Saturday, March 08, 2008

Property Tax

The idea of property tax reform is interesting to say the least. However, after speaking with many people, the concept of property tax reform is different for nearly each one. A person’s property tax bill is based on assessed value of the property. It is not the property assessment that is the problem, but the tax rate. A property assessment increase does not mean your property taxes will not go up and conversely a property assessment decrease does not mean your property taxes will go down.

What determines your total tax is the assessed value multiplied by the property tax rate. The property tax rate is determined each year based on the passed budget of each taxing authority divided by the total of all assessed properties within the taxing authority jurisdiction. Therefore, assessment has little to do with any increase in taxes paid. The primary culprit is the budget or proposed spending by the taxing authorities such as airport, library, schools, local government and county government. The rate of increase in these budgets actually determines how much more each of us will pay in property taxes.

If our property values increase by 20 percent this year and the government passed budgets increase by 3 percent, then the property tax rate will decrease by 14.2% but our tax bill will be 3% larger than last year. Because property values are not increasing currently, but inflation is we can expect our property tax rate to be higher next year resulting in a higher tax bill next year; unless our elected representatives restrict spending just as each of us tighten our belts in lean economic years.

The primary reason why property taxes in the past have increased so dramatically for some is that reassessment of property was not standardized nor was it always. This led many in the area not to pay their fair share of the government burden, leaving the rest to pay more. Now that there are laws requiring reassessment and standards for assessment, the property tax mess should for the most part be over. The way we control our property taxes is to control our elected representatives who spend our money. If we do not control our elected representatives, then our taxes will increase.

Eliminating Tax Financing Authorities and tax abatements will reduce the tax shifting from “special” interests to us. These “gifts” increase our cost in several ways. They require police, fire, road service, snow removal, schools to name a few services, yet do not pay taxes to help pay for the increase costs for up to twenty years leaving the rest of us to pay for their services while their abatements or TIF is used to subsidize their construction or land purchase.

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