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dwot (99.56)

Taxing battles

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December 19, 2007 – Comments (5)

There is a very good article outlining some of the issues with respect to property taxes and local budgets.

One of things that is happening is that in some areas, because tax assessments lag property increases and declines, people are still seeing their property taxes going up while they see their equity going down.

This is going to hurt -- state and local property taxes increased 50% from 2000-2006.   So now beginning the battle of how to deal with the bleeding local budgets.

I get so sick of the constant downloading of costs and tax burden from age to youth, and I don't see Florida's plan as anything but lets-just-head-our-young-people-over-the- head-with-a-2-by-4, again.  They are still getting up.

Florida has a plan that strong favors longtime homeowners over new buyers and part-time residents.  The part time residents are probably not youth, but targeting new buyers hits up younger home owners.  There is no justification for a discriminatory tax policy. 

And what of new buyers who aren't younger.  Well, if I was looking to buy in Florida right now, and I have definitely considered the idea of retiring to some place warmer, my thoughts are if you expect me to carry a bigger tax burden you are nuts.  You already have droves leaving because of the high cost.  So, they have all those places that need to be sold and they are sticking it to new buyers that might help to bail them out.  Good plan...

I have thought through how my local government responded to trying to manage budgets.  Those development taxes are an enormous steal from young people for older people taxes.  It probably isn't younger people buying the new homes, but a new home that is priced $50k higher to pay development taxes increases the price of all homes.  So, those buying the new homes get to charge more relative to the market and the vast majority of the development taxes are passed on by inflated home prices.  They the person entering the market is the hardest hit by it.  Well, that is assuming you don't have the crazy speculation and housing is priced fair for the costs.  So, we end up with young people saddled with an extra $50k of mortgage debt when the fair thing would be for everyone to pay an extra few hundred on their taxes each year and give young people the same opportunity older people had.

 The article estimates that falling real estate prices will reduce property values by $1.2 trillion dollars, and that will be a lot of local tax revenue lost and the end of piggy backing on increasing equity to increase taxes. 

Looks like those infrastructure replacement plans are going to be delayed...

 

5 Comments – Post Your Own

#1) On December 19, 2007 at 2:35 AM, zygnoda (26.60) wrote:

Yipee!  I hope we get some more pot holes. 

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#2) On December 19, 2007 at 7:51 AM, dwot (99.56) wrote:

A lot of investors think the fundamental of some commodities used in rebuilding infrastructure are going to do well because so much infrastructure needs replacing.

I could have sworn I read somewhere that some municipalities are facing downgrades on the debt they owe, so they will be paying higher carrying charges.

Infrastructure may very well need replacing, but I suspect there won't be the money to do so. 

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#3) On December 19, 2007 at 9:45 AM, dwot (99.56) wrote:

What you do...  My quote of the day:

"If by deflation of assets you are referring to house prices, you are certainly a contrarian. It will be interesting to see who is right."

I just have to put this one in down for the record, it is from my husband with respect to our Vancouver housing market. 

We are still getting messages and news stories here in Canada that our housing market is going up next year... 

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#4) On December 19, 2007 at 9:53 AM, buggoessplat (91.98) wrote:

This is an interesting topic, and it certainly hits home.  My fiance and I live in Florida, and neither one of us is sure how we will vote for the "reform" that Gov. Crist et al. have proposed on the ballot.  

Disclosure - I was pretty lucky with regard to timing of my home purchase.  I bought in September, 2000 in Lakeland, when the home price was more affordable than the rent, even if you consider ~$300/month or so in "maintenance" for things like the water hearer taking a dump.  Mortgage + Taxes + Insurance is $951 per month on a 3BR/2BA, 1700 sq.ft. home with a 15 yr. mortgage at 5.125% (Refi'd my 30 year at 6.875% in mid-2002, and happy I did).   At the time, this house, in a good neighborhood in South Lakeland, went for $113.5K.  I can't believe the appreciation, and I certainly couldn't afford the same house now with the same mortgage (if I could find one that low) due to appreciation.  

The homestead exemption for full time residents is $25K, and more importantly, it caps the tax increase at 3% per year.  In effect, my taxes have only gone up at about the rate of inflation since 2000.  Non-homestead owners (part-year residents, businesses, etc.), along with recent buyers (my $113.5K house is still probably worth $200K, down from $240K ~18 months ago) are certainly shouldering the burden, but I am not sure that the proposed reforms go far enough.  Even with depreciation in the housing market, the average tax bill for new buyers of homestead property is about double what it was as little as 5 years ago before the unrealistically wild appreciation.  Coupled with an approximate doubling in the homeowner's insurance rates due to the 3 hurricane year, this adds another $3K per year in cost to my house if I had to buy it again.  

When you figure that the median household income in my county is ~$50K per year, it is a wonder anyone can afford a home now.  I certainly wouldn't want that much debt.  But Crist's bill doesn't really do anything to help the affordability.  It proposes to increase the exemption to $50K, and it adds caps for non-homestead property and businesses, but this only decreases the tax load on a homestead property by ~$450/year vs. the old plan ($25K by ~18 mils = $450).  This still does not really help the new home buyer because of the high purchase price.  $40/month is beer money for a light drinker (if you buy it in the store, not at a bar).  

The larger question is where all of this tax money has gone.  Revenue is double what it was 5-6 years ago, but it isn't like we have more services or roads or schools or anything, even with the population growth.  My fiance is a high school math teacher, and she still makes a paltry $38K with a Master's degree, so it hasn't gone to her.   Now, with Crist's proposed plan, the legislature is wondering where they will cut to make up the shortfall, and they have again threatened to cut school funding from the pittance that it already is.  

It is a bit of a conundrum.  I don't want to vote for such a (relatively) small decrease in property taxes only to have some one not answer the 911 call because fire and police services were cut "due to lack of tax revenue," which is way more than it was a couple of years ago.  

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#5) On December 19, 2007 at 2:43 PM, dwot (99.56) wrote:

Interesting, and if you look at say a 4 months of the year resident, what you are saying is their tax bill is $900/yr more, or $225 for each month living there.  Add the extra $3k year for insurance and the carrying costs for the 4 months per year living there is about $1000/month.  And then your capital is tied up as well.  No wonder people are leaving Florida.

So, scare off the retirement crowd and young people...  Great way to perserve your tax base... 

People are looking to increase their retirement buying power and lifestyle and this policy will simply send them elsewhere.

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