June 12, 2012

"They argue that the [property] tax is unpredictable, inconsistent, counter to the concept of property ownership..."

"... and needless in a state that, thanks in part to wildly successful oil drilling, finds itself in the rare circumstance of carrying budget reserves."
An unusual coalition of forces, including the North Dakota Chamber of Commerce and the state’s largest public employees’ unions, vehemently oppose the idea, [questioning] precisely how lawmakers would make up some $812 million in annual property tax revenue; what effect the change would have on hundreds of other state laws and regulations that allude to the more than century-old property tax; and what decisions would be left for North Dakota’s cities, counties and other governing boards if, say, they wanted to build a new school, hire more police, open a new park.
ADDED: Rush Limbaugh connected this story to the aftermath of the recall in a segment of yesterday's show, which I blogged about here. Here's the part about North Dakota and taxes:
[North Dakota has raised] sales tax revenue 86%... And they did it, of course, without raising the sales tax rate. There's just all kinds of new economic activity going on....
Basically, it's a lot of oil fracking, but the liberal voices are playing in the media, scaring people about pollution:
It's an effort to get people opposed to the boom that's happening in North Dakota. It's like Scott Walker. After the Scott Walker recall debacle for the Democrats, what is the Democrat headline, what's the media headline? "Romney is Going to Cut Public Sector Jobs." That's the way they're trying to instill fear. Yeah, Romney's gonna cut public sector jobs.
But Scott Walker's recall victory steeled conservative nerve, so that a strong argument against public sector unions is now being made by other state governors. The point about North Dakota is that it could be a basis for building an argument about economic development as the best way to build tax revenue using sales tax — with no increase in the tax rate and justifying the reduction or elimination of other forms of tax.

North Dakota votes on ending the property tax today (exactly one week after the Wisconsin recall), so it's possible that there will be a big victory there that will give conservatives confidence to argue boldly for lots of fracking and tax-cutting. Rush mentions the North Dakota governor as someone who, like Walker, could become a hero for this line of conservative argument. There's just one big problem! North Dakota's Governor Jack Dalrymple — a Republican — has opposed the property tax ban:
“It’s mind-boggling, really,” he said, in an interview, of the effects of such a ban. “We’d be changing everything, frankly.”
Dalrymple is no Scott Walker.
The notion, he said, that the state has enough surplus to replace property taxes for localities around the state without raising other taxes is false. For starters, he said, much of the state’s benefits from the oil boom are already dedicated legally to particular funds and cannot simply be transferred to support schools, counties, towns, park districts and the like.
Cannot simply? Like you can't change whatever these limits are? Is it complicated? Do it complicatedly.
“I have to say that we totally understand that North Dakotans are very concerned about their property tax payments,” Mr. Dalrymple said. “You have a tension there, and people say this can’t keep on.”
This guy is no Scott Walker. Rush Limbaugh needs to attend to this detail.

75 comments:

tim in vermont said...

I am sure that the public employees union opposes this. How else can you capture a piece of everybody's home and indenture the owners to pay for your retirement before they can pay for their own?

chickelit said...

Possession is only 9/10 of the law--the rest is tithe.

AJ Lynch said...

1- I'd like to see states leave it up to the cities and counties to decide if they will levy property taxes.
2- The state calling the shots reminds me of the feds calling all the shots i.e. Obamacare.

If it is a power grab by the feds, it is also a power grab by the state.

Bob_R said...

Property isn't usually a very good basis for taxes since it's only loosely correlated to disposable income. But the downside of a law like this is that you take taxing authority away from localities and put more power into the state government. Take away the state's power to tax income or sales and give it to the locals and you might have a plan.

David said...

Sounds like a good idea on the surface and is made possible by taxes on oil production. But it's a bad idea.

The principal problem is that the state legislature becomes the mechanism for funding local activities if the property tax is eliminated. Thus the elimination of the property tax becomes the source of centralized control and back room dealing to allocate the goodies. This will not lead to good results. We have seen this in South Carolina, where the state legislature now has practical budgetary control over schools due to removing schools from property tax funding.

Think Norway. Take those oil revenues and create a sovereign wealth fund, which will be the base for investment in the state long after the oil revenues go into their inevitable decline.

Pogo said...

Despite housing prices plummeting, property taxes are rising.

but cities are also running out of other people's money, and can't pay their bills.

It's unsustainable.

MadisonMan said...

This does seem like a way for the local government to lose control to people in the state Capitol. Wasn't it Buckley who said that sending tax monies to DC was a bad idea because before the money gets sent back to you, it goes out for a wild night on the town in DC, and you lose some? The same is true in Bismarck, I will posit, although to a lesser degree, I hope.

I think a better step would be to abolish the income tax, or gas tax, or some other state-controlled tax.

fleetusa said...

David is right.

