’s already a term for whether something earns or costs you money on a regular basis. It’s “cash flow”. Kiyosaki rightly suggests to people that they reexamine their financial priorities and focus on things that make them money rather than cost them money, but that doesn’t let him redefine what an asset is.
As k9bfriender points out, his definition is also pretty facile. If your car isn’t providing value greater than its cost, sell it and get your transportation some other way.
I will grant that California property taxes are a weird beastie. Every place I’ve every paid property tax (all in the midwest) use my above described format, to allow cities to actually pay their bills.
Vote in a different government, which is what you’d have to do anyway to get this “forced purchase” option established.
“Oh, but this way future governments can’t screw me over on this type of property tax,” I hear an imaginary you reply.
Of course they can, they just reverse the previous decision, or if inertia means that’s unpalatable to the community, they find some tax hike that’s acceptable, or they do it anyway and get voted out, or they ride a declining economy right into the abyss.
Creating complicated barriers to government activity is not a good long term solution for any community. Either the barriers are ignored/smashed, or they create more bureaucratic messes, and government waste.
I’ve thought of the forced purchase system myself and also realized it wouldn’t be very workable due to the opportunities for corruption, in addition to the aforementioned fact that in most situations they could simply raise the millage rate instead. It would, however, prevent individual miscalculations of worth.
Cities can’t just arbitrarily bump up your appraised value on a whim. Generally the mechanism for determining the rate is codified by law. In a world where the values and rates could be arbitrarily adjusted and cities were bound by this silly rule a smart city would give you a “break” by saying the appraised value was half the predicted market value and double the tax rate.
Swap it around and I might support it. You set the appraised value on your property wherever you like, and if someone offers you that much money you have to sell it. You want to save on taxes and underappraise, you take the risk that someone comes along and buys it out from under you. It works in claiming races to keep things relatively honest.
Thanks for all the responses everyone, much food for thought. It seems it was a poor idea doomed by complexity and the vagaries of municipal politics, I do see some merit in subsequent politicians just coming in an repealing it even if such a thing passed.
I wouldn’t have thought so many people are totally fine with paying annual property taxes on non-real-estate property, but apparently it’s a lot more common than I thought, so color me better informed!
Something similar happened in Guatemala in the early 1950s under the Arbenz government, which was trying to wrest some control back from American corporations like United Fruit.
The government wanted to buy up land from big foreign landowners like United Fruit, and redistribute the land to Guatemalan peasants. They valued that land at $3.00 per acre, which was the value that United Fruit had declared in their own tax returns.
When the government tried to assume control of the land, and compensate United Fruit at $3.00 per acre, United Fruit (and the US government) complained that the land was actually worth $75 per acre. The Guatemalan government, understandably, asked, “If it’s worth $75 an acre, why didn’t you declare that value on your tax forms? You said it was worth $3.00 an acre, so that’s what we’re going to pay you.”
This debate was, of course, all rendered moot when Guatemalan generals, with the help of the CIA, overthrew the democratically elected government of Guatemala. In the world of taxation and compensation, be careful who you cross.
Why does one need a car to take place in US society. Heck, what does “take place in society” even mean? :dubious:
Really? You set a fair market value on your house on July 1. Market prices go up. Do you run to town hall and up your estimate to avoid someone buying you out in September just as your kids are starting school?
Or you live on a street which has both houses and commercial property. I want to build a shopping mall. I force a bunch of you to sell to me at a price you set which was actually 10% above market value for the houses for your safety form above, but worth it to make the property commercial.
Because they have tax appeals boards, which are in CA anyway, elected representatives. Who wont stay elected very long if they did that.
Or if they are appointed they are appointed by elected reps, who again are answerable to the people.
In theory they could do the same with ANY tax. Income tax? The iRS could just “audit” you and declare you owe a billion dollars.
Property tax? Billion dollar house.
Tariffs? Those widjets will be taxed a a million each.
Ect, etc.
But they dont do this and never really have.
So I set a price on my house, you come along and give me that price, and that’s a problem? I expect that with my system most people would add the nuisance and cash cost of relocating to their assessments so that average assessments would increase, but that drops the millage rate so taxes would be neutral. No staging costs, no realtor’s commissions, no lawyers fees, cash in hand for the price you set. Who knows the value of your house better than you do?
So if I spend a lot of money on my dream house, I’m supposed to appraise it for far more than it is worth on the market, and also pay substantially increased taxes on it, because as a property owner I am no longer able to exercise consent with respect to contracts? That’s totally fucked up.
Plus none of this actually has to do with the cost of real estate transactions. You still need lawyers, you still need title searches and insurance, and so on.
And I think the market knows the price of my house better than I do, provided that it is a market in that people voluntarily engage in it. I’m imagining other applications of those ridiculous system you’ve come up with: how about people get to rummage through your house and take stuff, while leaving some cash behind, whenever they feel like it.
