Soccer Dad

The taxman cometh

For some reason or another many in the political class can't break their addiction to taxes. Hurt by the prospect of more citizens acting responsibly and buying hybrid cars that use less fuel California and Oregon are considering "mileage taxes." Everyone pays for the mileage they drive regardless of whether they're driving gas guzzlers or not. You see states need those gas taxes for highway projects. (But they won't need as much money to clean up/fight pollution either!)
Makes me think of this:

If you drive a car,
I'll tax the street.
If you TRY TO SIT,
I'll tax your seat.
If you get too cold,
I'll tax the heat.
If you take a walk,
I'll tax your feet.

Then there was this ode to property taxes in the Washington Post, "Assess This." The author David Brunori can't praise property taxes enough. For instance:

The property tax is simple to administer and to pay. We don't spend a lot of time on it. There are no forms to file, and no accountants need be hired. And it can't be evaded. This helps minimize the government's administrative costs. But honest taxpayers should appreciate it as well.

Earlier in the article Brunori had mentioned that in the past property taxes were poorly administered:

And the system was plagued for much of the last century by shoddy administration, which meant that identical houses were sometimes assigned vastly different values. Though most of those problems have long since been addressed, the property tax remains an object of public scorn.

Well actually that's been my experience. And several times within the past fifteen years, so it's not exactly ancient history. Here are my gripes:
1) We bought our house in 1991. Six months later we received a tax bill with an assessment that was 40% higher than what we paid for the house. We went downtown for an appeal with an assessor. He rejected our appeal. So we had to go downtown a few months later for a hearing before the assessment board. My wife brought the documents showing how much we paid for the house and the board accepted our proof, knocking our assessment down to the purchase price. So I had to take off parts of two days of work to get the correct result.
2) The second time we were assessed at about 10 - 15,000 dollars more than we could have sold our house for. So instead of going downtown we filed our first appeal by mail. It was rejected. So we appealed the next time before the board. We showed that houses comparable to ours had not risen in value and that the ones that had additions and thus were no longer comparable. The assessor representing the state said that we were the ones who had to prove that the other houses had additions. (What about due process? Wasn't that the state's burden!?) Additionally we showed that the houses that were truly comparable had sold for little more than we bought our house for. The data was from the previous 3 years, as per the state's guidelines. That argument was rejected (arbitrarily) because those sales occurred too early in the cycle. (Nothing in the guidelines suggested that proximity to the appeal was necessary.) Our appeal was rejected and the too high assessment stuck for the next three years.
3) The next time I decided to appeal our too high assessment, our first attempt, by mail was rejected. The next time I went to an appeals board. I had photographs showing that a higher priced house had an addition that mine did not. I showed that the calculation for our property area was wrong. None of it mattered. The appeal was rejected. (The one mistake I made was referring to a previous ruling of the appeals court. A friend with a nearly identical house used my materials fight his appeal succesfully. I referred to my friend's result. I wasn't supposed to do that. Still I had plenty of evidence that the assessment was too high.) When I lost I decided to appeal to the tax court. Before I was scheduled to be heard in tax court, I received a phone call offering to split the difference. Apparently the state does all it can to avoid going to tax court. While the assessment was too high, it was not unreasonable.
Remarkably, the two assessments I've had since then have been low even though property values (especially last year's) were rising. I don't understand how that happened. But it just underscores the arbitrary nature of the assessment process. The fact that there are no papers to fill out gives the government a lot more control over the process, fair or not.
I've thought about what to do about this sort of abuse. One possibility is to make an assessment the equivalent of an offer. A homeowner would have the option of paying the tax bill or selling his house to the state. Of course I doubt people would just move and the state doesn't need to become a big property owner.
The better approach might be to consider the value of a house when it is sold. Assume a straight line appreciation and calculate the yearly taxes based on that. If the sum paid is greater than the sum calculated, the homeowner would be refunded the difference. (If I don't pay the required tax the state will penalize me. Why shouldn't the state have to repay me if it takes too much for taxes?) Hopefully the threat of having to repay taxpayers for abuses would serve as a rein on arbitrary assessments. Might this be too much work? This sort of calculation could easily be done with a spreadsheet.
The gist of Mr. Brunori's article though is that the better quality of services paid for by property taxes repays a homeowner by making his property appreciate in value. Again, from what I've observed I don't find this terribly convincing. I live in Baltimore City where the property tax rate is twice that of surrounding counties. Yet the schools and services of the city are far inferior to those the neighboring jurisdictions. Appreciation in home prices is less due to the services than to sociological phenomena. For example, Baltimore is considered a very desirable location for Orthodox Jews. So in my neighborhood there is great demand for houses and the prices are spiralling ever higher and higher. But that has nothing to do with our higher rate of property taxes or lower quality of services.
If the assessment office heeded its own regulations I might accept Mr. Brunori's arguments. But from my experience there's been nothing fair about the process. Worse, I suspect that most people don't fight unfair assessments so the state usually wins without a fight.

Posted by SoccerDad at February 16, 2005 5:29 AM