Comment by Melatonic
5 hours ago
True but imagine you're in the same home for 30 years. That home with somewhat affordable property taxes could double in value and now you owe double the tax. With no real increase in useable income unless you sell
5 hours ago
True but imagine you're in the same home for 30 years. That home with somewhat affordable property taxes could double in value and now you owe double the tax. With no real increase in useable income unless you sell
That's just property taxes in a nutshell, though. We periodically see discussions about land value taxes and it's a feature of those as well; proponents shrug and point out that you didn't do anything to earn that extra value so it doesn't belong to you anyway.
I'm not taking a position here other than to say I don't believe there is a universally acceptable tax. Every tax I've ever read about or experienced personally, someone has made a valid argument for why it leads to a bad outcome or is otherwise unfair. You have to decide what gets priority, pick the system that matches that, and then be honest about where you're making tradeoffs and why.
But property tax is just absurd.
The property was purchased with "after tax" money. So at purchase date the value was already taxed.
If one sells, and make a profit, we tax that profit. Why ask for a tax on the value of the property, each year.
There should be local taxes, and there are. To fund services and whatnot of course. But taxing a percent of the current value of a property is unfair as the owner may live in there with no intention to sell and potentially no revenue whatsoever.
Why is it unfair to tax a property that is receiving services at a rate proportional to its value? One part of the value of the police service this is paying for is for protecting your property, and certainly that is more valuable the more valuable your property is.
And one value of property taxes (one that is dysfunctional on empty lots) is that it encourages "maximum" use of high value property (lots of bad particulars here, but the overall direction is about right). While we may dislike an elderly person being effectively forced out of the home they have lived in for decades, it is usually for more "productive" uses (for the market definition of productive).
As an example my in-laws have three properties in Hungary that are empty, and have been for quite a few years. Cumulatively they get something like ten weeks of use in a year. But since Hungary does not have property taxes there is almost no incentive to make better use of these properties (yes, they could rent them out for an advantage, but there is no disadvantage pushing them to sell).
Isn't all money "after tax" though? It all goes around. The exception would maybe be the treasury minting loans.
Everything is unfair. The housing crisis is unfair. Young families struggling to afford a family home is unfair. Having to pay into a pension system you'll never get to use is unfair. Land and housing is different from personal property. There's only so much to go around and we'll have to share. A property tax is one tool to incentivize efficient allocation, and to drive prices down.
I haven't researched national stats, but from the experience of having lived in two states, one blue and one red in case that's important to a counter-argument, both limited property tax to 3% annual growth, even if the valuation is higher, preventing that exact scenario. It only jumped to tax on the correct valuation when the property exchanges owners.
Sure this doesn't prevent issues if someone is stuck on savings/Social Security, etc., but it prevent surprises, such as a boom in your area causing sudden explosion of equity and taxes due.
The cap required it be your residency, i.e. you aren't renting it out and you are a citizen.
3% yearly compounds to doubling the value in 24 years.
So even with the cap, it's more than likely the property tax costs a typical owner more than double what it did 30y ago.
Not a big deal if you bought at age 20 (unlikely) and still receive some work income. But if you are retired, it stings harder each year.
Again I can't speak for every principality across the board, but for the places I have lived, it seemed very fair. Regarding your concern, I might have been unclear, but when I said "limited property tax to 3% annual growth", I meant it can be lower, but doesn't exceed 3%. It adjusts with inflation unless inflation is over 3%, so no matter what, the owner is winning if it is their primary residence, with the caveats I previously mentioned.
Inflation adjusted though it is like a 10% increase.
Property taxes are not that simple, usually. E.g caps on growth of total property tax receipts or on increase per year, rebates, other schemes.
The typical way property taxes are done in the US is that the local government first sets a revenue amount, then a tax rate is determined which produces that much revenue. You don’t have a situation where property values double and the local government automatically ends up with double the tax revenue.
The government should need to accept its 2% in kind. I guess by the time people cannot pay these taxes any more they are much closer than 50 years to their eventual death. Thus it only reduces eventual inheritance. Problem solved
Most of the problem solved, but does mean that generational wealth transfer stops being a way to climb out of instability. Just another chip in American class mobility.
you could rent out a room though?
but you also have a much improved quality of life as a result of that property value going up, because theres more desirable stuff around
Being stressed about finding the money to make your payments is probably not a much improved quality of life. And they probably picked the place cause they liked it as it was, so don't be so sure about appreciation of those new developments anyway...
Why should I get to have that sort of externality on others just because I have more money than them?
People refinance all the time.