patrick.net

If you want see the effects of a 100% property tax increase. Check out the housing prices in Portsmouth, NH. A lot of folks had their taxes go from $6k a year to $12k a year. The tax increase starts this year so it will be a good market to follow to see a drastic increase from start to finish. And by finish I mean the end result that will pretty much price out all of the local pubs and restaurants that are barely hanging on. Also, a lot of people in this town bought their houses before the bubble and they will now be forced to sell because of this increase. But who will want to move into a nice little seaside town if all the pubs and restaurants are gone? Looks like the future of Portsmouth, NH will be another bedroom community for Boston with lots McDonalds and Walmarts near by.

Lake County, IL here. We're in a house search and the more the recession drags on, the less I'm willing to spend overall and the more leery I am of high tax bills. Compounding the problem is the short sales, where Lake County appears to take an on-again, off-again approach to whether or not the ultimate sale price reflects "market value." I've seen homes that were listed for close to two years, gradually reducing in price, taking months to sell at the final short sale price-- but somehow the final price doesn't qualify as market value, even though it's OBVIOUS no one was willing to pay more. So example....a house that sells for $400k can be taxed as if it's still worth $900k. SCARY!

With no way to predict what their future tax rate will be, I think a lot of buyers are shying away from well-priced short sales. So they rot and become tear downs. I'm sure that does a lot for abutting property values.

Many listings here say "taxes have been appealed" but that offers zero reassurance until you know what the new tax rate is. And yes, whatever it is, it will be going up. The city has to fund the pensions that bombed in the market crash, the school district has to fund the schools that the state isn't paying bills on, the county has to fund it's bizarro assessment process....

With property taxes this high, there is no such thing as "owning" a house. You'll be old and gray and still owe $3000 a month. (I know seniors who are selling their lifelong paid-off homes strictly because they can't afford the taxes.) In the last 15 years, property taxes have DOUBLED here. I wonder whether the senior citizen exemption has doubled....bet not.

ehenlinux says

But who will want to move into a nice little seaside town if all the pubs and restaurants are gone?

More importantly who will want to move into a nice little seaside town if the property taxes are $12,000???

At nearly 10k per student nationally spent on education, you'd think we would be a nation of Einsteins. Nope. I nearly threw up when I went to vote in the public school cafeteria - 22 (I counted them) HUGE LCD TV's in the lunch room - what the hell is that about? It's a new school (less than 3 years old) and is nicer than most of the houses of the kids it serves - this was no small feat. Now I know why my property taxes have gone up nearly 100% in the past five years..so they can watch sponge bob and eat their government-provided meals. I wish they would stop knocking on my door with their incessant fund raising activities too - really, I'm forced to finance you already why would I voluntarily give them even more? Perhaps they should auction off some of those TVs instead.

EightBall says

I wish they would stop knocking on my door with their incessant fund raising activities too - really, I’m forced to finance you already why would I voluntarily give them even more? Perhaps they should auction off some of those TVs instead.

On our son's first day of kindergarten in one of this affluent Conn. county's best school systems (so say the homeowners in town), each child had to bring a supply of crayons, water colors, magic markers, pencils, scissors, etc. I never heard of that. This kind of crystalizes our apprehension to purchase a house in this high(er)-tax town.

If a restaurant's bathroom is dirty, what does the kitchen look like?

if only we could get HELOCs based on our assessed property value

I think our educational system strated at good note providing great education at somewhat high cost. This system has evolved into teaching low number of arrogant brats into not learning anything at extremely high cost.
There are far too many student completing high school that can not read or write. On such student our system spend upwrd or $100K during their learning year. The issue here is not the tax system but education system. Education system has become a blackhole of vested interest. It needs a major overhaul to make it more answerable.
-PBS

Except to raise the taxes to the point of people not being able to afford ANYTHING other than
public education.

Was this the government's ulterior motive from the get-go?

There are lots of large percentages flying around in this thread.

What is missing is the the exact figures of the property taxes.

