The Insidiousness of Property Taxes

 

Over on this thread, there is a discussion on whether the elimination of the property tax deduction would be a good thing. Any time the subject of property taxes comes up my hackles raise, my blood pressure skyrockets, and my wife flees the room so she doesn’t have to listen to the tirade again.

When the state levies property taxes you never truly own your home. Since private property is often considered a fundamental principle of a free society, this is a serious problem for me. My wife and I “own” our home. The state of Texas only charged us $325 per month to live in it this year, but that amount is expected to go up every year for the rest of my life. It does not matter whether I make $30k per year or $130k per year, it still costs me $325 per month to keep what I supposedly already own.

What makes property tax so insidious is that many people don’t even know how much they’re paying. Their mortgage company conveniently packages it up in an escrow all year long so all they see is one monthly payment for principle, interest, and property tax. They never realize that 25 percent of their payment is going to taxes. Oh, and did I mention the best feature of property taxes? They’re self-raising. Mr. Representative doesn’t even have to vote for a tax increase. He gets one automatically any time the housing market improves.

I despise property taxes. Give me an income tax over a property tax any day. At least then people have to file a tax return every year and are forced to see how much the government is taking from them. I truly pity those of you who live in states with both income and property tax.

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  1. Curt North Inactive
    Curt North
    @CurtNorth

    Amen, love your message and I agree 100%.  I live in Michigan, also a state with high property taxes.  To me it’s not much different than ancient times when the King owned everything.  It might sound extremist but it’s really not.  You never really own your land, as you said.  At at the end of the day the king (government) will send his soldiers to kick you off his land, or put you in jail, or both.  And if you resist his soldiers and try to keep what you’ve paid for, you could be killed.

    Property taxes are immoral and I vote against them every time I can, including school bond issues.  No matter the issue, if it raises property taxes, I vote no.

    • #1
  2. Kevin Schulte Member
    Kevin Schulte
    @KevinSchulte

    When they tell me it is for the children. I say “screw the children”.

    Agree whole heartedly with you jaWes

    • #2
  3. PHenry Member
    PHenry
    @PHenry

    jaWes (of TX): he state of Texas only charged us $325 per month to live in it this year, but that amount is expected to go up every year for the rest of my life.

    I’m not as opposed outright to property taxes as you are, but it is not right that the rate should rise like it does.  You should be ‘grandfathered’ at the rate and price you paid at purchase for your home.  That the rate should rise based on the estimated current value is just radically unfair.  It means I can not budget for the future, especially after retirement, because I have no way to estimate nor control the taxes going forward.

    As it stands, any given year my locality can jack up my rate and or my estimated home value and demand nearly any amount.  Some even lose their homes over it.  Not defensible, in my opinion.

     

    • #3
  4. Miffed White Male Member
    Miffed White Male
    @MiffedWhiteMale

    My problem with property taxes is that unlike income taxes, payroll taxes and sales taxes, they are completely unrelated to cash flow.  If you’re out of work for an extended period of time, the same amount of money is due at the end of the year.  And there are extremely high transactional costs involved in disposing of the property to be rid of them.

     

     

    • #4
  5. livingthehighlife Inactive
    livingthehighlife
    @livingthehighlife

    Gotta disagree with you, fellow Texan.

    My property tax is market driven and not relevant to income.  I could make $500k per year and yet live in a small house paying a small property tax.

    We’ve lived in the same house for 20 years and yes, my property tax is quite a bit higher than it used to be.  But my house has appreciated in value by 80% or more.  My income has appreciated a lot more than that over the same 20 years, so the net is I’m paying less in property taxes than I would in income tax.

    • #5
  6. PHCheese Inactive
    PHCheese
    @PHCheese

    I am with you. I always wondered why property taxes had to be so complicated. Why not take the local budget and divide by the number residents. Business could have a like arrangement something like divide by the number of employees.

    • #6
  7. Majestyk Contributor
    Majestyk
    @Majestyk

    Implied rents…

    • #7
  8. Al French Moderator
    Al French
    @AlFrench

    jaWes (of TX): My wife and I “own” our home. The state of Texas only charged us $325 per month to live in it this year, but that amount is expected to go up every year for the rest of my life.

    $325? My property tax bill this year is more than $6000.

    • #8
  9. Mark Camp Member
    Mark Camp
    @MarkCamp

    To keep the social apparatus of coercion and compulsion running requires expenditure of labor and commodities…
    Governments must resort to taxation, i.e., they must raise revenues by forcing the subjects to surrender a part of their wealth or income.”

    Ludwig von Mises. “Human Action: A Treatise on Economics.” iBooks.

    In a just republic these taxes are distributed, insofar as practical, according to the benefits accruing to the individual from the protections that the social apparatus of coercion and compulsion (government) provides him.

