Providing Equitable Property Tax Relief

Adopting good property tax reform is not easy. 72.9 percent of local government tax revenues were made up of property taxes over 2000-2001 alone. Most owner discontent is that they are assessed based on increasing market values, sometimes exponential increases, instead of the fairer option for an owner to pay a set percentage over what was paid in the prior year. The discontent has owners forming property tax relief organizations and making ardent speeches to foster membership. Cutting property taxes is also a major plank in gubernatorial candidates’ election campaigns and state representatives are presenting bills echoing some proposals of these tax reform organizations.

“The outcry is loud now because the increases are taking place at an accelerated level over a shorter amount of time,” Daniel R. Mullins told the Wall Street Journal. He is an associate professor of public affairs at American University in Washington, D.C.

Property taxes are usually collected and used by municipalities to pay for fire and police protection, garbage collection, road maintenance, and other local services. Property owners’ frustration often stems from them not seeing increased or improved municipal services with their increasing tax bills. Housing prices are the prime factors in this ramping of tax bills. While the tax rates in municipalities’ havent increased or decreased, assessments have increased dramatically using the same rates.

Stories from frustrated property owners are many. Peyton Gannaway told the Wall Street Journal that he got a 233% increase in his tax bill on his five-bedroom waterfront home in 2003. This 66-year-old retiree that resides in Crystal Bay, Nevada fought to reduce his tax bill unsuccessfully and joined a local tax revolt in order to protest. David Whetsell, a resident of Lexington, South Carolina, told the Wall Street Journal that his property taxes have increased 20% each year since the year 2000 and started STOPTAX.org in 2004 to highlight these issues. Dr. Harvey Waxman, who retired in 2000, told the Wall Street Journal that he received a 2004 tax bill on his two-bedroom house in North Kingston, Rhode Island that increased 243% over four years. He started RIGHT (or Rhode Island Gets Honorable Taxation) to promote property tax reforms. “It just became so clear to me that something was flawed in the system,” he told the Wall Street Journal.

Illinois, Maine, Nevada, Pennsylvania, and Montgomery County, Maryland have already passed legislation and measures to limit annual tax bill increases. In the wake of this legislation, states such as Rhode Island, South Carolina are considering the passage of similar legislation in their current or January sessions.

Yearly federal aid has also hurt states. The Government provides funds to states to fund federal mandates. The unfunded gaps to the all states amounted to $26.6 billion in fiscal 2004 and in fiscal 2005 totaled $31.9 billion, leading states to depend more on property taxes.

Robert Tannenwald, a Federal Reserve Bank of Boston economist speaking with the Wall Street Journal, analyzed housing and property-tax data to find that normal home prices between the fourth quarter of 2001 and the fourth quarter of 2004 increased at an annualized rate of 8.2 percent as proprty-tax collections rose at a slight lower rate of 6.0%. These findings are affected by factors including the fact that assessments on commercial property and rental homes generally do not increase at the rate of owner-occupied homes and that some states and municipalities have also responded to this problem and already lowered tax rates.

Jerry Joseph told the Wall Street Journal, “With increased property taxes and increased [real-estate] development, you’d think they’d have enough money to not have to raise property taxes or give significant reduction.” Jerry is a 68-years-old homeowner living in Potomac, Maryland. His local county council recently approved a measure to slow property tax increases. Montgomery County Council President Tom Perez told the Wall Street Journal, “We heard from a lot of residents and we listened.”

You may like these other stories...

Divorce is hard, and the IRS isn't going to make it any easier. The IRS generally says "no" to tax deductions that might ease the pain of divorce. In certain circumstances, however, you might be able to salvage...
IRS chief: New rule on the way for tax-exempt groupsIRS Commissioner John Koskinen told the USA Today on Monday that the agency will likely rewrite a proposed rule regulating the political activities of nonprofit groups to...
With tomorrow being Tax Day, you might see some procrastinators at your office filling out forms, printing out paperwork, or getting last-minute tax advice from their accountant so they can meet the IRS’s filing...

Upcoming CPE Webinars

Apr 17
In this exciting presentation Excel expert David H. Ringstrom, CPA shares tricks that you can use with pivot tables every day. Remember, either you work Excel, or it works you!
Apr 22
Is everyone at your organization meeting your client service expectations? Let client service expert, Kristen Rampe, CPA help you establish a reputation of top-tier service in every facet of your firm during this one hour webinar.
Apr 24
In this session Excel expert David Ringstrom, CPA introduces you to a powerful but underutilized macro feature in Excel.
Apr 25
This material focuses on the principles of accounting for non-profit organizations' revenues. It will include discussions of revenue recognition for cash and non-cash contributions as well as other revenues commonly received by non-profit organizations.