Cutting Property Taxes Can Make You Pay More!

My childhood friend and Forbes writer extraordinaire Vahan Janjigian wrote a great article about how municipalities should lower real estate taxes to help get us out of the world economic mess.

Here is Vahan’s words and my notes back.

Cut Property Taxes Now
Posted: 09 Jan 2009 11:34 AM CST
According to the S&P/Case-Shiller 20-city Home Price Index, housing prices peaked in July 26. They have fallen 23% through October 2008. With employment falling, housing prices will no doubt go lower in coming months.

If there is any good news in this, it is that the affordability index is improving. This index tries to give us some sense of how affordable the median priced house is for the median income family. In addition to housing prices, the affordability index considers mortgage rates, which have also come down largely due to government intervention.

Unfortunately, the affordability index ignores an increasingly important cost of home ownership: property taxes. Prospective home buyers in many parts of this country, especially the Northeast and Midwest, must pay close attention to this cost before signing on the bottom line. For many homeowners the monthly outlay for property taxes now rivals their monthly payment toward principal and interest.

This economic recession we are currently struggling through was largely brought on by the collapse of housing prices. The recession won’t end until housing prices stabilize. Lower mortgage rates are certainly helpful, but reducing property taxes would go a long way to provide a much needed boost to the housing market. Obviously, the federal government has no role here. It is up to local municipalities to cut property taxes. Like the rest of us, they need to trim their budgets and live within their means. Otherwise, more neighborhoods will be plagued with vacant and foreclosed homes.

Good morning Vahan,

About property taxes, I am sure every municipality is quietly scared to death that property owners will appeal their values in the next cycle that they can. But, on the other hand, they may try to push through other types of taxes to make up for it so their budgets won’t get killed.

Real estate taxes, though are federally tax deductible so even though they are high, people do get some relief federally.

Imagine if their real estate taxes went down but there was a local income tax imposed that would be “revenue neutral” at the municipal level. But, in effect, it would be raising peoples total expenditures in the end.

No good answers. Just lots of problems.

Let’s hear your ideas about how to save the local governments without hurting the residents!

No comments yet

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: