Assessment of Assessments
By Dave Phillips     Â
I love this time of year…the buds are starting to bloom, the grass is turning green, and homeowners are screaming about their assessments. That’s right, I love hearing homeowners scream about their assessments. How could anyone like to hear such discontent? Simple, I love it when the citizens are engaged with the politicians about taxes.
I have not heard anyone complain that their property had appreciated, but everyone is upset about having to pay more taxes. Suddenly, the local budget is being debated and the citizens are engaged. Man I love the spring.
But let’s take another look at the assessments. Are they too high? Should the tax rate be lowered? Should we change the law to prevent such steep increases? I’m going to answer “no� to all three questions.
First, it is important to note that state law requires that assessments reflect the true market value of the property. Now there are cases where the assessments are too high, but on the whole, they are reflective of home prices in our area. The timing of the assessments could not have been worse with the change in the market happening just after the assessments were tabulated and just before they were released to homeowners. It was hard to swallow hearing one month that the real estate market had slowed and the next that it had gone up 30%. Bad timing, but both pieces of news were true.
Second, I don’t think the tax rate should be lowered. I understand this is an unpopular view, but hear me out. I believe that a bulk of our taxes should be paid and spent locally where the money can be watched and benefits can be easily observed. So raise my local taxes, but cut my state and federal taxes. The farther the money gets away from those who pay it, the less accountability. For instance, I was in Washington yesterday visiting congress members and it was suggested that we should give each congressperson $100K for travel so we did not have to worry about the ethics of lobbyist paying for fancy trips. That’s $100K times 535 members or $53.5 million. The beltway dweller that suggested this said “that’s not very much money.�
It has become popular to suggest we need a new law that prevents assessments from going up so much. States like California and New York have such laws. While such laws sound good, the unintended effects on the market are something to consider. In Cali, for instance, you are assessed at what the property cost when you buy it. That encourages you to stay put and not move. That will affect home prices and the pace at which they sell. I am a free market guy with a mantra of “keep the government out of the marketplace at all cost.� In the history of capitalism, I can not think of any case where the government’s manipulation of a free market worked out well in the long run.
Yeah, I love this time of year.