Wednesday, March 10, 2010
Musings on Property Taxes
Property taxes are quite a popular revenue source for politicians. The main reason is that it is rather unlikely that anyone will remove their property from a high tax area. The property and the taxpayer are quite literally stuck. As property tax rates increase, (Racine's property tax rate is 50% higher in Racine than in Wind Point-full disclosure- I own property in both locations) property owners calibrate their investments accordingly. The higher the taxes go relative to other communities, and if all other factors remain equal, the greater the likelihood that people will want to sell their homes and move to lower tax areas. With more people wanting to sell than wanting to buy, naturally there will be downward pressure on the price of property. High taxes actually steal value from homeowners. Another way to react to high property taxes is to gradually allow a property to deteriorate, lowering its value and the tax obligation. For some homes in some areas, years of deterioration renders a home more trouble than it is worth and the owner just walks away. In these situations, government policy has contributed to the end result of a home having zero value. So now the city ends up with the property and has a decision to make, raze or build. Lately the city has been getting more and more involved in the real estate business. The city plans to rebuild these homes with taxpayer money. Then they want to use more taxpayer money to get low income folks to "buy" the homes. I put "buy" in quotes because they are not really buying the home. Rather, they are minority investors in the highly risky sub prime real estate investment. The other investors are you the taxpayer who will be holding the bag when the new owners inevitably default on their obligations. Sorry, you don't get to default on your obligation to subsidize their home "purchase." Racine has been doing this kind of nonsense for years such that now much of the wealth has left Racine. There are fewer and fewer Racine folks to milk for these programs so now we go to the feds for help. Is it any wonder so many of our cities are such a mess?