I’m looking to buy a house, so I am reading these disclosure documents. There is this house listed for $XXXk. However, the tax assessment is less than 10% of the listing price. So, this guy is paying taxes on less than 10% of the house’s market value. Fuuuuu…
Edit: Censored some details that are being taken out of context…
the only takeaway here is that ohai is living quite comfortably.
Taxes on a 800k house in a NYC suburb would be about 20-25k.
He forgot to mention some important facts:
This is actually for his mistress
It’s going to be her vacaction house
The cost is just a days work
Main complaint here is that CA is bankrupt and is increasing income taxes. Yet, there are millions of people paying property tax at 1/10 the rate that they should be. Ironically, this is a result of previous “tax revolts” that resulted in caps on property tax growth. Pretty obvious what should be done to fix the state’s finances - especially funding for schools, which usually comes from local property taxes.
Yeah, that’s how it is near me as well, although there is a wage tax for the city that somewhat offsets the cost of local social services. Re-assessments take a long time and there is cost involved, but raising the wage tax is easy. It’s been a long time, but they are in the midst of finishing up a re-assessmetn now.
Edit: The assessed value of my property is less than 10% of its value. It’s started to get ridiculous, which is the point at which I think the municipality decides it cost and political chagrin of a re-assessment is outweighed by the increase in revenue.
Property taxes are BS all together. They could never tax people at market value because all the old people would never be able to pay it, but they can pay it on their cost basis from 40+ years ago.
And everyone needs to stop hating on Ohai for making coin. You guys sound like the occupy crowd, all the sudden its a crime to make it rain?
I, for one, am happy for Ohai that he’s doing well.
And I think Ohai adds value to the forum with his comments too.
As to the substance of his post, it’s not uncommon for appraisal values to creep up at a fraction of the market value. It’s very wierd how it’s done and probably rife with opportunities for abuse. When I owned in Washington DC, homes would be reappraised for tax value a year or so after they had changed hands. The basic idea was so that people who had lived in the same place a long time wouldn’t suddenly be swamped by an enormous tax bill simply because their neighbors were selling homes at substantially higher prices than they’d bought it at years ago. The value would creep up roughly to cover general inflation, so that tax revenues could keep pace with the city’s exposure to inflation, but only new residents would pay taxes at market prices, and even these were adjusted somewhat so that the jump between taxes on the previous owner and the new owner would not look ridiculous.
How they actually computed these values is kinda strange, but the policy objectives do make some sense.
I never said I make a lot of money… people just assume…
I’m buying a house right now and the assessed value is only 65% of the value that it was appraised at through the process of getting my loan.
I am not of the house buying or point in my career but can someone clarify why this is a big deal?
Is reassessment mandatory after purchasing the house? Also can one get their house reassessed for tax purposes after the market value has dropped?
Which part are you referring to as the “big deal”? To me, it’s the fact that people are underpaying property taxes. House values have increased dramatically in CA over the last 30 years. However, there are laws that cap the YoY tax increase. So, there are people who own a house that is valued at say, $1,000,000 today. However, the property tax might be based on a past assessment of $150,000. So, if property taxes are 1.5% a year, they should be paying $15k. However, due to the $150,000 assessment, they only pay $2,250 in taxes. As a result, the state loses a ton of revenue. Yes, I am saying that people should pay more tax. Bchad would be proud.
Usually, the house value is reassessed after purchase. So that’s another thing. The tax system favors entrenched buyers over sellers and makes home buying less affordable, since you must economically compensate the seller for losing their entrenched tax rate. There are some neighborhoods in the SF Bay Area where the median income is $85k, but the median home price is $800k+. This is kind of ridiculous. Not sure if you can reassess if home values drop. My guess is yes.
If by policy objectives you mean raising revenue while keeping voters happy, then I would agree with you. However, economically it seems backwards. The economically efficient property tax should be 0%, just like it should be for dividends and capital gains. For dividend and capital gains taxes, sometimes people complain that if you reduce taxes to 0%, then that would cause market values to surge, effectively giving a payday to those who are already wealthy. One way to resolve this is to make it so that new investment is taxed at a 0% rate (like by increasing the cap on Roth IRAs to infinity so that the wealthy would have to pay full taxes today and then transfer it over to a tax-free account). The concept is similar for property. Reducing property taxes to 0% would give a pay out to existing property owners as a result of their property becoming worth more. To the extent that the wealthy hold more property that is more valuable, they would receive a large portion of the benefits. People who object to that could be in favor of a 0% tax rate on new property, which is economically more efficient than having higher tax rates on new property. Having a higher tax rate on new investment than old investment is generally bad for the economy. The only reason it is that way is because of the political influence of those who have been in the community for longer periods of time. Eliminate the property tax altogether (replace with consumption tax) and you avoid the poltical issue.
The assessed value of a home is meaningless as long as everyone in town is basically at the same percentage of market value. Where I now live, the assessed value is in large part based on the age of the home. So, if you have 2 houses with the exact same market value but one is 15 years older than the other, the older one will have property taxes that are 10-15% lower. Fortunately, I’m in a 90 year old house and in one of the few towns in my area that doesn’t have a wage tax as well.
I’m not blindly in favor of all tax increases. Just because someone here needs to defend the fact that not all government spending is intrinsically damaging doesn’t mean that I think all taxes and sources of revenue are equally good, or the more, the merrier.
I just don’t believe that “cut taxes on everything” is the silver bullet to everything and push back against that when it gets proposed without analyzing the consequences. Sure, in some imaginary academic world, GDP would be maximized when taxes are 0% everywhere, but we also know that that would be a world with no real way to provide national defense, ensure that contracts are upheld/adjudicated, and people would pump toxics into the air, soil, food, and water to the extent that they could hide that they are doing it.
What’s the groups take on rent stablisation? I personally hate it because all my neighbors pay literally 5% of what I am paying in rent just because they have been there for decades. I also think, it would help decrease some of the overbearing rent costs in nyc. Sorry if this goes in another direction - i’ll create another page if you think this will dilute the prop tax discussion but I think its along the same lines.
It’s not just keeping voters happy. Plenty of homeowners can’t or don’t vote (not citizens). If you are a retiree who bought your home years ago, but a bunch of yuppies move into the neighborhood and drive prices up because it became cool, there is no real reason why that person should have to have to their taxes triple after living there for years and years when they engaged in no transaction themselves. Inflation adjustments so that one can at least count on existing property tax revenue in real terms is something that it is reasonable for cities to be able to expect.
By the way, if property taxes are all 0%, how do you plan to pay for police and fire and local services? Most cities don’t have an income tax and get much of their revenues from property tax. I think cities seem to show a fair amount of restraint by ny trying to milk property booms for every last cent of tax revenue.
State income and Sales taxes should be enough, that’s already an additional 17% in CA
I actually like the idea of local property taxes to pay for local services. That way, the benefits are more direct to the taxpayer. If it the tax goes up to state or federal level, there’s more of a chance that you would be subsidizing other people. Of course, other factors should be considered, like administrative efficiency. However, for stuff like schools, local tax sounds pretty appropriate.