4 ms·

Property gets assessed by government, a sticker price is put, and then the homeowner has to pay % of it as tax over here, as far as I know. Rinse and repeat eve

by kredd 3y ago

Property gets assessed by government, a sticker price is put, and then the homeowner has to pay % of it as tax over here, as far as I know. Rinse and repeat every year.

mitthrowaway2 3y ago
On the surface that's similar to how it's done here (BC Canada) but you have to look a bit deeper at the math. Otherwise you'll fall into the same sort of faulty reasoning as the "I don't want a raise to bump my tax bracket" people. For the most part, property taxes are not a fixed percentage the way that, say, sales taxes are. The rate floats, and that is important. Property taxes generally go to the municipality, which sets its budget based on its planned expenses (sewers, road maintenance, etc). The city decides it needs, say, $100 million for the next year, and let's say all of it will be paid for by property taxes. Then they calculate the total appraised value of all of the property in the city. Let's say that's $100 billion. From that budget and that sum, they derive a property-tax percentage for this year: 0.1%. Now if your property is worth $1 million, you have to pay $1000. Because your property tax rate is 0.1% and your property is worth $1 million, you might expect that if your property doubles in value to $2 million, your property tax will double. This is true if your property appreciates while the total value of the city property remains $100 billion. But most likely, if your property value has doubled, it's due to macroeconomic or region-wide trends that have caused everybody else's property value to double. Thus the total property value is now $200 billion, so your property tax rate drops to 0.05% to meet the city budget, and you still pay $1000. This makes sense, because your tax should not increase unless the city budget also increases. If your tax has increased, the culprit is your city budget; property values are irrelevant, because they only determine how the tax burden is divided up, not how much there is. If property values were much lower, the tax rate as a percentage would be much higher, and that's generally the case. Municipalities offering similar services, but where properties are more affordable, will have higher property tax rates. Therefore, if you need to invest $10 million in property for whatever reason, you'll pay a lower tax rate on that $10 million in an area where property values are high relative to the municipal budget, than in an area where property values are low relative to the municipal budget, even though the latter will probably buy you more total property.
- vel0city 3y ago
  > For the most part, property taxes are not a fixed percentage the way that, say, sales taxes are. The rate floats, and that is important. Maybe this is common in Canada, but it's definitely not common around where I live. Tax rates stay somewhat fixed, property values go up and down. Every now and then a county or city government will lower the rate when they're flush wish cash, but it's not a given. For the most part every time my property value increases I'll be paying more.
  - mitthrowaway2 3y ago
    Good to know! I hope you at least get good services back in exchange for those windfall tax dollars when there's a paper property valuation boom.
    - vel0city 3y ago
      There are some things that attempt to blunt and provide relief for exploding property valuations. There's a concept of a homestead exemption which 1) reduces the valuation of your home by a fixed amount (which was potentially recently increased) and 2) caps the amount of taxable increase by 10% each year. But with #2, your assessed value does go up, the difference between that 10% and its actual assessed value is shown as a cap loss which you then whittle away in future years as it marches up 10% until it hits the current valuation. This homestead exemption can only be claimed on an individual's primary residence. And as mentioned, some governments have already passed tax relief in the form of cutting some rates. But not after getting a few years of these windfall tax rates. I don't completely mind; I think the city I live in has some pretty good city services overall. I get a lot of enjoyment from the public parks, library, bike trails, and more. I just lament the fact this is probably just an additional cost that'll keep marching along going higher and higher outpacing inflation overall. https://www.texastribune.org/2023/07/27/texas-property-tax-cuts-explained/ https://www.texastribune.org/2023/07/27/texas-property-tax-c...

by kredd 3y ago

Property gets assessed by government, a sticker price is put, and then the homeowner has to pay % of it as tax over here, as far as I know. Rinse and repeat every year.

mitthrowaway2 3y ago

On the surface that's similar to how it's done here (BC Canada) but you have to look a bit deeper at the math. Otherwise you'll fall into the same sort of faulty reasoning as the "I don't want a raise to bump my tax bracket" people. For the most part, property taxes are not a fixed percentage the way that, say, sales taxes are. The rate floats, and that is important. Property taxes generally go to the municipality, which sets its budget based on its planned expenses (sewers, road maintenance, etc). The city decides it needs, say, $100 million for the next year, and let's say all of it will be paid for by property taxes. Then they calculate the total appraised value of all of the property in the city. Let's say that's $100 billion. From that budget and that sum, they derive a property-tax percentage for this year: 0.1%. Now if your property is worth $1 million, you have to pay $1000. Because your property tax rate is 0.1% and your property is worth $1 million, you might expect that if your property doubles in value to $2 million, your property tax will double. This is true if your property appreciates while the total value of the city property remains $100 billion. But most likely, if your property value has doubled, it's due to macroeconomic or region-wide trends that have caused everybody else's property value to double. Thus the total property value is now $200 billion, so your property tax rate drops to 0.05% to meet the city budget, and you still pay $1000. This makes sense, because your tax should not increase unless the city budget also increases. If your tax has increased, the culprit is your city budget; property values are irrelevant, because they only determine how the tax burden is divided up, not how much there is. If property values were much lower, the tax rate as a percentage would be much higher, and that's generally the case. Municipalities offering similar services, but where properties are more affordable, will have higher property tax rates. Therefore, if you need to invest $10 million in property for whatever reason, you'll pay a lower tax rate on that $10 million in an area where property values are high relative to the municipal budget, than in an area where property values are low relative to the municipal budget, even though the latter will probably buy you more total property.

vel0city 3y ago
> For the most part, property taxes are not a fixed percentage the way that, say, sales taxes are. The rate floats, and that is important. Maybe this is common in Canada, but it's definitely not common around where I live. Tax rates stay somewhat fixed, property values go up and down. Every now and then a county or city government will lower the rate when they're flush wish cash, but it's not a given. For the most part every time my property value increases I'll be paying more.
- mitthrowaway2 3y ago
  Good to know! I hope you at least get good services back in exchange for those windfall tax dollars when there's a paper property valuation boom.
  - vel0city 3y ago
    There are some things that attempt to blunt and provide relief for exploding property valuations. There's a concept of a homestead exemption which 1) reduces the valuation of your home by a fixed amount (which was potentially recently increased) and 2) caps the amount of taxable increase by 10% each year. But with #2, your assessed value does go up, the difference between that 10% and its actual assessed value is shown as a cap loss which you then whittle away in future years as it marches up 10% until it hits the current valuation. This homestead exemption can only be claimed on an individual's primary residence. And as mentioned, some governments have already passed tax relief in the form of cutting some rates. But not after getting a few years of these windfall tax rates. I don't completely mind; I think the city I live in has some pretty good city services overall. I get a lot of enjoyment from the public parks, library, bike trails, and more. I just lament the fact this is probably just an additional cost that'll keep marching along going higher and higher outpacing inflation overall. https://www.texastribune.org/2023/07/27/texas-property-tax-cuts-explained/ https://www.texastribune.org/2023/07/27/texas-property-tax-c...