    These benefits are the protection of his wealth and of the services of his income.

    Therefore, property taxes per se are just.

    One hears that the existence of property taxes imply that one doesn’t own his property.  But it is precisely the fact that they are levied on  what one owns, and not on what another person owns, which makes them just.  The fact that the citizen is obligated to pay his fair share, and forced to do so if need be, is not a denial of ownership; it depends on the very idea of ownership.

    But aren’t property taxes insidious, because the way they are collected conceals the amount paid?

    This is an example of a non sequitur argument: the conclusion is unrelated to the question.   The fact that a manner of collecting a tax is wrong doesn’t imply or even hint that the tax itself is wrong.

    • #9
  10. RushBabe49 Thatcher
    RushBabe49
    @RushBabe49

    Once you have 20% equity in your home, you can get rid of that escrow account and pay your own property taxes and insurance.  Way back when, in a previous life, our insurance company nearly cancelled our homeowners insurance due to the mortgage servicer changed addresses and didn’t notify them.  Same thing with taxes once-the bank was delinquent in payment of our taxes and we had no idea that we were close to losing the house.  We scraped together the additional principal payment, and said bye-bye to escrow.  I have paid my own taxes and insurance on my current house since I bought it in 2000.

    As to those taxes, due to a ballot measure last year, we now not only rent our car from Sound Transit, we also rent our home, to pay for a boondoggle we will never use.  Since I own my home free and clear, those years when the assessed value goes down, I pay lower taxes (per $1,000 of assessed value).  Last year my value increased by 39%, and my taxes went up, too.  But we are lucky to live in a state with no income tax (yet).

    • #10
  11. Miffed White Male Member
    Miffed White Male
    @MiffedWhiteMale

    Mark Camp (View Comment):

    To keep the social apparatus of coercion and compulsion running requires expenditure of labor and commodities…
    Governments must resort to taxation, i.e., they must raise revenues by forcing the subjects to surrender a part of their wealth or income.”

    Ludwig von Mises. “Human Action: A Treatise on Economics.” iBooks.

    In a just republic these taxes are distributed, insofar as practical, according to the benefits accruing to the individual from the protections that the social apparatus of coercion and compulsion (government) provides him.

    These benefits are the protection of his wealth and of the services of his income.

    Therefore, property taxes per se are just.

    One hears that the existence of property taxes imply that one doesn’t own his property. But it is precisely the fact that they are levied on what one owns, and not on what another person owns, which makes them just. The fact that the citizen is obligated to pay his fair share, and forced to do so if need be, is not a denial of ownership; it depends on the very idea of ownership.

    If the proceeds collected from property taxes were devoted to protection of property (police and fire services, for example), you might have a case.

    But the bulk of mine go for inflated public school budgets.

    A not insignificant portion of the remainder goes to providing inflated public employee pension benefits.  (I’m not parroting boilerplate anti-government employee argle-bargle here.  I live in  Milwaukee County.  Google Milwaukee County backdrop Pension scandal – we give 6-figure cash payouts to county employees when they retire, plus their monthly for life pension afterwards).

     

     

    • #11
  12. jaWes (of TX) Member
    jaWes (of TX)
    @jaWesofTX

    Al French (View Comment):

    jaWes (of TX): My wife and I “own” our home. The state of Texas only charged us $325 per month to live in it this year, but that amount is expected to go up every year for the rest of my life.

    $325? My property tax bill this year is more than $6000.

    We have a modest 40 year old 1900 sq.ft. house. But we love it.

    • #12
  13. The Cloaked Gaijin Member
    The Cloaked Gaijin
    @TheCloakedGaijin

    Al French (View Comment):

    jaWes (of TX): My wife and I “own” our home. The state of Texas only charged us $325 per month to live in it this year, but that amount is expected to go up every year for the rest of my life.

    $325? My property tax bill this year is more than $6000.

    Mine’s about a little more than $325 a year, and twice as large as those million-dollar Silicone Valley things.

    I was researching  a house the other day that is in one of the best school districts in the area.  It’s a public school which is essentially 100% Catholic, and the house is about a mile away.  The house comes with 19 acres.  The yearly taxes were $572.  I guess that would be about $30 an acre per year.  The house was about 2400 square feet, if you included the finished parts of the basement.  (Of course, you’d be forced to live in a county where about 85% of the residents voted for Trump…)

     

     

    • #13
  14. JoelB Member
    JoelB
    @JoelB

    Property taxes are subjective based on someone’s estimation of the value of the property. Funny thing, though the mayor had a nicer house than mine, it wasn’t worth as much according to the appraisers. Now how do you think that could be? Hmmm

    • #14
  15. Mark Camp Member
    Mark Camp
    @MarkCamp

    Miffed White Male (View Comment):
    If the proceeds collected from property taxes were devoted to protection of property (police and fire services, for example), you might have a case.

