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11/1/2007
It's the tax levy, stupid...
It’s that time of year again. News story after news story about budgets and property taxes. How are you supposed to read them? Very carefully – and using your head.
So, for just a little help with the “using your head part,” below is a slightly updated repeat of last year’s “It’s the tax levy, stupid….”
Numbers, numbers, everywhere numbers. It’s a field day for the media and local governments when tax time comes around.
If there’s nothing else you remember about your property taxes, remember this: It’s the tax levy, friend, the tax levy. (“Stupid” is memorable, but perhaps a little too harsh and Clinton-esque.)
An individual’s tax payments, are ultimately determined by two things:- Total tax levy required by the community
- A property’s value, relative to the rest of the property in your community.
Given even these couple of numbers, the very best way to judge a community’s budget is to look at the increase in the TOTAL TAX LEVY. (well, I suppose in the history of the world, a decrease has been registered - somewhere!)
Some would say you can look at the change in the “total” budget or the “operating budget,” but budgets have lots of different categories, and it’s often difficult to compare apples to apples, one year to the next.
So, Junior, it’s the TAX LEVY, the TAX LEVY.
The fussy variable that wants to confuse property owners, local officials and especially the guys with the ink, is property values. They change. Sometimes it’s new construction, new value added to the community. Sometimes it’s just inflationary increases of existing properties. It all combines to make a big mess of tax numbers and tax season information.
Because of this business of property value, tax RATE numbers are meaningless. Absolutely meaningless. And so, in most instances, are the calculations that tell you the tax on a $150,000 home. Was it $150,000 last year too? And if not, how much did it increase? Depending on your community, your home may or may not retain the same value for a number of years at a time. Therefore…. disregard all information presented to you about tax RATES and taxes on a $150,000 (or whatever) home.
Remember. It’s the TAX LEVY. The TAX LEVY.
Now that we have that down…. one more point to consider. And it’s an important one.
At budget time, look for information about the increase in new construction in your community. This is really important and often a hard number to find in print.
Because unlike increases in value from reassessment of existing properties, new construction is real growth in a community. And if the TAX LEVY rises by less than the increase in new construction, then on average, an individual property owner’s taxes really are going down.
That new construction number is also important because it serves as the Property Tax “Freeze” tax cap if it’s higher (in 2008) than 3.86%. Too many numbers and explanations already. More on the tax cap calculation another day.
COMMENTS
Good article. You don't have to look too far to find a tax levy decrease, though--Sheboygan County's proposed levy for 2008 is $549,000 lower than for 2007.
Yup, FoxPoliticsNews featured the article last week. I too, was pleased to see it. The reduction is due to privatizing one nursing home, not a reduction in expenses elsewhere or a reduction in services. JE
Mike Collard (Thu Nov 01 11:40:48 2007)
This is an interesting subject and not one in which I'm versed at all.
Without going into alternatives like taxing land rather than property (not the same thing) then if someone lives next to Riverheath or the Purdy development project, then are they going to be assessed for the appreciated (even if unsold) value of the development(s)?
I hope that this discussion comes back around to taxing land versus property. It is a system used by Minnesota and it means that landlords who are absorbing the holding cost of undeveloped or abandoned properties (ie slums) will stop getting a free ride and will have
to either pay their back taxes or sell to someone who could use the property (land) more productively.
The Post Crescent did a report on back taxes owed by some of these owners who are delaying paying back taxes in lieu of resale. That's the holding cost.
So referring to the initial question, the old Penney's building which laid dormant for 25 years or more in the heart of the city probably had assessed vallue from 1971 while the nightclubs (improved properties) and such all around it were being assessed more.
That's the difference between land based taxation and property based taxation.
As the build up around the Penney's building increased, the value of the Penney's building remained stagnant and affordable to "hold." Meanwhile city services which we require go up over the years but the landlord does not pay a fair share.
Lon Ponschock (Thu Nov 01 14:35:31 2007)
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