I looked around the web and it looks like one has to look it up almost county by county. For example, for Santa Clara County, California, there is a long and complicated document to be found at

http://www.sccgov.org/SCC/docs%2FFinance%20Agency%20%28AGY%29%2Fattachments%2FProperty%20Tax%2FTax%20Rate%20Book%202010-2011.pdf

The basic STATE property tax rate in California is 1.00%, but then on top of that there is a small fraction of a percent in variable parcel, school, bond, what-have-you taxes.that depend on the exact location of the property within cities, counties, school districts, water districts, and the like. It gets complicated.

And apart from the tax rate side, there is the taxable valuation side and the the whole Prop 13 law that limits the increase in valuation to the paid amount + min(CPI,2%) per year.

Whew, I wish there was a way to get a better overview of this, such as maps that shows a Venn diagram of all the various overlapping districts. Instead one almost has to go address -by-address on the county tax assessors web site.

Addendum:

In Santa Clara you can look up the dollar amount by address, but the page does not show what valuations and rates were applied

http://payments.scctax.org/payment/jsp/startup.jsp

Another important aspect of property taxes:

Parcel taxes (flat amounts per parcel) are very regressive because they do not at all take into account the size or value of the property.

Likewise, Prop 13 is incredibly regressive because people who bought early generally live in areas that are now very expensive, and pay a much lower effective tax rate than the later arrivals.

Here is a sample of the formula used in Cook County. Unfortunately one never knows what multiplier and tax rate will be used until after the bill is finalized and sent out.

To calculate your property tax bill, use the following example, which is for a home with estimated market value of $100,000:

$100,000 Estimated Market Value
X .10 Assessment Level (10%)
$10,000 Proposed Assessed Valuation
X2.8439 2007 State Equalizer
$28,439 Equalized Assessed Value
- 5,500 Homeowner Exemption
$22,939 Adjusted Equalized Value
X.10 Sample Tax Rate (your tax rate could vary)
$2,293 Estimated Tax Bill in Dollars

JeffO,

thanks for the example. One thing is for certain, property valuations and property tax rates are a bit of a black magic.

shrekgrinch says

ehenlinux says

If you want see the effects of a 100% property tax increase. Check out the housing prices in Portsmouth, NH. A lot of folks had their taxes go from $6k a year to $12k a year.

That is why we have Prop 13 out here in California. And, despite the wanton socialists who post on patrick.net, Prop 13 rocks for this very reason.

Since I'm here in the Midwest, can someone tell me more about the Prop 13 thing? I assume that there is no mystery multiplier or equalizer in play? If we could make it so that even one of the variables was a fixed number, the process would be somewhat more fair, I suppose. Then again, 'fair' is not what our taxing body is really concerned with.

Let's take this practically:

I looked at a ranch of about 2300 square feet just last week. The home is in foreclosure with an asking price of $309k. http://www.realtor.com/realestateandhomes-detail/Palos-Park_Il_60464_M85818-46450 The assessor has it listed with an 'estimated market value' of $574k. http://www.cookcountyassessor.com/Property_Search/Property_Details.aspx?Pin=23272030520000

The treasurer is showing the 2009 tax bill is $8900. But that $8900 is based on the market value of $574k. There is no way an appeal will be successful next year (the appeal process is closed for this year) because the surrounding homes still have a "market value" near this number. With Prop 13, would I be limited to the $309k? If yes, then I would probably be agreeable to the other taxing mumbo jumbo Cook County, IL applies, but forcing me to use their market value and deal with all the other equalizers and such is killing me.

You'll also want to make sure the previous tax bills have been paid. That would be a nice surprise to find out after the fact, now wouldn't it? Especially with an $8900 tax bill - that isn't chump change in my neck of the woods. Of course this varies from state to state as to whether it would transfer to you as the new owner...ask a local real estate attorney - most (but not all) realtors are more concerned with the deal going through. Illinois may have owner-occupied reduced rates as well so the $8900 might not be for real. If I turned my house into a rental my taxes would go up 200% in my county. Isn't that nice?

