By Brian Massie, A Watchman on the Wall
Here is an anonymous “letter to the editor” answering my question “Is property ownership important?”
I believe in personal property rights.
I understand the need for various levels of government to provide services that are
more effectively provided by public entities, and the citizens need to fund these services through various means.
There are and will continue to be various revenue mechanisms.
As is the case now, the citizens need to pay their legislated obligations and understand all property they own now serves as collateral for these obligations.
The current tax based on Property Values where the amount of tax is based on the
current and generally increasing appraised value of the property plus the continued
addition of various levies determined by the general public is no longer a sustainable
mechanism and has gotten out of hand.
Much of my property value is sweat equity where I have increased the value of our
property by improvements I have done. I like yard work and carpentry, and being at
home. I now pay a significant premium for this choice.
I pay $38,000 per year in property taxes for my home and 3 adjoining lots. Because this is not a deductible expense, that means the first $55,000 per year of my income is consumed to pay this obligation. This over a 3-fold increase to what we started paying when we built and moved into our home 18 years ago.
I own the decision to build and live in our home; and overall I am happy with this
decision.
I worked in the financial services industry and planned our finances extensively.
I thought I had done my research and accurately anticipated future living expenses. I
now see I did not fully understand or anticipate the operation of property tax expense
when we decided to build our retirement home in 2006. I missed the full impact that my efforts to improve the property and the ability for the public to pass levies, (in fact we supported most of the levies), would result in a current tax of the magnitude we are experiencing.
I worked until age 72. After 60 years, (I had a paper route at age 12), I became
conditioned to the idea that I could earn what I needed by working more. I did not fully appreciate the difference between having earned income that I could increase by working more, that covered all expenses, to being retired, and relying on investment income that can fluctuate with our economy.
The fear of outliving our assets was real and now 3 years into retirement and continued planning, and our booming economy, I am comfortable that we can adjust and continue. Many retirees do not have the training my career provided me and their fear of outliving their assets continues.
I appreciate our progressive (in tax terms) system of taxation, if you are more
economically successful our system provides, you pay more in tax. I agree with this
concept. At the same time, most taxes accompany some gain that can be used to pay the tax, or they are a “user” fee where we have some discretion on making the
purchase. We pay income taxes from income we receive, this includes gains on the
sale of property. We pay taxes on things we decide to buy. We pay licensing fees to drive, fish and other activities in which we choose to participate. We pay entrance fees.
Our current property taxes are based on a valuation of the property that increases the tax immediately based on an estimated current market value without any offsetting realized gain that can be easily converted to cash to pay the tax. There is no other tax where the tax can increase based on an increase in current valuation without sale of the property.
I would agree to a personal services tax/fee for other public services that will be
provided as needed.
Because the tax is paid on my property valuation versus services rendered, my wife and I now pay far more in property tax than the value we will receive for the services we are funding; and with minimal limits to how much we will pay in the future as appraisals result in increased valuation and as new levies continue to be pursued.
So my wife and I are paying for services we will never receive, because we have
decided to invest in our home versus boats, cars, club memberships, extensive
vacations or other luxury items.
We are now evaluating whether we would be better served to buy a smaller home and use our property tax savings for things where we would see a direct benefit, such as vacations or service providers.
Also influencing this decision is if our property declines in value as we saw in 2009 and we sell it for less than we have invested, we will have paid tax on an inflated value and never recoup the excess tax we paid.
And, in my opinion, the worst part of this taxation is that it is decided upon by the
general public, not our elected officials through our representative form of government.
Many of the people who vote for the tax increases have little business acumen and will pay little, if any tax for the levy they pass.
So if taxation without representation is Tyranny, what is representation without taxation, Legalized Theft? Or worse…a step toward increased Socialism.
I believe, as you have stated that, we need a mechanism to pay for public service.
The value of the services is not directly proportional to our property values.
The value of a service is based on the “risk” for the need for those services.
In basic terms:
– Location, age and to some extent size of a home determines the cost for fire protection.
– Location determines the cost of police protection.
– Location and residents’ ages determines the cost for emergency medical service.
These are social programs and there will be some wealth redistribution to fund these.
This means that we need to be effective and not waste tax payer money.
We need to have our elected representatives, who should have the best information,
and better than the general public’s business acumen, analyze our needs and
determine the funding.
To have a tax that is based on property value where someone with a more expensive home pays significantly more solely on the basis of appraised value than someone in a lesser expensive home and have this amount decided by those who are not as informed or as greatly impacted by the taxes they levy has resulted our current property tax dilemma and cannot continue.
But here we are and how do we correct this?
I do not know the specific solution. These are ideas from 50,000 feet. We all need to be part of the solution. We need to pay for services we receive in the community we choose to live. The taxes and fees need to be objective and based on consumer choice and use. Sales taxes seem to be one choice, whether this is local, State or National (VAT). Income taxes. Capital gains taxes on the sale of property where the gain is not reinvested into a replacement residence. Licensing Fees and other user related fees.
Most importantly, everyone should have some responsibility, no matter how small. This is not an economic decision, it is to reinforce the idea that we all need to be part of the solution. Everyone wins with this approach, because it reinforces we are all on the same team and we are all part of the success of the plan, our system operates on the concept of the exchange of value and there is no free lunch.
Additionally, much of our current property tax goes to operating our public schools.
Many of the schools’ systems are based on the situation that existed 50 years ago and have become inefficient.
We need to reduce the resulting waste. I believe most teachers are good educators.
I believe most school administrators know how to manage the education process for
their districts and the day-to-day operation of the schools and State compliance. I
believe facility decisions, capital purchases and the districts representation in contract negotiation with the unions should be handled by a professional management team independent of the operation of the schools with input from the administration.
The district who the taxpayers fund needs to have an advocate.
In the past this has been the school board, who are generally volunteers and do not
have extensive business or negotiation experience. With advances in technology and the increased options and complexity, I believe this system can achieve better results with consolidation and professional business management, as has been seen in mos other businesses and with school systems in other states. This will require Ohio government to drive this change. I hope I live to see this happen.
All social plans including public and school employee health and welfare plans need to address our increasing life expectancy and the cost for our advancing medical
technology.
Our current teacher and public employee insurance and retirement system will pay
someone 80% of the top 3 years of income for life after 40 years of service and they
receive some of the most generous medical insurance benefits in existence.
These plans and funding are based on life expectancy and medical insurance expense from 50 year ago with modest updating compared to private industry where the retirement benefit was anticipated to have a payout for 7 to 12 years. And where
medical insurance costs were 5% of payroll versus 40% today.
Today, someone starting at age 18 who lives to 90 will work until 58 and receive 32
years of their highest earning years as income. They will be paid more in retirement
benefits than they earned working. And add the value of their medical insurance. It is not sustainable.
To just stop the revenue stream by ending all current property taxes without a
replacement plan would be very disruptive. I have friends in California where
Proposition 13 was enacted in 1978. Their system freezes the valuation at the
purchase price and they have other taxes for their funding.
But we have to get everyone’s attention. Human nature is such that most change does not occur until “it hurts enough”. So maybe it does have to “hurt” first to initiate
change.
Your ending property taxes initiative is getting reform into motion.
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Categories: Community Activism, Contributors, Real Estate Taxes