Flippin’ Bait

I think Charlie may be trying to bait me with this post on equalization rates so I’ll bite .

Here is the salient piece:

No tax increase is ever a good tax increase, but at least city residents won’t get a hard of a kick as taxpayers in other parts of Montgomery County are getting.
I know there are some “never tear anything down ever” people out there, but demolition does have its benefits. This is one of them.

The problem with this statement is two-fold:

1) If you are going to claim savings from demolition via reducing the assessment rolls, then that means that the expense of demolition saves you more than the expected future tax revenues from the properties. That cannot be as it suggests that we would be best served by aggressively lowering the assessed tax base. You can lower the assessed values by taking property off the tax rolls or by lowering the market values of existing stock. Personally I would rather pay a marginal tax rate of  hundreds of dollars than lower my property values by tens of thousands of dollars. Plus no financial case exists that shows positive returns from demolition, quite the opposite.

2) A reduced total assessment means that existing city tax payers will see more stress on services and tax rates as the assessed base shrinks. So sure, we pay a smaller share of the county budget but it means that we likely will face a higher city tax rate increase as the asset base is shrinking while the city budget trend is increasing. No free ride here and as the city assessed base shrinks, it puts downward pressure on home values while upward pressure on the tax rate — the classic Amsterdam economic cycle.

As an FYI, the purpose of the equalization rate is to assure that communities do not game the assessments so that they pay an unfair share of county and school district budgets compared to other municipalities within the same tax district. So it matters not how other municipalities assess — full value, 1/3 value, in yen, whatever — the equalization rate corrects for that. Or at least that is the statistical objective.

And the 3.8% sales tax increase on the sale of your home cited in the post is pure rubbish for a large portion of the city homeowners. Read the repudiation here.

 

If I may spout some corporate-speak, we need to think ‘win-win’ in terms of taxes; the present state is a win-lose in that some lose more than others. (Not sure you can ‘win’ with taxes) Anyway, the desired future state should be growing assessed bases for the entire county. That would not be so bad as it would suggest growth based solutions to our tax rates.

I’ll admit to being a numbers nut and I’m OK with that. 😉

 

You may also like...