Prop 13 is a California thing and wouldn't apply to you. People complain about it for some reason but being the slave to the assessor is just wrong.

Prop 13 is a disaster in California. When it was approved by misguided voters in 1978 it did a number of things:

1) roll back property tax rates to 1975 levels.
2) cap property tax at 1% of assessed hom value and cap local taxes on property at 1% of that 1%.
3) limit yearly growth to 2% a year.
4) property tax reassesment is only triggered when more than 50% of the property changes hands.
4a) Seniors have the option of tranfering their current tax assesment level to new property.
4b) transfers of property within the family (to children, for example) do not trigger a reassesment.
5) institute a supermajority requirement for new taxes to be instituted in the state.
6) institute a simple majority requirement to repeal taxes.

If you bought your house a number of years ago for $309, hey that's great, your taxes are limited to around $3k/year to start. The unfortunate sucker who purchased his house last year for $574 is paying around $5700/year - $2k more per year than you just because he bought at a higher price.

While long time residents have been huge beneficiaries of this law (in parts of Silicon Valley, for example, it's possible to find someone paying $1000/year living next door to someone paying $10,000/year on an almost identical property), the biggest beneficiaries have been commercial property owners. Commercial property owners typically get around the reassesment issue by breaking up ownership among several shell companies or individuals. If no individual owns more than 50% of a property no reassesment is triggered.

One horribly bad effect of prop 13 was that it started starving local governments of funding, resulting in local governments having to go to the state government more and more. This resulted in schools, among other services, getting starved for funds, which is part of the reason why California schools are no longer at the top of nation.

And because of the two thirds supermajority to pass a new tax lawmakers in the state capital could no longer effectively raise taxes when they needed to in order to deal with budget issues. While anti-tax people may think this is a good thing, one of the issues that emerged from this situation is that people/lawmakers/interest groups starting using the state initiative process as a means to go directly to CA voters to institute new programs/expenses. These new programs weren't alway adequately funded, but now they have to be funded and can't be cut during the budget process because the initiative process removes it from the control of the state legislature.

I don't think allowing for property tax increases of 100% in a year is necessarily a great thing, but prop 13 is just stupid and unfair.

omgbacon says

The unfortunate sucker who purchased his house last year for $574 is paying around $5700/year - $2k more per year than you just because he bought at a higher price

Theoretically the higher property taxes should be coming out of the purchase and should be a wash.

And yes, the commercial property protects are the main problems with Prop 13. That and its application on rental properties. Sheer stupidity.

prop 13 is just stupid and unfair

Some slick operators snuck in a lot of bad stuff with a needed tax reform. Golf claps all around.

But IMO median and below owner-occupied homes and below should enjoy insulation from tax rises over the years. Somebody like my mom in her house in Fresno isn't consuming city resources any more and shouldn't have to move out of her average place to avoid a rising tax burden.

HEY PATRICK! I LIVE IN NEIL CODELLS SCHOOL DISTRICT AND NOW PAY $20K PER YEAR PROPERTY TAXES! HOORAY CROOK COUNTY!

You Thought California State Pensions Were Out Of Control? Wait Until You See This List From Illinois »

UPDATE: Since we published this story yesterday it has been picked up by Glenn Beck, Business Insider, Patrick.net, and several other sources. As of 5 AM this morning it has been seen by 322,000 unique visitors. Keep it going!

##

Meet Neil Codell an Illinois educator with a $26 million state pension.

Just to drive the point further -- if Obama gets his way on his proposed state bailout, you will be paying a portion of Mr. Codell's pension. 'Codell, Neil C.' is 4th from the top of the list. His estimated career pension is $26,661,604. That's almost $27 million for a single administrator within just one local Illinois school system (Niles, to be exact).

* Read about his benefits package HERE

Obama has requested a $50 billion bailout, this time for states. We've covered it before, in a general sense, here, here and here. Certain states are broke for one reason -- Public Employee Pensions.

Rather than require that certain bloated, mis-managed states cut pensions, Obama is trying to sell Congress another bailout -- this one for bankrupt mini-Greece fiefdoms that are politically important to Democrats -- California, New York, Illinois and Michigan.

