Friday, July 10, 2009

Property Tax Revolution!

To get an idea of how fed up people are with paying taxes, please read the following article:

Property owners appealing their tax assessments

Homeowners across the country are challenging their property tax bills in droves as the value of their homes drop, threatening local governments with another big drain on their budgets.

The requests are coming in record numbers, from owners of $10 million estates and one-bedroom bungalows, from residents of the high-tax enclaves surrounding New York City, and from taxpayers in the Rust Belt and states like Arizona, Florida and California, where whole towns have been devastated by the housing bust.

It's worthy of a Dickens story," said Gus Kramer, the assessor in Contra Costa County, Calif., outside San Francisco. "These people are desperate. They know their home's gone down in value. They've watched their neighborhoods being boarded up. They literally stand in there and say: 'When can I have my refund check? I need to feed my family. I need to pay my electric bill."

The tax appeals and reassessments present a new budget nightmare for governments. In a survey conducted by the National Association of Counties, 76 percent of large counties said that falling property tax revenue was significantly affecting their budgets, said Jacqueline Byers, the association's research director.

Officials in some states say their property tax revenue is falling for the first time since World War II.

The recession has already taken a significant toll on states' budgets, as rising joblessness, a weak business climate and a drop in consumer demand have cut sharply into receipts from taxes on sales, personal income and business earnings.

The pain at the state level is trickling down to county and local governments. To compensate, about 10 percent of large counties are raising the tax rates associated with home values to minimize the revenue loss, the county association said.

Even so, most counties simply have to absorb the lost revenue. Municipalities are laying off workers, renegotiating labor contracts, freezing salaries and cutting services.

The revenue losses are coming as homeowners prod towns for new assessments, and as municipalities conduct regular revaluations of their real estate. While declining residential values weigh heaviest on many governments, the value of commercial real estate is also sliding as businesses shut down and move out of storefronts or shopping malls.

Property taxes are meted out by a disparate patchwork of cities, towns, counties, and school and fire districts, all with their own rules. Because tax formulas vary widely county to county, not every decrease in assessed values automatically lowers a household's property taxes.

But officials across the country say there is no question that the number of appeals has risen from the usual trickle to a flood.

In suburban Atlanta, thousands of people lined up at government offices to file their requests for reassessments before a March 31 deadline. In parts of Ohio, appeals have multiplied fivefold. Tax lawyers in the northern suburbs of New York say they have never been so busy, and some towns have hired extra employees to sift through the paperwork and are spending hundreds of thousands of dollars on legal fees to deal with the cases in tax courts.

The call for counties to acknowledge the falling price of homes is loudest in states where taxes are highest, or the housing crisis has hit the hardest.

"We've been absolutely getting killed," said Robert W. Singer, the mayor of Lakewood Township, N.J., and a state senator, whose town is setting aside $2 million to pay tax refunds to homeowners. "We've never had this before. Usually they're undervalued. Now, everyone's overvalued."

The appeals are not just coming from individual homeowners. Condominium associations and entire subdivisions are pushing for new tax assessments, as are companies that own office towers, industrial parks and shopping malls.

New Jersey, which has the nation's highest property taxes, has been besieged by tax appeals from homeowners like Peggy Tombro, whose rambling home in Bound Brook is assessed at a value of $1.8 million but is languishing on the market with an asking price of $1.3 million. Her taxes are increasing to $53,000 a year.

"I don't know what else to do," said Ms. Tombro, 63, who has gone back to work selling antiques to pay her tax bill.

In the Inland Empire of California, near Los Angeles, Joylette Lynch, 70, is challenging the assessed value of her home as she tries to scrape together $1,158 a month to pay her mortgage, taxes and other bills. Her two-bedroom house in a community for older residents was worth as much as $280,000 three years ago, but houses on her block are now selling for less than $100,000.

"If the house is not worth what I bought it for, why am I paying the same amount in taxes?" she asked.

Ms. Lynch, meanwhile, lost her job at a Bed, Bath & Beyond this year, and is behind on her mortgage payments. Shaving a few hundred dollars off her annual tax bill of $4,300 might not keep her out of foreclosure, but it would help, she said.

"Everything's in God's hands now," she said.

Officials say stories like these are common as unemployment hits 9.5 percent and people seek to trim their budgets. Appraisers and assessors, normally concerned with land values and comparable sales, are becoming ersatz crisis counselors.

