WILLisms.com: Trivia Tidbit Of The Day: Part 267 -- Property Taxes.

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Trivia Tidbit Of The Day: Part 267 -- Property Taxes.

Property Taxes-

As a new homeowner, property taxes are suddenly on my mind quite a bit. I knew property taxes were somewhat exorbitant, but now I know they are. It's just plain shocking to think that such a high percentage of my mortgage payment is actually taxes.

And I don't think I am being a paranoid, fundamentalist, anti-tax zealot about this, either. Property tax rates have crept upward over the past quarter of a century (.pdf):

Interestingly, some states have it worse than other states.

About 3 dozen Trivia Tidbits ago, we noted that Massachusetts actually has a lower state and local tax burden than its reputation would suggest (17th lowest among the 50 states). New Jersey, meanwhile, has the 10th highest state and local tax burden.

Part of that formula is the income tax rate. But a lot of it is property taxes.

Here is the tale of two states, one that passed property tax reform (Massachusetts), another that did not (New Jersey) (.pdf):

In 1977, Massachusetts had the highest property taxes in the nation while New Jersey had the second highest property taxes in the nation. As the table below demonstrates, in 1977, Massachusetts residents paid $97 more per capita than New Jersey residents.
In response to voter dissatisfaction, both states attempted to deal with property taxes in very different ways. Massachusetts voters, through the initiative process, instituted local spending limits. Conversely, New Jersey amended its Constitution to create an income tax with all the revenues used specifically for property tax relief. The two contrasting measures produced very different results and should serve as an instructive guide for policymakers in dealing with property taxes.

....

While Massachusetts adopted Proposition 2 ½ and was reaping the benefits of a flexible, stable property tax system, New Jersey took a different avenue. Rather than limiting the property tax levies through a method similar to Proposition 2 ½, New Jersey lawmakers increased state taxes to finance additional local government spending. This had very little effect on reducing property taxes but did pay for more government spending and more property taxes. The result: New Jersey has now overtaken Massachusetts as leader of the property tax pack.

The proof is in the pudding.

Ideas matter. Policies matter. Ballot measures matter.

Property tax reform. Now. Let's do it. In Texas. Everywhere.

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Posted by Will Franklin · 13 February 2006 08:17 PM

Comments

With the recent rise in home prices, I am now being taxed on a paper profit. 1/3 of my mortgage goes to taxes. IN VIRGINIA. If this keeps up, my mortgage payment will be higher when I pay off my house than it is now.

And Virginia wonders why people don't retire and stay...

Posted by: Jim at February 14, 2006 08:00 AM

I don't escrow my property taxes. So last month I cut a check for 2005's taxes.

It's quite painful. I am thankful that TX doesn't have a state income tax, though.

I agree with your sentiment, Will but look how difficult it is for TX to figure out how to fund our schools...

Tax reform? Probably not any time soon.

Posted by: Hoodlumman at February 14, 2006 08:40 AM

Until 4 years ago the taxable value of my home was 20% below market value. Today it is equal to market value which has increased 30% in as many years. Why did Harris County start making sure they pegged it to market value? To increase revenue of course. How can the schools and city/county still be broke? Unfunded mandates, reduction in Federal grants? Correct me if I am wrong but don't zero% of property taxes go to the state of Texas?

Posted by: thomas at February 14, 2006 10:18 AM

Oh, the joys of home ownership! (and puppy ownership!) What discoveries and adventures lie ahead?

Posted by: Auntie Sal at February 14, 2006 12:27 PM

Hood,

We escrow ours, so it's not as big of a single hit, but it's still ridiculous.

And, yeah, unfortunately, Texas has the same basic Robin Hood school funding system that California has, so we're not going to have property tax relief in the very near term.

Posted by: Will Franklin at February 14, 2006 12:47 PM

Using only the tax rates would not lend itself to an accurate analysis.

Taxes are calculated by multiplying the assessed valuation, or taxable value, by the tax rate.

Before 1982, there were few taxing authorities who used computerized valuations - most used a manual appraisal system that was years out of date. Up to 1977, the local tax office was using the apprisal manuals and costs from 1962 - without change.

Since the valuations did not change from year to year, the governments would chabge the tax rates.

Now, the tax appraisal bodies change the valuations on a regular timetable while the taxing authorities can change the tax rates yearly.

So, any chart that only shows the tax rates will only tell part of the story.

Posted by: Poole at February 14, 2006 09:39 PM