In Omaha area we pay a property tax of about two to 2 1/2 percent of full Market Value. So a 200K house will have $4K-$5K in property tax. Fortunately we have had a stable economy compared to other areas, but our property taxes as a PERCENTAGE of market re-sale of our houses is quite high. I believe it ranks very high compared with most areas of the country.

In Nassau County, Long Island NY taxes are ridiculous and getting worse every year, in an area that hasn't come close to seeing the bubble fully deflate.

What I find even more ridiculous is asking prices for single family houses on the market as opposed to the current 'fair market values' according to Nassau County's property tax assessment website: http://www.nassaucountyny.gov/mynassauproperty/main.jsp

Pick virtually any house for sale in this county on MLS and look at the current asking price as opposed to the fair market value the county lists for the same property. Asking prices are 10-30% higher on average than listed by the county, and the current assessment values for every single home in the county have decreased year after year since 2008.

Look back at the sales history on the county website, and look at the purchase prices as opposed to the assessment for a given year, people were basically paying in-line with the assessment. Now obviously no-one wants to let go of this 'wealth' they've accumulated over the past 10 years, and it's taking much longer than I'd hoped to see these numbers start to fall in line.

Who in their right mind would purchase a house for much more than the county is currently assessing it for is just begging for a re-assessment and tax increase. This lack of forethought is part of what enabled the bubble in the first place. Whoever is listing their house for much more than this fair market value is out of their mind.

As my wife and I look at houses in the area, we bring a copy of the county's page for each house we look at and have made offers accordingly. Perhaps if we sling enough *(#*($, eventually some of it will stick. I think you'd be foolish to pay even the current fair market value for the house for this current year, as the trend of assessed values is downward and shows no sign of stopping.

In Tucson, this year my tax bill went up over 10% and I also have a few rentals in Albuquerque and hey go up every year at least 3-5%.

Tough being a landlord... Daryl

Can't comment on Illinois but in SC (Richland county) landlords (non-resident owners) are charged 6%. That makes it not worth being a landlord for me. So, I'm planning to turn my house over to the county unless a buyer completes the sale. Buyer offer is $20,000 for 1262 sq ft. Rental income is $550 to $650/month. But its low income so you have to restore the house every few years. So, in my opinion, some break point occurs with landlords when taxes get too high. That probably knocks the market down significantly.

tenant in foreclosed house says

I-man says

Here in Fairfield County, CT, taxes are basically disconnected from home prices. The town assesses the house based on some formula (e.g. number of bedroom, acreage, SF, etc.) and then sets the mil rate based on the annual budget. […]
I am looking to buy a house and I’m very aware of the tax burden. I’ve seen some pretty good deals but have passed because the house is dirt cheap but the taxes are horrendous so the monthly vig is beyond what I’m willing to pay.

We’re looking for a house in Fairfield County, Conn., too. We are facing the paradox that, while they have higher values, wealthier towns such as Greenwich and Westport have lower taxes, more services and, in some cases, better schools than the inland, more laid back, beautiful and less fancy part of the county (two or three towns inland from the Long Island Sound such as Redding, Ridgefield, Easton, Weston). Some of those inland towns tend to be high on the BS meter for school quality — homeowners all talk up their schools. It reeks of desperation IMHO. I think some of those towns, which voted down development over the years, which would have attracted a business tax base, may be fearing for the future with state budget in the red.

I used to live in Redding pre-divorce (the ex and kids now live in the house). It's got a decent school system but the town budget is often driven by the school supporters. They'll demand the best of everything and claim that the school system keeps house prices high. Every year, there's a fight between the "nothing's too good for my kids" and the "let's be reasonable about expenditures" crowds and there are usually several budgets that get voted down before enough cuts are made.