Jeff Furst, the appraiser in St. Lucie County, Fla., said a 62-year-old man recently walked into his office and described how his wife had been laid off and his salary had been cut in half. He was struggling to pay his taxes and looking for relief, Mr. Furst said.

"We're hearing from people like this every day," Mr. Furst said. In St. Lucie, which sits along the Atlantic, property tax revenue is expected to fall 20 percent, and tax appeals are 10 times as high as they are normally. "Most people are going to see a significant decline in their tax bill."

Mr. Kramer, the assessor in Contra Costa County, said homeowners started swamping his office with requests for new assessments in December. As many as 500 people would call in one day. His voice mail message now begins: "If you're calling to request an informal review of your property value due to the declining real estate market."

Contra Costa has now reduced the recorded value of more than a third of the 350,000 privately owned properties in the county.

Lisa Driscoll, the county's budget director, said property tax revenue had been growing about 8 to 9 percent a year but was now projected to decline 5 percent next year. The county has cut $50 million from its budget to offset the decline in real estate and other taxes.

Bonnie Grassley's house in Fort Pierce, Fla., reflects the rise and fall of the broader economy. Its assessed value topped $153,000 in 2006, as Florida's housing market caught fire. Now, it is worth $77,500.

Though her tax bill is only $150 a month, Ms. Grassley is out of work, spending her savings, and says she hopes a reassessment will save a couple hundred dollars a year.

"My home means everything to me, and it's all I really have," Ms. Grassley said. "I'm determined to keep it, come hell or high water. It's a terrible way to lose your home, just over taxes."

The implications of a property tax are profound. If you decide not to pay your taxes, the government puts a lien on the property and has a right to foreclose and own your house. So truthfully, you are only "leasing" from the state because they allow you to keep your home so long as you pay your property taxes. It is no different than any other government racketeering/extortion scheme where through the threat of violence, imprisonment, or foreclosure you are forced to pay the faceless government for something you already paid for.

Why people put up with this is beyond me. Are they really the dumb sheeple that I hope they are not? What is really sad is that these people are only protesting the amount of the property tax and not the existence of it. I have only one more question that is strikingly important to what we see as the proper role of government in a liberty seeking life.

When was it the intent of the state to become a revenue maximizer?

The original intent of the government was to provide a legal system, public safety and infrastructure that would be difficult to acheive in a market driven setting. Now, we have out of control governments looking to maintain the status quo of the bubble years by raising taxes wherever they can to pay for bloated budgets built on expectations of 10% annual economic growth. People need to fight for their hard earned money right now and the government is trying to take it away for their pet projects, failing schools, and corporate donors.

In any case, we are going to see more and more job cuts at the state and local levels in government because of falling property, income, and sales tax revenues. Credit risk is rising in municipal bonds because of the budget fiascos in California and other states and again, falling revenues. The recourse at the very top, federal level is to try to federalize drops in state debt to then redistribute to the states in the form of "stimulus" packages. My guess is this is why talk of another round of stimulus is coming up in the media again. Many states are in massive need of cash in the face of job losses, falling incomes, lower sales revenue, and more people moving to a underground economy. Of course, federalizing the state debt into an already massive $11 trillion debt is akin to an unemployed person running out of cash and then cash advancing $50k out of his credit cards to pay his mortgages. Needless to say, it ends badly. The math is never wrong and like I've been saying, the feds have only two courses of action:

1. Stop the madness of running up debts, cut the federal budget, and begin to pay down the debt. This leads to a deflation of overall credit and lower prices.
2. Keep printing money to finance the expansion of federal expenditures. Initially, as private individuals lose their jobs and default on their debt there is a deflation in private credit (this is what is happening now). However, the federal government tries to bridge the gap in the fall in private credit by issuing public debt to maintain the status quo. Eventually, the private credit is defaulted to a point of exhaustion, but the government continues to borrow and "stimulate" because prices have not come down to a low enough level. The supply of new debt issued becomes too great and cause interest rates to rise. The central bank may willingly "buy down" the rate by bidding at Treasury auctions. This "buy down" is monetization (money printing) and combined with stagnating tax revenues, it would cause the hyperinflationary scenario that people are dreading because the interest rate in the market does not reflect the credit and inflation risk of holding the currency and the government's bonds. This leads to a currency crisis and a hyperinflation caused by outside investors dumping their holdings and not allowing trade to occur with that currency.

So my tangent has ended, but I wanted to get this off my chest for a while as it has taken a long time for me to figure out what the likely outcomes would be in this situation just to be prepared. Now, go do your part in deconstructing the state and appeal your property tax valuation!

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