Reappraising property tax rates at point of sale--is this a thing?

Great Debates
21

I’d propose the each natural person gets to exempt one property from all property taxes. Corporate persons would get no property-tax exemptions. Then reassess property value and tax each year.

I’d also tax all increases of wealth at the same rate. Wages, interest, capital gains, rents, inheritance, everything. With a large annual exemption for natural persons (none for corporate persons), about the same size as the median income (say $100,000). If a person’s wealth went up more than $100k during a year, that person is paying 40% or whatever on the increase above it.

Taxes have to ultimately be based on the ability to pay. Natural persons have to be able to live with dignity. Corporate persons only get to exist to the extent that they benefit society.

22

Many states have property tax breaks for the elderly, which might be a better solution.
The big problem in California is that corporations get the break also. They are not on fixed incomes.
BTW I believe that in most cases if you move within California you get to keep your tax rate. The real problem is that our houses have appreciated so much that you would pay a massive amount of tax to downsize, so people don’t. Only way out is when someone dies and the base gets adjusted.
The situation @hajario mentioned is true on my block also. Massive differences in how much tax we pay.

23

Not "most cases’- you have to be 55 or older, disabled, or victims of a wildfire/natural disaster.

24

You definitely do not get to keep your rate generally. There is an exception if you are over 55. Until recently you had to stay within your county but now you can go anywhere but there are limitations such as the new home must be of a lower value and must be purchased within two years of the selling of the old place and this scheme can only be done three times. There is a similar exception for people who are younger and become disabled (edit) or if the house is destroyed in a natural disaster.

25

That’s what I was referring to. Perfect for downsizers and people like me. I haven’t studied it in detail since I’m more or less stuck, not that I mind it. No stairs in my house.

26

Or purchase a replacement home if your home was acquired by a public agency under threat of eminent domain.

27

People move to Ohio and lose their MINDS over our local income tax (they bitch about it daily on the Ohio subreddit). Trying to get our residents to vote yes on a .5% income tax increase was like asking them to murder a child.

But I look at our city budget and the revenue lines show we make 6x in income tax than we do in property tax. We have amazing city services. And the only people paying into it are people who are working. Retired, disabled and unemployed people don’t have to pay it. But we all benefit from it. And we all pay the same rate whether we work at Wendy’s or Cleveland Clinic.

Now, school funding in Ohio is heavily based on property tax (and I guess un-[Ohio]-constitutionally so) so it’s not to say that our property taxes are low across the state. But the amount we pay to the city is a pittance, and we still have nice things. And very granular control over our income taxes at the ballot box.

28

I’m OK with this, but I’d modify it a bit and put a (low) capped tax on your primary residence. Enough to at least contribute to the schools/roads/police etc. A “skin in the game” tax.

And then maybe have a huge exemption amount, and then a surtax above a certain home value (maybe 2x the median home value in the municipality?).

So your primary home you pay a nominal property tax on. Any rental/investment properties are taxed fully. And homes that are valued far above the median for the area pay a surtax. As the median moves up, so does the exemption amount.

29

I have a coworker who moved here from Ohio, and she and her husband often complain about how high the taxes were in Ohio. I’m like, where do you think our salaries come from, and why do you think they’re so low here? Gah! Taxes mean services, and we’re the service!

30

(Johnny Carson) “I did not know that!”

31

The problem is most likely restrictive zoning. If more people want to live somewhere than there are housing units, and zoning prevents lot splits, granny flats, basement apartments, and multifamily housing, then the only market response left is price inflation. If the rich want to move into your neighborhood, they’ll find a way.

I’m not following these statements. Are you saying property taxes are inherently regressive, or they’re regressive because they’re levied at a flat rate? Because…

Right, the view from here in Ohio is that municipal income tax is regressive because not only is it a fixed rate, but also because it disproportionately hits younger poorer working people who are less likely to be land owners.

That would be disastrous for the retirement community of single-family homes with no businesses. No income tax because nobody works, no sales tax because there’s no stores, no funding for the roads, police, fire department. When there’s a lot of retirees in an area it’s very difficult to properly fund schools because the seniors vote against all the tax levies.

The thing about the landlords, flippers, and businesses is that those higher taxes are passed along to tenants through rent, new owners through higher resale prices, and customers through higher prices for good and services, so it’s not a simple 1:1 trade.

Nobody will agree how much skin they need to have in the game. Also too many people concentrated in a neighborhood that are all homesteaded will be a big drain. You could argue that it would require the municipalities themselves to reform their zoning to allow more uses, or it could make them merge/consolidate with others, but more likely we’d just get stuck at an impasse like Prop 13 has done to much of California.

32

So, I wonder if you could have a quintile-based property tax progressive rate.