But like you also said, I have to buy a whole bunch of school supplies for the kids that I would've thought would be covered by the school.

omgbacon says

While long time residents have been huge beneficiaries of this law (in parts of Silicon Valley, for example, it’s possible to find someone paying $1000/year living next door to someone paying $10,000/year on an almost identical property), the biggest beneficiaries have been commercial property owners. Commercial property owners typically get around the reassesment issue by breaking up ownership among several shell companies or individuals. If no individual owns more than 50% of a property no reassesment is triggered.

The homeowners who are paying $10K are the ones who overpaid during the bubble.
Its just one of the many signs of the vast mistake(s) they made.

I-man says

Every year, there’s a fight between the “nothing’s too good for my kids” and the “let’s be reasonable about expenditures” crowds and there are usually several budgets that get voted down before enough cuts are made.

If they want to spend more on schools in CA just go out and buy more CA lottory tickets.. thats what its for...

thomas.wong1986 says

I-man says

Every year, there’s a fight between the “nothing’s too good for my kids” and the “let’s be reasonable about expenditures” crowds and there are usually several budgets that get voted down before enough cuts are made.

If they want to spend more on schools in CA just go out and buy more CA lottory tickets.. thats what its for…

Redding, CT not Redding, CA. Schools are funded by local taxes in CT.

Move, on CO property tax is 1% and we have a higher quality of life then Chicago.

eee says

Move, on CO property tax is 1% and we have a higher quality of life then Chicago.

Oh sure, move....Give up two jobs, leave our church, leave all of our family here...It's easy to suggest it, but at the end of the day, our life is here. (A fact that is being exploited by the taxing body.)

maire says

I’m in a Kansas ‘burb of KCMO. My property tax bill has been flat for three years but my property’s value has fallen by 30%, partly because it followed the pattern of the nationwide real estate crisis ... This coming spring when the next year tax info is sent for review, I fully intend to protest the tax and take it as far as it goes up the “leg” of the state.

You can't have it both ways. When I had my first house, the assessment amount was something like half the market value of my house at the time. I questioned why that was, but in reality the tax assessment has little to do with the market value of your house. OK, so your house is worth less every month and you demand that the tax assessment should follow the downward trend of the market. Fine we can do that, but when the housing market takes off again and your house is worth more every month, then your taxes should increase every month as well.

So you can have it one of 2 ways, #1 assessments have little to do with actual market value of your property, or #2 assessments closely follow the market value of your house. It might be great for you right now what housing is going down, but it's going to hurt when houses start going back up.

I vote to allow every home owner to decide for themselves which way they want to be taxed, #1 or #2, but once you pick, you can't change your mind later on when things become unfavorable for you. Personally I prefer #1, it gives you a nice stable monthly rate to pay, rather than wildly fluctuating rates depending on what the market is doing.

As for me personally, I've seen my tax rate go down about over last $1,200 year. The township reassessed all of the properties last year and a new tax rate was set. People who were not paying there fair share are paying more now and people paying too much got a break. I'm sure there are lots of people up in arms about increases in there property taxes, but being on the other end of things, I can see the fairness of it.

TechGromit says

So you can have it one of 2 ways, #1 assessments have little to do with actual market value of your property, or #2 assessments closely follow the market value of your house. It might be great for you right now what housing is going down, but it’s going to hurt when houses start going back up.
I vote to allow every home owner to decide for themselves which way they want to be taxed, #1 or #2, but once you pick, you can’t change your mind later on when things become unfavorable for you. Personally I prefer #1, it gives you a nice stable monthly rate to pay, rather than wildly fluctuating rates depending on what the market is doing.

With # 2, defining the taxable value is quite straightforward, leaving any dispute to what the true "market value" is. For most properties, that can be found fairly accurately and objectively using recent comps. With # 1, who and how defines that "stable" value?

he he,

Ya'll should check out Oregon's property tax structure. We like, California revolted against taxes through the ballot measure system. Measure 5 passed in 1990, http://en.wikipedia.org/wiki/Oregon_Ballot_Measure_5_(1990) , capped property taxes at 15 dollars per 1000 dollars of assessed value. It also made school funding statewide vs. local, now all the money goes down state and then is sent back on a per student basis. This has screwed Portland schools. Next up is measure 47/50 passed in 1996/97,http://en.wikipedia.org/wiki/Oregon_Ballot_Measure_50_(1997) , reduced property taxes to the lesser of the 1994–95 tax or the 1995–96 tax minus 10 percent and limited future increases in assessed property values, except for new construction or additions, to 3 percent per year.