"Think Norway"

Years ago a wise Norwegian government official told me, "left to their own the Parliament would spend every penny of oil revenue and then some".

So the wise Norwegians set up a black box fund which will help them when the oil runs out.

Chip S. said...

I agree with David and MadisonMan.

The easier it is for people to vote with their feet, the easier it is for people to get the government they want.

If a city or town spends its property tax revenue well (mostly on good schools), the relative desirability of that locality as a place to live can actually raise property values. Use state funds and you have to move out of state in order to flee wasteful government.

Michael Haz said...

This is a good thing. A state sales tax, plus revenue from oil production is all that is needed.

Scott M said...

You say, "Peak oil? WHAT Peak Oil??"

I say, "But, shut up!"

Toby said...

This is idiotic. The proposal calls for the state to make up the shortfall in city and county budgets. It is in no way conservative to remove local responsibilities and decision-making powers and give them to the state government.

Chip S. said...

Unless you can explain why it wouldn't be better to lower or eliminate the state sales tax than to eliminate the property tax, I don't see the basis for your assertion, Michael.

edutcher said...

In Jersey, weren't the public sector unions the ones who kept yelling, "Raise our taxes"?

Darrell said...

Why are property taxes based on some pie-in-the-sky crrent sales price? Does that new price do me any good until I sell? Hell no.

Property taxes should be based on purchase price. And some flexibility has to be built into the system to accomodate those with income issues. No one should lose their homes over taxes. And no tax sale should come in only six months, like in some areas.

AJ Lynch said...

I suspect Michael Haz is looking at his own retirement and views a state income tax as less costly to his own situation in retirement.

Chip S. said...

from the article...

“I would like to be able to know that my home, no matter what happens to my income or my life, is not going to be taken away from me because I can’t pay a tax,”

IOW, she'd like to be one of those people who don't pay taxes if their incomes are low.

Leech.

John M Auston said...

About time this is getting some attention. The Property tax is an abomination. Especially for the elderly, still living in the same home for decades, paying an ever increasing 'mortgage', forever.

Un-American.

AJ Lynch said...

Darrell - I also like the idea of the property tax being based on the most recent sales price of the property.

AJ Lynch said...

Basic govt services have to be funded- if we exempt the elderly from RE taxes, should we exempt the childless from school taxes? Let them get a reverse mortgage to pay their taxes.

Chip S. said...

The Property tax is an abomination. Especially for the elderly, still living in the same home for decades, paying an ever increasing 'mortgage', forever.

Let them accrue tax liabilities that are payable when they sell or their heirs inherit.

Retired people take out reverse mortgages all the time.

Darrell said...

Possession is 9 points of the law--and the law has thousands. Does possession help you if stolen merchandise is found on your person? Do you get to keep it? Receipts and bills of sale verify ownership. Don't bother going over and collecting all the jewelry and valuables when your relative dies if distribution is specified in the will.

rhhardin said...

Real estate taxes are the good ones. There's little disincentive effect, and they're stable income for good times and bad.

They ought to reduce the sales tax as necessary to avoid the money flood instead.

That unleashes even more economic activity.

Darrell said...

Reverse mortgages usually give you a fraction of what the house is worth. That's how that works.

AJ Lynch: The most recent sales price would be your purchase price, no? Perhaps I am missing something?

Scott said...

I own a house in New Jersey. For a house with a market value of around $200,000 I pay about $5,000 a year in property taxes.

If North Dakota repeals its property tax and it sticks, I would be sorely tempted to move there and telecommute.

lemondog said...

If a home over time increases its market value, for whatever reason, why is the homeowner liable for an increased tax. It is only paper wealth, nothing tangible. Until the property is sold there is no real wealth gain.

Apply a tax to the value appreciation when the house is sold.

Granted during the housing boom homeowners used their homes as atm machines using money which could in turn be invested to generate added income but then that would be subject to some sort of tax.

lemondog said...

ps...Go North Dakota!!!

Chip S. said...

If North Dakota repeals its property tax and it sticks, I would be sorely tempted to move there and telecommute.

And you'll find that property prices have risen more or less by the present value of the tax that used to be assessed.

Darrell said...

AJ, I just read your comment again and there is no disagreement. The lack of sleep does that.

Drew said...

North Dakotan here, and I wanted to clear up some ignorance:

1: THe state already sets the mill limit for property taxes.
2: The state already funds 75% of education expenses.
3: Localities cannot raise and lower taxes, they have to ask the state for permission and then it applies to ALL localities if they approve it.
4: There is ZERO local control now. Localities can use an emergency provision to raise rates for a short period of time but the need MUST meet the requirements of an 'emergency.'
5: To replace the funds the state can raise sales taxes and income taxes and or fees. This is far preferable to property taxes because they are voluntary: You get to choose whether you want to make more money and pay more income tax, buy more stuff and pay more sales tax, choose not to buy licenses and partake in the extra fees.