If the current rate is something like 1.00% (100 cents per $100 value), a half-a-million-bucks house costs $5,000 in property taxes each year, right? But if you divide the home values into quintiles, maybe you get something like this:

Lowest quintile: homes <$100,000

Second quintile: $100,000<homes<$250,000

Mid quintile: $250,000<homes<$500,000

Fourth quintile: $500,000<homes<$1,000,000

Highest quintile: $1,000,000<homes

Maybe we tax value of less than $100,000 at a 0% rate, the next $150,000 value at a rate of 0.50%, the next $250,000 value at a 1% rate, the next half-million value at a 1.5% rate, and any value over 1 million at a 2% rate.

Totally making the numbers up here, so please don’t quibble with how insanely high a 2% rate would be–instead, could a graduated system like this work? Is it in effect anywhere? If so, how’s it working out?

Edit: a bit of Googling is showing that, of course, this isn’t some new idea. But I’m having trouble finding evidence that it’s been implemented anywhere.

33

I don’t get why liens never come up as a solution to these problems.

You can be a pensioner struggling to pay your property taxes on a fixed income or a retiree who sells your house and moves to Florida to live like a mogul because you’ve accumulated millions in capital gains over your lifetime, I don’t think you’re allowed to do both.

A certain minimum property tax is required to be paid in cash that’s based on when you originally bought your house, the rest can optionally be applied as a lien against your property, with some reasonable interest rate a few points above prime applied to it. You’re still allowed to live in your house for as long as you like, it’s just when you sell it, a big chunk of your sell price then immediately goes into the pockets of the government before anyone else gets paid.

The government can then package up a bundle of these liens and sell them on the private market to fund schools and road paving. There’s still a minor subsidy for long term home owners but not the obscene subsidy that’s happening now.

34

While I think this is actually a pretty good idea, you can pretty easily see why it isn’t politically popular.

The estate of the deceased would not enjoy seeing a potentially large amount of the inherited home’s value going immediately to the local government (likely not even where the beneficiaries live). And what happens when the tax lien is greater than the home’s value (not too hard to imagine if you live there long enough and values rise enough).

“Local Government Takes Possession of Dead Grandma’s Home Due to Tax Lien” isn’t really a winning political headline, even if it is good government policy.

35

That’s what Colorado allows.

36

I would say both of these are true. It is regressive to tax illiquid wealth (such as real estate), because it places a larger burden on those who have less ability to pay. It is also regressive because it’s levied at a flat rate.

Income taxes can also be regressive, depending on the rate schedule. Flat rates without exemptions are always regressive.

Potentially, but usually a retirement community is set up with a homeowners association that handles the fees and expenses of the community. Owners should know what they’re buying into.

But for other communities that have low income, low property values, and low sales, that is why many states support poorer areas with statewide taxes. Expecting every local area to support itself is yet another way a tax system can be regressive

“Skin in the game” fine, but it needs to be recognized that money is not the only skin. If a person is allowed exactly one property exemption, whatever locale they choose is skin in the game. It’s where they have the most interest in maintaining property value, which should correlate to wanting to improve the quality of life in the area.

37

That would be a disaster for bedroom communities. And natural persons get lots of benefits from local taxes. They send their kids to school. They use the paved and plowed roads, they benefit from police, fire, and emt services provided by the town. They use the town libraries. …

I just wanted to say, this only makes sense. The town should have a property tax goal (reached by its budget, or local law, or whatever) and should then split that tax burden over the properties, not just blindly charge a fixed rate.

That’s a really interesting idea. Progressive rates work for income taxes, maybe they’d also work for property taxes. If they did that, they’d have to review property values and “re-quintile” regularly, too, but that’s probably not a large burden.

38

The problem arises when it doesn’t account for inflation, especially local inflation engendered by the higher cost of living. When property values skyrocket, but the city keeps its budget the same, that means they’re not paying public staff more. Public staff won’t be able to afford property in the city.

That’s what’s happening where I live: fewer new teachers are applying for jobs in our city, due in part to the disparity between the housing costs and the offered salary. And that disparity is due in part to revenue neutrality.

39

Any proper budgeting process accounts for inflationary salary increases for employees. Obviously, your town is having issues with aligning taxes and spending. But no property tax process should start with “what were last year’s tax rates?”, as the trends in property prices are often out of sync with the rest of the economy. They ought to start with “what do we think we need to spend next year?”, along with any legal restraints and political considerations on what taxes they can charge.

40

It’s only a disaster is you ignore the rest of my tax proposal:

The basic problem is that taxing the property of individuals is not a good way to fund community services. It’s one of the reasons we have such disparities between communities. The tax base needs to be grounded on the ability to pay, and owning a property to live on is not a good metric for that.