    But the bulk of mine go for inflated public school budgets.

    A not insignificant portion of the remainder goes to providing inflated public employee pension benefits. (I’m not parroting boilerplate anti-government employee argle-bargle here. I live in Milwaukee County. Google Milwaukee County backdrop Pension scandal – we give 6-figure cash payouts to county employees when they retire, plus their monthly for life pension afterwards).

    Citing inflated government expenditures as an argument that it is unfair to collect property taxes is an illogical argument.  The fairness or unfairness of a means of distributing the cost burdens of government is unrelated to how competent or incompetent government is.  The pension budgets would not somehow be “not inflated” if the source of government funds were a different kind of tax.

    This is another example of the logical fallacy called “non sequitur argument”.

    • #15
  16. Muleskinner Member
    Muleskinner
    @Muleskinner

    High property taxes are the unintended consequences of the 17th Amendment. It allows the federal government to push costs for their programs down to the states and local governments, especially education costs. How long would the “unfunded federal mandate” last if the state legislatures were electing the Senate?

    • #16
  17. Mark Camp Member
    Mark Camp
    @MarkCamp

    Miffed White Male (View Comment):
    My problem with property taxes is that unlike income taxes, payroll taxes and sales taxes, they are completely unrelated to cash flow. If you’re out of work for an extended period of time, the same amount of money is due at the end of the year. And there are extremely high transactional costs involved in disposing of the property to be rid of them.

    It is fair for a citizen who is receiving the benefits of government in a given year to pay tax, in proportion to those benefits, in that year.

    The fairness of that tax is totally unaffected by any loss of other income.  One is still receiving the benefits of the property, and therefore owes no less tax.

    But, one may say, doesn’t it matter that it would be prohibitively expensive to sell a house, and unreasonable, given that one might quickly find work, and now be out a house plus 20,000 in transactional costs?

    This is not a logical argument.  Living as a responsible adult in a free country for a year will cost something–this is normal and expected.  One might lose one’s job and take a year or two to find one.  This is no less a normal part of life which every citizen in a self-governing republic must plan for.  The fact that people recklessly buy a house and eliminate all their liquid assets, on the hope that nothing will go wrong, is not a fact that alters the fairness of taxes.

    Food is an expected expense which will not disappear just because you lose your job.  So everyone knows to allow a rainy day fund for it.  Why are taxes any different?  The fact that food expenses don’t need a dollar-for-dollar match in savings (you CAN and will lower them somewhat) and property taxes DO need a dollar-for-dollar replacement simply means that one must plan the savings accordingly.

    • #17
  18. Aaron Miller Member
    Aaron Miller
    @AaronMiller

    Do we need any tax beyond a simple sales tax? All other taxes are punitive, double-dip, or obscure total taxation.

    • #18
  19. Majestyk Contributor
    Majestyk
    @Majestyk

    Owning rental property absolutely brings to my mind the fact that property taxes make sense.  I pass those costs on to my renters, obviously, but what incentive do I have to dispose of property that I own and just sit on to no benefit, and conceivably make no improvements upon?

    I do think that property taxation at the very minimum encourages property to move into the hands of people who will use it the most productively.

    • #19
  20. Miffed White Male Member
    Miffed White Male
    @MiffedWhiteMale

    Mark Camp (View Comment):

    My problem with property taxes is that unlike income taxes, payroll taxes and sales taxes, they are completely unrelated to cash flow. If you’re out of work for an extended period of time, the same amount of money is due at the end of the year. And there are extremely high transactional costs involved in disposing of the property to be rid of them.

    It is fair for a citizen who is receiving the benefits of government in a given year to pay tax, in proportion to those benefits, in that year.

    The fairness of that tax is totally unaffected by any loss of other income. One is still receiving the benefits of the property, and therefore owes no less tax.

    How is the value of my house and land “in proportion” to the “benefits of government” received in that year, to the extent that the taxes on that property fund anything beyond police and fire protection, sanitation, etc?

    Then explain where public education falls into that.

     

     

    • #20
  21. Ralphie Inactive
    Ralphie
    @Ralphie

    Curt North (View Comment):
    Property taxes are immoral and I vote against them every time I can, including school bond issues. No matter the issue, if it raises property taxes, I vote no.

    I live in Michigan too, and always vote no on every issue proposed no matter how passionately argued for. It is the only time you have to reduce or prevent government spending.

    Then there is the personal property tax you pay as a business for your equipment every year. The same tools that were paid for and taxed, are taxed again next year.

