I just received my property tax bill. Although in the last two years, my home's value has dropped by 1/3, my tax bill is the highest ever. This January, local tax authorities will begin to send out property assessments for 2009, telling homeowners what their property is valued at, and how much their tax bill is.
But many assessments won't reflect any of the steep home price declines that have been making headlines for the last year or so. And even if property assessments do drop, property tax bills won't necessarily be any lower.
Property taxes climbed relentlessly earlier this decade as home prices rose, according to Peter Sepp, spokesman for the National Taxpayers Union. This year Americans will pay more than $400 billion in property taxes, up about 25 percent from levels in 2004 and double what they paid 10 years ago. At best, says Sepp, those steep increases may start to level off.
Even if local prices are way down, taxpayers may not get a lower assessment because there can be a big lag between when the home sales used to calculate them
take place and when the assessment is actually issued.
And tax collectors often raise tax rates to offset lower assessments in order to meet their budgets -- which will be very strained this year. Assessments go down but tax rates go up, so the tax collections stay roughly the same.
"State and local governments depend very heavily on real estate taxes and they are reeling from a loss of revenues from sales taxes and other sources," said Bruce Hahn, of the American Homeowners Foundation.
In good times and bad, government will find a way to fund itself, indeed to expand. It is the only entity on earth with police powers to extract as much money as it wants from us and if even that's not enough, to print as much money as it wants, even if that means the value of our money decreases.
Morals of the story:
- If you're contemplating looking for a job, look for a government job. As I've said in previous posts, especially in tough times, unless you're a star employee or a great entrepreneur, a government job may be your last and best home for decent-paying, secure employment.
- Even if times stay tough or even get tougher, expect your taxes to rise further. Obama has promised a tax cut for 95% of Americans while also promising access to health care and college for everyone including the 13 million current illegal immigrants, spending $150 billion on alternative energy, $150 billion
more on an infrastructure package, etc.
You don't need to be a mathematician to know those numbers don't come close to adding up. To pay for his promised programs, he will have to raise taxes on the middle class, the group that pays the lion's share, the most painful share, of taxes.
And remember that candidates run more moderately than they govern. Obama, his all-left-of-center advisors, and all the new-government-program-seeking liberal special interest groups that supported him will clamor for ever more risky schemes that will require your federal income tax, social security tax, self-employment tax, payroll taxes, state income tax, local income tax, sales tax, property tax, capital gains tax, bridge and tunnel tolls, user fees for parks, etc., plus the myriad additional taxes embedded in products you buy, for example, from the hefty levies built into the price of filling your gas tank to the price of a bottle of Bud, and if, after taking all that money from you, you still manage to die successful, estate tax.
Taxes essentially force the middle-income earner to work for free for the government for the first half of every year. You're essentially a slave and the government is your master.
Ask yourself whether working half a year for no pay is worth it, not just to you but to all Americans. Think, for example, about the public schools so bad that millions of parents wish they could afford to send their kids to private schools. Think about the public hospitals you shun because you know you'll get better care elsewhere. Think about the government's nonresponse, even in emergencies, for example, Hurricane Katrina.
In sum, when you're staring at that voting machine, think about whether you want to spend more or less of each year working for no pay to fund the government---assuming the government can get the voting machines to work.
How long have you had your house? Under Prop 13, anyone who bought before 2000 or so is making out like a bandit on property taxes, even if they're paying more than before.
ReplyDeleteHm. Property tax assessments are controlled by prop 13 and the birth of the conservative no-growth-for-goverment movement in California. Linking the housing bubble to Obama's fiscal policy seems like a stretch. (McCain's proposal is worse from a property tax standpoint; he wants to purchase mortgages from the banks at their current value, thus keeping the bubble inflated, or at least he did during the last debate. The proposal may well have changed since then.)
