One of the things we hear about property taxes is that rising property taxes are driving poor widows on fixed incomes out of their lifetime homes -- and that therefore the property tax must be "reformed" or replaced by taxes which fall on other groups of citizens: e.g., workers, consumers.
Is this the direction we should go? Is the fact that some people live in places they can no longer afford a reason to make a major change in the tax most municipalities rely on?
LVTfan thinks otherwise. Yes, the property tax is in need of some reform, but it is fundamentally the best tax available to us.
First, there are several dynamics to be considered. As market values for properties rise, some localities choose not to lower the millage rates. This is a major issue, and all too often is neglected. Yes, they face rising costs: health insurance for their employees, extending infrastructure at the fringes, demands for more services, expectations of good schools.
Second, the property tax as most of us know it (putting aside taxes on cars, boats, "personal" property -- often the equipment of businesses!) is an odd combination of two taxes:
- the part of the tax that falls on buildings and other improvements -- houses, condos, rental apartment buildings, commercial buildings of various kinds (both owner-occupied and rental);
- the part of the tax that falls on land value -- which ranges widely, from a few thousand dollars per acre for farmland to as much as $.5 to $1 billion per acre for midtown Manhattan.
The part of the conventional property tax that falls on buildings has effects that are undesirable: it discourages good maintenance; it discourages prompt redevelopment of obsolete buildings, even on choice sites; it penalizes those who seek to provide rental venues for other kinds of businesses, which seek to employ people and serve market preferences and compete with each other for our business; it penalizes companies that invest in machinery, in good architecture, in energy-saving technologies. It causes those who want to build to go elsewher
The part of the conventional property tax that falls on land values nudges owners to put vacant land to use, underused land to better use, and to replace obsolete buildings with buildings that satisfy current needs in the marketplace -- be they housing, commercial, educational, whatever.
But I'd like to return to the topic of elderly people being "forced" from their homes by rising property taxes. There may be a few cases where this might be a valid description of the dynamic. But we ought to be alert to the possibility that it is a convenient excuse and/or the "straw that broke the camel's back" after years of an aging individual or couple becoming increasingly unable to manage to care for a house that was suitable in size and configuration for raising several children, as it ages and they age. It becomes too large to clean, to maintain, to cool, to heat, to get up and down stairs, to do laundry in, to take a bath in. None of these issues -- the activities of daily living, in the lingo of those who take care of seniors -- is easy to talk about or even to acknowledge to oneself. Yet we cling to houses that we love, to houses in which we could shelter our grown children and their children if they fell on hard times, to yards we labored over, and now must pay someone else to maintain or watch go to seed.
And at the same time that the older generation continues to occupy those family-sized houses, convenient to jobs, schools, playgrounds and other amenities that serve young families, a whole new generation of families are in need of such homes, and must either cram themselves into smaller places, or "drive till they qualify" -- commute long distances to jobs that pay well from housing they can afford. And this forces us to build schools, sewers, water systems, pave roads, provide public safety, public health, and lots of other public investment way out on the fringe -- also known as sprawl.
Many -- certainly not all! -- seniors would be very content to move into something smaller if they could remain in their home town. But the market isn't building for them. Land sits unused, even in the downtown. Landholders are holding out for their price, waiting for someone to make them an offer they can't refuse, and since their carrying cost (in conventional property taxes) is low, they are content to sit and wait. Wouldn't we be better off to shift our taxes in such a way that they no longer are encouraged to sit and wait, and they are motivated to figure out what excellent use their great sites can be put to? Some of it would be building housing for seniors. Some for middle class folks. Some for working class folks.
Let's take the steps that will invigorate the economy: Let's get our well-located unused land -- e.g., my own city's 4.3 acre "hole-in-the-ground" -- yes, they even call it that on the Assessor's database! -- which has been there for the 33 years I've lived here! -- put to good use, to meet current human needs. Let's get our well-located underused land -- in my city, there are lots of well-located small properties with chain-link fences around them, or "taxpayer" rental houses from the Victorian era on them, or one- and two-story diners and retail stores, suitable to the 1940s, where there should be mid-rise and high-rise multi-use buildings -- put to good use, by the private sector, without any "command and control" type measures, just simple, wise incentives.
Our communities will be better places for all of us to live.
And yes -- Bill Batt is correct, that we should provide some flexibility for seniors to continue to stay on it their homes if rising property taxes really are the only reason they're moving, through the option of deferring, with interest, some portion of their property tax, as a lien against the property, to be satisfied when the property is sold or transferred.
That's fair to everyone, and good for the community.