Business
Property Taxes Likely To Rise
December 11, 2007 
Despite the nationwide decline in housing sales–and the subsequent value of homes–it is likely 2008 will bring a property tax increase.
Here’s why. Ada Assessor Bob McQuade tracks local sale prices and has appraisers in the field on a daily basis. He predicts the valuations will be pretty much flat. Some of the “McMansions” may decline in value, but generally speaking the values are static.
McQuade’s office provides only a basis for local governments (city, county, schools etc.) to LEVY AGAINST. Idaho property taxes are based on a PERCENTAGE of value. This means that if a taxing authority needs more cash to pay for salary obligations, new libraries, police cars or operating expenses, the levy will INCREASE. But they are limited to a 3% increase in local spending.
Example: $100 house at 2% yields $2 tax. Same house worth $200 at 1.5% yields $3. However if the value goes down to $75, they need 4% to get that $3.
Property values are established as of December 31 for the following year. The notices usually come out over Memorial Weekend at the end of May for the 2008 assessed value.
During the so called “boom years,” levies actually went down but local governments made extra money off the increased values. Those increases were based, in part, on the artificial increase in property values. Growthophobes will tell you that contrary to claims that growth pays for itself, growth caused artificial increases in value and increased demand for services.
The GUARDIAN argues that McQuade puts too much stock in the “comparable sales” reported by realtors. It is in the best interest of these sellers to keep the prices high. They will never tell you “the market sucks.” They also won’t tell you a property went for more than its true value to cover sub prime loans.
Anyone who has purchased a house knows of all the money manipulation that goes on with lenders. Things like “paying” more for the house in order to get enough of a “cushion” to pay for a down payment, finance a car or just provide spare cash. Buyers felt they had “equity” as long as the subjective private appraisal was high enough to cover the debt.
A recent public radio report surveyed realtors from across the nation. Each and everyone described the market as “soft,” but added the market in their area–every market–was still very good.
Banks teetering on the edge of solvency and reporting the highest rate of foreclosures since the Great Depression tell a different story. People trying to sell overpriced homes will also tell you things are tough.
When someone “buys” a house for $300,000 and fails to ever pay for it or pays interest only, can the purchase price reasonably be considered when establishing true value? These factors combine to make the GUARDIAN believe values are down rather than flat and local governments should pull their collective belts in a few notches.
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Comments & Discussion
Comments are closed for this post.
Dec 11, 2007, 12:00 pm
Another inequity is the fact that neighborhoods appreciate or depreciate at different levels. My home must have been right on the average. My estimated tax is almost exactly what it was last year. A friend’s house was appreciated significantly and she is suddenly faced with a $600 increase. The services we each receive remain unchanged–an obvious inequity. The answer is to look at basing property tax on the cost of the services provided, not on the value of the property.
Dec 11, 2007, 4:20 pm
That voluminous sucking sound you hear eminating from Downtown Boise is the insatiable apetite of local government swallowing more tax dollars. I have never heard of Prop taxes decreasing. The exemption increase last year was just a shell game. Gov’t will ALWAYS consume what it can. California stopped this insanity with Prop 13. There may be some shortcoming to it but I think it is time to put it on the table again. Problem is, our legislature promises to find a way around it.
Dec 11, 2007, 4:25 pm
Even worse is the fact that when government buys up property it goes off the tax rolls and has to be absorbed by the rest of us since government spending never goes down.
For example, the dentist on the corner of Ustick and Maple Grove paid $18,000 per year in property taxes. There were three of these buildings each paying about the same I would imagine. The dentist wanted to stay, ACHD said no we’re buying the property and bought out all three buildings at a cost of upwards of $2.5 million tax dollars. The foregone taxes of $18,000 x 3 buildings is absorbed by all the rest of the taxpayers while the properties sit vacant. Will they ever be sold to a private person thereby putting the taxes back into the pot? Who knows if and when.
Watch for ACHD during the coming year to say they are about $16 million short of what they need for their projects. Hold on to your wallets people.
Dec 11, 2007, 4:46 pm
Property tax raises based on market value are unfair. That is a tax on unrealized gains. I have lived in my house for 15 years and have never benefited from the increase in value, rather I have been punished by ever increasing taxes every time it goes up in value and since I don’t plan on selling soon I am happy to see a declining market. No other investments in my portfolio, such as stocks, are taxed on unrealized gains. They are taxed as ordinary income when I sell them. The property tax value should be locked in at the price it was last sold for. Thats the way it was on the home I owned in California when I had to move there during the “dark years” in Idaho of the 80’s to find work. There will always be disparity in property taxes, as a newcomer in California I paid several times the taxes of some of my neighbors but that was the deal when I bought the property and the payments remained the same for the duration of the deal. The person that bought my house pays over double the taxes I did but thats the deal he made and it won’t change for him either. Lock in the value at the last sale price and eliminate all the bureaucrats in the assessors office to help reduce costs in county government.
Dec 11, 2007, 5:06 pm
It’s Idaho’s time for Prop 13!
My house has lost about $30 thousand in value. I’d be lucky if I even got that. Someone pay attention–taxes need to be dropped accordingly. Boy do we need some leadership!