ReplyDeleteSomething I find interesting: year on year, the largest contributor to the Federal tax bill is the military, in
- direct cost
- cost of contractors
- cost of mercenaries (yes, we're recruiting from, for instance, Chile these days - http://www.theage.com.au/articles/2004/03/05/1078464637030.html - that article is 2004, but the practice continues)
- cost of benefits for recently out of service GIs
- cost of health care for veterans
- cost of pensions for veterans
- cost of pensions for veterans who put in their 20 years for us, then get jobs in the State, Defense or US Postal Service etc who qualify for pensions on both
- cost of weapons systems design, engineering and manufacture
Conservatives generally, and you as well, often discuss costs and look for savings. Yet, I never see these costs systematicall considered when conservatives talk about the cost of government.
500 dollar hammers, yes. Particular weapons systems, yes. But a real rethink?
Many of these programs are, of course, set in stone - we cannot fairly cut back on veterans health or retirement benefits, and we should actually be paying our serving soldiers more, so that it's not a benefit for them to retire and turn around and work for Blackwater instead.
But there are things we could, do, surely. We could introduce legislation explicitly for the officer corps ending the practice of double pensions effective with induction dates of Jan 1 2009. (Officer pensions are much more costly than the others, and the forgiving rules for the less-rewarding military careers are fine; the officers are often being educated at our expense, and rewarding them with pension plans that are a great incentive for folks with much less chance of advancement seems counterproductive to me.)
We could start implementing fixed bid contracts for our military hardware, rather than leaving "cost overruns" open for renegotiation in every one of these contracts
We could recognize that many of the jobs in the defense sector amount to white collar welfare.
I find it very intersting how unwilling to look for real budget savings in the largest single sector of Federal spending fiscal "conservatives" are.
We need to reexamine our budget, and I was taught that while clipping coupons is helpful, you need to start with your largest fixed expenses and reevaluate them first.
I bought my house nine years ago and still am paying $4,000 a year just in property tax for a middling home (1900 sq. ft., average construction quality)in a middle-middle-class neighborhood 50 miles from San Francisco.
ReplyDeleteDo you call that "making out like a bandit," especially when you add up all the other taxes that all citizens are required to pay.
Like most middle-class people, when you add up all the taxes and government-imposed user fees, the government forces me to work for half of every year at no pay.
Hardly "making out like a bandit."
Dr. Nemko, you're making out like a bandit. My parents are paying nearly $9,000 a year in property tax. My family's home is a 1600sq. ft. raised ranch in a middle class neighborhood and is 60 miles north of Manhattan. It's on a 1/4 acre lot.
ReplyDeleteAs a middle-class person myself, I understand watching half my paycheck disappear into government coffers. But we should be fair about these things - taxes are high, but we get a lot in return. It's not as if we were paying tribute to royalty after all, the money is used on our communal upkeep. Of course, tax funds can always be used in useful or wasteful ways...but that's another story.
ReplyDeleteThe previous commenter said he believes he gets a lot in return for the 50% of his income that he pays in taxes.
ReplyDeleteI've rarely heard that before. Dear readers, do you feel the same way?
A lot in return? Absolutely not!
ReplyDeleteI have a question: if the private sector did everything the government is currently supposed to do for the public (everything from defense to road maintenance to border & immigration control), how much would it cost, and would it be done better?
ReplyDeleteJust curious.
First, I would have government do less.
ReplyDeleteFor example, education is the field I know best. There are no fewer than six layers of government supervising what a teacher does. I'd eliminate five, if not turn the whole enterprise over to the private sector.
2. Yes, I am convinced that the private sector would do a better job of nearly everything the government does. For example, the private sector would certainly eliminate teacher tenure. Millions of teachers, who after just two-years, got lifetime tenure, and now are burned out or failed to keep current, thereby poorly educating millions of kids each year.
More broadly, because the government has a monopoly, it has less incentive to provide quality services than do private companies. If a private company doesn't do a good job, there are other private companies eager to take their place.
Also, government agencies have far less incentive to provide the taxpayer bang for the buck than do private corporations. Those agencies know that not only are their jobs secure if they merely do minimal work, they don't need to be cost-effective because the government has police powers to raise taxes and print money. Companies need to be careful with their dollars or they'll get eaten alive by competitors.