So now old ladies are protected from rising taxes do to rapid gentrification, however there is no reset clause like in prop 13, all taxes are based on historical values, so the yuppy who buys the house next door for a half mil, still pays little tax.

This has caused wild tax inequalities across cities, homes in neighborhoods that were nice in 1995 have taxes twice to three times that of a home with the same sale price in a neighborhood that was crummy in 1995 and is now nice.

This has depressed values in old established neighborhoods, and inflated those in rabidly gentrifying areas.

hehe distorted markets caused by bad tax policy

unstoppable says

rabidly gentrifying areas

Heh ... "rabidly" was probably a typo, but it describes some gentrified parts of the Bay Area very well...

Fisk says

With # 2, defining the taxable value is quite straightforward, leaving any dispute to what the true “market value” is. For most properties, that can be found fairly accurately and objectively using recent comps. With # 1, who and how defines that “stable” value?

Number #1 is established with property assessors once every ten years, this is the way it's been done in New Jersey for decades.

isaaclang says

One county employee actually told property owners at the public school board budget hearing, “If you don’t like your taxes, sell your home and leave the county!” Those property owners present could not believe the audacity of this government employee.

That type of attitude is rampant amongst all government "workers." I'm convinced that if most of the parasites that "work" for the government were forced into the marketplace where the rest of us mere mortals have earned a living, they'd starve.

I've said it before, I'll say it again; nothing on planet earth is more wasteful than government.

What Jeff O is saying is absolutely true!

In IL, the corruption is rampant in every level of government and that includes Chicago. My property taxes went up $800, even though my home value dropped by over 50%.

Part of the reason that I defaulted.

romeotybalt says

What Jeff O is saying is absolutely true!
In IL, the corruption is rampant in every level of government and that includes Chicago. My property taxes went up $800, even though my home value dropped by over 50%.
Part of the reason that I defaulted.

And I will again restate my position, if you tie property taxes to the value of your home, then you shouldn't be bitching when prices (and your property taxes) skyrocket again. It costs the same or more to run government regardless of what the paper value of out home is.

apres93550 says

HEY PATRICK! I LIVE IN NEIL CODELLS SCHOOL DISTRICT AND NOW PAY $20K PER YEAR PROPERTY TAXES! HOORAY CROOK COUNTY!

20k seems high, but is this for a typical average house or do you live in a mega mansion? 20k seems excessively high... high that is until you know just how big the house you have is. I read another posting were someone said there 2009 tax bill was 6k, for cook county Illinois, so it makes me think your real estate property is no average house.

Just had to comment on schools since that's the #1 argument the counties always use for new taxes. My daughter is in preschool. It costs $250/month. They bring home crafts every day. We never pay extra for those. How can a non-funded organization run a preschool like this (higher student teacher ratio than public schools); when the United States Department of Education can not? Somehow the public school adminstrators need to look at what is happening with preschools and learn.

TechGromit says

apres93550 says

HEY PATRICK! I LIVE IN NEIL CODELLS SCHOOL DISTRICT AND NOW PAY $20K PER YEAR PROPERTY TAXES! HOORAY CROOK COUNTY!

20k seems high, but is this for a typical average house or do you live in a mega mansion? 20k seems excessively high… high that is until you know just how big the house you have is. I read another posting were someone said there 2009 tax bill was 6k, for cook county Illinois, so it makes me think your real estate property is no average house.

$20K is very high for Cook County. My relative has a very nice house--$500K valuation and pays ~$8K. So, this person definitely doesn't live in the average house. One thing to keep in mind is that property tax rates vary within the county--depending on city, school district, fire district, etc.

maxweber says

My daughter is in preschool. It costs $250/month.

Does she got to preschool all day for 5 days/week?