    • #21
  22. Aaron Miller Member
    Aaron Miller
    @AaronMiller

    Majestyk (View Comment):
    I do think that property taxation at the very minimum encourages property to move into the hands of people who will use it the most productively.

    Most profitably, you mean. Property taxes favor businesses over homes, large corporations over small businesses, the rich over the poor. That’s how, for example, homeowners are driven from beaches in favor of condo and hotel chains.

    It’s not justice. It’s a recipe for political favoritism. Whoever promises to generate more tax “revenue” wins.

    • #22
  23. Misthiocracy Member
    Misthiocracy
    @Misthiocracy

    Only problem is that income taxes are pretty hard to administer at the municipal level, what with all the property owners who live outside the jurisdiction, etc.  Would the cities be able to deduct it from your paycheque, or would they have to chase you down at tax time to pay up?  Also, if you own two properties does that mean you’d have to pay the income tax twice?  More etc, etc, etc…

    Municipal sales taxes are a little easier to administer, what with all businesses having to be licensed by the city government, but relying on sales taxes is rapidly becoming non-viable thanks to online shopping.

    • #23
  24. Larry3435 Member
    Larry3435
    @Larry3435

    Miffed White Male (View Comment):
    A not insignificant portion of the remainder goes to providing inflated public employee pension benefits. (I’m not parroting boilerplate anti-government employee argle-bargle here. I live in Milwaukee County. Google Milwaukee County backdrop Pension scandal – we give 6-figure cash payouts to county employees when they retire, plus their monthly for life pension afterwards).

    And would you feel better about financing that particular boondoggle if the government took the money out of your income instead of your property?

    • #24
  25. Majestyk Contributor
    Majestyk
    @Majestyk

    Aaron Miller (View Comment):
    Most profitably, you mean. Property taxes favor businesses over homes, large corporations over small businesses, the rich over the poor. That’s how, for example, homeowners are driven from beaches in favor of condo and hotel chains.

    It’s not justice. It’s a recipe for political favoritism. Whoever promises to generate more tax “revenue” wins.

    If you’re poor, you probably can’t afford to live in a big city, no.

    You know what else isn’t just?  Income inequality, right?

    • #25
  26. CJ Inactive
    CJ
    @cjherod

    The real injustice is how much of my money is getting plowed into failing government schools. I have never encountered anyone who would argue that public schools do a good job of educating children. The discussion very quickly devolves into how cutting school budgets is mean because some teachers will lose their jobs–as if the purpose of public schools is as a make-work program for education majors.

    • #26
  27. Miffed White Male Member
    Miffed White Male
    @MiffedWhiteMale

    Larry3435 (View Comment):

    Miffed White Male (View Comment):
    A not insignificant portion of the remainder goes to providing inflated public employee pension benefits. (I’m not parroting boilerplate anti-government employee argle-bargle here. I live in Milwaukee County. Google Milwaukee County backdrop Pension scandal – we give 6-figure cash payouts to county employees when they retire, plus their monthly for life pension afterwards).

    And would you feel better about financing that particular boondoggle if the government took the money out of your income instead of your property?

    Actually, yes.  See my earlier comment about the un-relation between cash flow and property taxes.

    • #27
  28. Z in MT Member
    Z in MT
    @ZinMT

    The dirty secret is that property taxes are a very long standing protection racket. Essentially the government enforces your right to your property as long as you pay protection tax. If your property is worth more than the government can demand a higher protection tax.

    Texas is notorious for high property taxes, particularly in the nicer suburbs of Houston, Dallas, and Austin.

    • #28
  29. Charles Mark Member
    Charles Mark
    @CharlesMark

    I don’t know how it works in America but here in Ireland we have a property tax for the last couple of years which is based on the gross value of the property, disregarding any mortgage. Since the crash in 2008 many many people have homes which are well into negative equity such that the asset is worthless to them save and except as shelter until the repossession axe falls. But they still have to pay the tax. And to rub salt in the wound, many of the lenders are in the partial ownership of the State which collects the tax.

    • #29
  30. JcTPatriot Inactive
    JcTPatriot
    @JcTPatriot

    Excellent post, Wes! Your kind of post is one of the reasons I love Ricochet.

    Here in Central Texas, I have a similar Tax Bill, and you are right that mixing it in the Escrow hides it from my prying eyes. I’m not even sure how much my Homeowner’s Insurance is right now, because it is hidden in there, too. Don’t get me wrong, I have a pretty good idea, but I would have to go get the numbers to tell you exactly. I believe it is close to yours. Of course, if you live in one of the Socialist cites, like Austin, Houston, or Dallas, you’ll pay a lot more, but they have a lot more Union pensions to pay into there.

    The real butt-kicker and the one that gets under my skin, is the School tax, because I know a ton of it is going to administrators and pensions and has nothing to do with Education.

    • #30

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