“Honey, where did my running shoes go?”
“One of the neighbors bought them for $20 last week. I forgot who it was. Why don’t you just walk through the houses on this block until you find them again? Here’s the $20 bill they left!”
Think about this like the more reasonable version of the OP’s suggestion. Not that someone can “swoop in” and buy something out from under you, but that the tax value of property is determined by actual market offers.
So, when someone comes along and makes an offer for your dream house at 10% more, he doesn’t just up and own it. What happens is that you either have to sell or have to pay property taxes at the value that you and the buyer both agree that it’s worth.
Are there issues with this idea? Yes. But they’re not the cartoonish ones you’ve come up with.
nm, need bigger edit
Walk me through this. I have a house that is fairly appraised at $500k. But I want to keep it, so I say it is worth $550k, and I may more tax on something that, in an actual free market situation (like if I died and the house were auctioned off), would only yield $500k.
So then you want to buy my house. If you offer $550k, I’ve already said that’s what it is worth to me, so do I have to sell?
If you offer $825k, and I don’t want to move, am I now obligated either to move against my will, or pay an additional 50% property tax because a single yahoo wants to screw with my life? Or can I reject this insane bid and continue paying the inflated tax on the inflated $550k value?
The whole problem with this idea is that every flavor of it forces people involuntarily into a market, when quite a few people would likely favor stability. Like, families who don’t want to have to risk finding a new house in the same school district, etc.
I’m not sure what cartoonish objections you’re talking about.
By definition if someone is willing to pay $825,000 for a house then it’s worth at least that much, and if you’re not willing to accept it then it’s worth more, regardless of the cost of construction. Yeah, you should raise the appraisal and start paying the taxes on what the house is worth.
Because that’s not fair market value. Fair market value is not defined as the price as which one particular person wants for something that isn’t on the market.
Fair market value (FMV) is an estimate of the market value of a property, based on what a knowledgeable, willing, and unpressured buyer would probably pay to a knowledgeable, willing, and unpressured seller in the market. … . Fair market value differs from the intrinsic value that an individual may place on the same asset based on their own preferences and circumstances.
Fair market value (FMV) is, in its simplest expression, the price that a person reasonable interested in buying a given asset would pay to a person reasonably interested in selling it for the purchase of the asset or asset would fetch in the marketplace.
http://www.appraisers.org/docs/default-source/college-of-fellows-articles/defining-standards-of-value.pdf
For the purpose of this appraisal, fair market value is defined as the cash or cash-equivalent price at which property would change hands between a willing buyer and a willing seller, both being informed of the relevant facts and neither being compelled to buy or sell.
No, because you’re already paying property tax on that valuation.
You would have to pay a higher property tax.
You are correct that “single yahoo who wants to screw with my life” is a weakness of this plan. Although, I think it’s a vastly more limited one than you assume. I mean, lord protect me from nefarious villains who want to pay me $300k more than my house is worth.
Yes, someone with money to burn could certainly be a jerk about such things. I’m not convinced that’s a serious exploitable problem though. Someone willing to devote hundreds of thousands of dollars to being a jerk can surely find some way to do so without vastly overpaying for your house, or else they’re not a very creative wealthy jerk.
In the vast majority of cases, though, if someone comes along and offers you, say, 10% more than the appraised value of your house, then your house is actually worth 10% more than you think. And it’s not at all unreasonable to be taxed on that actual value.
Essentially, this system uses the market to determine a real price for houses, and then the owners are taxed on that real price. Yes, there are some loopholes to close up (you want to build in some buffer for transaction costs, etc.), but in principle it’s pretty workable.
That is a downside, but note that that downside already exists in most places. Property tax is generally already based on the most valuable use of a property, and people are forced to move because they can’t afford the taxes on their houses. Attempting to fix that problem is why California’s property tax system is so fucked up, so there are tradeoffs to valuing stability over efficient use of property.
If you, for example, have some low-value use for land that is high value, you get taxed on the high value. So, if you had a little farm in the middle of Manhattan, and want to argue that the land isn’t worth that much, because it only generates $10k worth of vegetables every year, that’s not going to work. The government is going to say, nope, your land is worth $x million, because we could build skyscraper luxury apartments on it. If you want to keep farming it, that’s fine, but you have to pay property tax at the real value.
The “forced sale” is less of an actual forced sale, and more of a proof that the price is real. Right now, if you want to dispute a tax valuation, you get your appraisal, and you fight silly proxy battles over how much your mountain views are worth, or whether the noise from the nearby bus line detracts $5k or $7k of value.
If you base valuation on offers, it’s real simple. “Guy over there is ready to write you a check for $X; your house is worth $X. Don’t want to pay the tax, sell it to him, and he’ll pay it.”
The bit about someone buying your running shoes out of your closet is a serious scenario you are worried about?