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Some Wisdom On Property Taxes From A Very Odd Source

tax

“As Property Taxes Become a Real Burden, Can Backlash Be Far Off?” screams a headline from an article in the (gack….choke…) New York Times. We will avoid the obvious comments about stupid questions and proceed with the point. Of course the backlash isn’t far off!

Let us illustrate with an example. In Westerville there is a pending levy vote on 7.99 additional mills. For a house with a value of $170,000 (a reasonable middle-of-the-road value there) this will bring a tax increase of $475 per year which will mostly go to salary increases for administrators and teachers. But wait a second. Just last spring an additional millage was voted to a “capital improvements” renewal levy that will cost at least $75 additional dollars per year, leaving out the increase on a renewal caused by being taxed at the current valuation rather than the previous one (tens more dollars per year). Let’s call it an even $100 more per year. And, oh, yes. Forgot to mention that suddenly the fire department needs 2.7 additional mills. That’s about $160 more per year.

Now all of a sudden you’ve got, when all of the voted millages kick in, an additional $735 dollars per year for so-called “necessities” that aren’t really. That’s an additional $61.25 per month that is unavailable for spending on items from local businesses like restaurants, clothing, grocery and hardware stores. Throw in various “throw-away”  millage increases for mental retardation, libraries and various other socialistic tax vampire increases and you’re looking at nearly $900 per year in additional taxes over two years.

The theoretical house in Westerville 12 years ago may have been valued at, say, $122,000 then and $170,000 now (the obvious recent drop in value due to the market crash was, of course, ignored by the Franklin County Auditor who chose to hold the property valuation line in most cases. The Delaware County Auditor George Kaitsa claims that some values have actually increased  in the Westerville School District portions of Delaware County, proving that Fantasyland actually exists and the Delaware County Auditor is its Great and Powerful Oz. Pay no attention to that man behind the curtain). In other words, the house supposedly appreciated by about 39% in 12 years. But what about the taxes? That same house paid about $1750 per year in property taxes in 1997 and now pays about $3300 in taxes or about 89% more currently. The growth of current taxes has outstripped the value of the house by a factor of over 2 times. Now if the new millages pass and the taxes take effect that additional $900 per year comes into the picture and suddenly the $3300 per year in taxes is $4200 per year. That means in 13 years the value of the home will have grown 39% (assuming a continued flat real estate market) and the taxes will have grown by 140%, outstripping the growth in value by about 3.5 times. This thoroughly crushes the argument that failing to pass levies leads to decreases in property values. Who wants to move into a tax district where the taxes grow 3.5 times faster than property values? These are ugly numbers that should be a wake up call to voters who know them. We’ll see. The tax districts certainly aren’t being honest about it.

The article itself attempts to make some absurd points about New York real estate values and taxation. It is the New York Times, after all, the home paper of Pulitzer Prize winning Stalinist dupe and “progressive”  Lincoln Steffens (who once gushed of the Soviet Union of the late 1920’s and early 1930’s “I have seen the future- and it works!”) and hyper-Keynsian Paul Krugman who still thinks the fascistic economic misadventures of Hoover and Roosevelt that created a 17 year long “Great Depression” (24 years if you count how long it took for the stock market to recover) from a rather nasty but potentially short-lived recession (ala the very deep, short and little known depression of 1921) saved the country from the same “Great Depression.” For instance

Property taxes are high around here in large part, of course, because property values are high. But there are several reasons why property taxes are higher here than in other costly parts of the country. Unlike California and Massachusetts, there are few, if any, longstanding brakes in place that kept property taxes down (and, in California, led to disastrous revenue shortages). Public employees unions are powerful and politically feared. And we’ve come to expect good services — top-rated schools, nearby police in little boutique towns — and have been willing to pay for them.

Taxes are high because values are high? Well, no kidding but what about the points made earlier in this analysis regarding the rate of tax growth? Taxes are high because unions are feared? Why are such a tiny percentage of workers so fearsome? And frankly, the claim that California has been “deprived of revenue” due to property tax reforms is to approach the subject as if the state of California had a right to that revenue without recourse to a vote which proposition 13 brought to a halt in the late 1970’s. It doesn’t (Ohio failed to learn that ugly lesson and recently passed into law a bill that allowed school districts to offer permanent levies that feature tax rates that grow with property values without an intervening approval vote; hence the rapidly burning fuse on the property tax powder keg). And “good services” need not necessarily be expensive. Neither can they be cheap.

The fact is that school systems and bureaucracies dependent on the property tax have become bloated thanks to property value increases that far outstripped inflation. Now that the property value gravy train is derailed they all are, like all leeches, starved for more lifeblood in order to continue growing. That’s right. The real problem is not that these agencies need the funds to operate properly and efficiently, they need them to continue to grow. The fact is that what the Times is calling “good services” are often rapidly expanding unelected bureaucratic agencies that stifle small business and trample private property rights (zoning and planning boards, municipal business sign and licensing provisions, etc).

The so-called “good schools” are likewise unresponsive to parents who want their children to be taught how to read at an intelligent level and reason in a manner that comports with their personal values. The schools’  goal is to foster thinking that state and federal mandates designed to create worker drones (“School to Work”) requires. This “education strategy” has created such abysmally dull thinking and widespread illiteracy in the United States, which in the 19th century was able to boast of literacy in the high 90% range, that it now declines to keep statistics on the subject. So much for “good services.”

The cost of the growth of government is tacitly admitted here

…several reasons why property taxes are so high: unreasonable state mandates piled on local governments; income tax dollars inequitably distributed back to local governments; far too many local governments — more than 10,500 in New York — that need to be consolidated or eliminated; fraud and waste; and economic stagnation producing no expansion in the property tax base. You could throw in crippling Medicaid costs and unsustainable pension costs.

The specter of unfunded mandates rears its ugly head. Also, what’s with “redistribution” of money from the state to local governments? Why is the money being taken from those jurisdictions in the first place? Money cannot be taxed and run through a bureaucracy without scraping off and, frankly, wasting significant percentages of it (conservatively 70% and up). Why not just drastically cut state taxes (and corresponding mandates) and allowing the local governments to go to voters for what they actually need to run without intervening and ultra-expensive bureaucracies? The alleged fraud and waste at the local level is obviously only compounded at the state and federal levels which are far less responsive to electoral safeguards. It’s a lot harder for crooked politicians to survive in small towns than it is in Albany or Columbus or Washington DC (and a lot less expensive). Everybody knows who and what you are in Podunk.


The last 2 paragraphs of the article tells the tale.

Gerald Prante, an economist with the Tax Foundation in Washington, said at least people feel they get something tangible from their local taxes and can tolerate them if they believe they’re getting what they paid for “If I told you I spent $40,000 on a car, it doesn’t tell you much unless you know what kind of car,” he said. “If it’s a Lamborghini, it was probably a good deal. If it was a Saturn, it’s not such a good deal.”Thus, for all the angst, the fact that most local school budgets still routinely pass indicates we might be more likely to grumble than to cut close to home.

The problem is that many suburbanites who bought the luxury car a few years back now can barely afford the Saturn.

Are taxpayers actually looking at the costs versus the return yet? When they do- WATCH OUT! And help spread the word.

Posted in Commentary, Economics, Private Property, Taxation.