Dec 11, 2007, 7:22 pm
Taxes should be collected based on income, not on the value of our assets (that may or may not have unrealized capital gains, as pointed out above by ericn1300) or our spending habits (sales tax).
In 2001 my property taxes (the amount I paid at the end of the year) went down, about $80. In 2004 they went down again, by about $19. And in 2006 they went down by about $660 due to the increase in the homeowner exemption from $50,000 to $75,000. This year, 2007, they went up about $160 in spite of the increase in homeowners exemption from $75000 to $89325, probably because the valuation of my lot doubled while the valuation of the improvement (my house) decreased. So taxes do go down, at least my individual taxes have gone down at times. I am quite sure that the total budget of the taxing authorities has probably never gone down.
We need leadership that will follow the desires of the citizens, and not the corporate interests, and I’m not just referring to local politics.
Dec 12, 2007, 12:06 am
Gov. Otter suggested a Prop 13 type property tax here in Idaho and the Statesman came out swinging against it, then declared it was “dead on arrival” at the State Legislature.
How do we make sure the legislature is DOA? We need to get rid of the people who stand in the way of important tax relief for the people of this state. To continue to RAISE property taxes at a time when the entire country is looking at the possibility of a recession is simply asking for horrible economic trouble. How many people in Idaho are going to have to lose their homes before the State Legislature wakes up and listens to the Governor? OTTER IS RIGHT — property tax increases must be limited to protect homeowners from the voracious appetite of big government.
Prop 13 works!
Dec 12, 2007, 2:02 am
“Property Taxes Likely To Rise”
Duh!
I trust you’ll keep this on a save key to use as a standing headline every year or oftener. ?.
They’ve risen about every year since I moved to the area 40+ years ago.
The officials’ explanation? Somebody built a big new house in our neighborhood, and that somehow made mine supposedly more valuable. Same house, same services, higher taxes. Hmmm …
And the colonists thought taxation *without* representation was bad!
Dec 12, 2007, 6:58 am
Property tax should be used to pay only for services related to property (fire, police to some extent, sewer, garbage). Other services should be paid for through other means. The first step in the process is to determine what it costs to provide services to particular types of property. The cost is not necessarily related to property value.
Dec 12, 2007, 9:03 pm
Eric,
I get a separate sewer and trash bill so those are not covered now by property taxes.
We should be taxed on income, not assets (property) or spending (sales taxes).
EDITOR NOTE–I don’t have the answer. We have tax on income and it is frought with loopholes. Should a guy with 4 kids who makes $50,000 pay the same tax as a retired guy who makes $50K from stocks?
Idaho’s “three legged stool of sales, income, and property tax is not a bad system. Shifting the burden around is the problem.
Dec 13, 2007, 6:52 am
Rod, I don’t have a problem with taxing on income. I don’t have a problem taxing spending. However taxing based on the value of a person’s home seems to me to more of a tax on debt, and as pointed out above, it’s based on unrealized gains in many cases. One way to approach the problem is to determine what it costs to provide services to particular classes of property. Once that number is known, we could intelligently decide what to do next. Perhaps we supplement that number with a local sales or income tax. Perhaps we have to subsidize that number for homeowners. I don’t know. But at least it would be a logical way to proceed… and it would not be based on property value–which is the cause of the inequities that we all see. I am suggesting that we quit tinkering with the edges of the problem and get at the heart of the matter. My friend does not think it’s fair that her taxes went up $600 and mine stayed the same. I have to agree with her.
Dec 13, 2007, 9:10 pm
Sorry, Editor, but I do think the three legged stool of income, sales, and property taxes is a bad system. Sales tax is, IMO, not fair, nor is the property tax. We could, given enough political courage, have an income tax system free of loopholes, social engineer schemes, and favoritism.
In other words, maybe the income tax isn’t perfect, but it is far better than sales tax, flat tax, value added tax and property tax schemes.
Dec 14, 2007, 6:22 am
I am at a loss on understanding the one cent
sales tax brought to us by Gov. Risch.
Raising the tax by 20% on sales, and now I receive my property tax bill with a increase of
18%.
Instead of having a fixed price on school maintance based on property tax, the one cent tax is suppose to guarantee this construction procedure on schools.
Every one cent tax to Idaho generates 200 million to the general fund. How did this effect my property tax?
I am guessing it did not?
What I am reading in the paper is that it affects the personal property of business and farmers.
Am I right?
Dec 14, 2007, 6:35 am
Rod.. the key phrase being “political courage.”
Dec 21, 2007, 7:33 am
Dave-I am looking to see you on the cover of Time Magazine next year as man of the year. As one who strives on a daily basis to serve the community which has given me my livelihood, (the City of East Lansing, MI; Home of Michigan State University) I am embarrassed and ashamed that any government entity would ever conduct business with such animosity to their taxpayers.
Sometimes government employees get complacent that they are safe in their jobs and forget they are a ‘GOVERNMENT OF THE PEOPLE, FOR THE PEOPLE!” In my unit of government our staff, regardless of the position they hold within the organization, are paid to be NICE! We practice this like a religion.
Every now and then someone has a bad day and has to be reminded of where our bread is buttered, but for the most part, we live by and practice our stated Mission, Vision and Values. I am curious if Meridian Irrigation even has a set of organizational values. They might think about developing one. Have a great Holiday, Love You.