Property taxes are evil and immoral. period.

Russ said...

I also find property tax an abomination.

In my current house & jurisdiction, I pay the state approximately $1000/mo for the privilege of living there. That's approximately the equivalent of a $200k/30yr mortgage payment.

In my jurisdiction, property tax is all about funding the schools. I realize they have to be paid for somehow, but the idea of slowly leeching off my real wealth is galling.

(P.s. the talk about property taxes paying for schools raising the home values is mostly exactly backwards. In jurisdictions with low property tax, the value of the homes are much higher because they can be.)

Dust Bunny Queen said...

There are many diverse problems with property tax.

First
is the assessed valuation of the home: If you bought your home at the peak of the market and are paying taxes on $850K while the house is now worth $400K. Or if you bought the place in 1960 at $75K and the value keeps going up to say $850K.

Prop 13 partially solved that last part. "The proposition decreased property taxes by assessing property values at their 1975 value and restricted annual increases of assessed value of real property to an inflation factor, not to exceed 2% per year. It also prohibited reassessment of a new base year value except for (a) change in ownership or (b) completion of new construction."

You can also petition for tax relief and have your home re assessed at the lower amount, but it takes some time and a lot of work..

Second is the issue of property owners being forced to pay additional assessments by bond issues that are mostly voted on by people who don't own property and who aren't paying the taxes. When the majority of the people who don't pay taxes can force those who do pay to cough up for things that they don't want or need, it is problematic. Just like our income tax system where almost 50% of the people pay NO INCOME taxes (don't bother going on about other taxes...I'm talking income taxes) and still want those few who pay the majority of INCOME taxes to pay more to subsidize their goodies.

The few paying for the benefit of the hangers on.

If the county or city wants to build schools then some of the funds should come from other than property taxes. Local sales taxes ...something.

The system is just inherently unfair to those who have property, worked hard to keep their property and are looked upon as cash cows to subsidize every harebrained scheme of the politicians and desires of the non property owning public.

Chip S. said...

Drew, Amazing info about ND's screwed up property taxes. Must have something to do with school spending equalization. If the prop tax is state-determined, then it makes a lot less sense.

But there are still the disincentive effects of sales and income taxes, which are the features you describe as "desirable."

Chip S. said...

Russ said...

P.s. the talk about property taxes paying for schools raising the home values is mostly exactly backwards. In jurisdictions with low property tax, the value of the homes are much higher because they can be.

I'd appreciate it if you didn't take my comments out of context in order to misrepresent them.

I described the effect on property values of a local government that was above-average in the efficiency of its spending. That is a logical proposition, not an empirical one.

If you actually look at empirical studies, you'll see that your blithe factual assertion is extremely difficult to document.

Drew said...

@Chip S:
I would gladly accept higher income and sales taxes because they are semi-voluntary. You can avoid paying more of them by not making or spending more.

What the opponents refuse to talk about is the 800million gorilla in the corner: That 800 million of prop taxes are now left in the economy -- to be spent, invested, saved, etc. This will have its own (snicker) trickle down effect and raise other tax receipts on its own.

but we can't mention that...cuz, like the sky is falling and the world will end if we remove prop taxes.

Drew said...

Oh one other tidbit:

The ND legislature did a property tax relief bill a few years ago by giving X amount of dollars to each locality which was to then be deducted from prop taxes in the next cycle.

Taxes did go down, but then the assessors had a kegger and raised everyone's home value and "poof" your tax bill was back to where it started before the relief bill.

MadisonMan said...

If you bought your home at the peak of the market and are paying taxes on $850K while the house is now worth $400K.

Is Madison the only place in the world where you can petition to change the assessed value of your house based on market conditions? I filled out the form in April, and hope to have someone come through by October, and my property tax bill should drop about 10%

@Drew, the lack of local control in North Dakota property taxes sounds very weird to me, and it makes me wonder about the history of it.

Chip S. said...

@Drew--Every individual sees an income or sales tax as something he can partially avoid by changing his behavior. But to argue this in the aggregate is simply to say that you want to pay less in taxes. Well, we all do--which is why governments don't rely on voluntary contributions.

To me, it only makes sense to evaluate different types of taxes by comparing them at the rates necessary to yield the same amount of revenue. In that view, a high degree of "avoidability" at the individual level is a bug, not a feature, because total economic activity goes down.

Dust Bunny Queen said...

Is Madison the only place in the world where you can petition to change the assessed value of your house based on market conditions?

Guess you didn't read the rest of my post. It is certainly available in Ca. [reassessment to lower taxes] Most people just don't know about it or don't have the education or ability to do it on their own.

Of course the County or other agency doesn't WANT you to reassess lower so they make it as difficult as they can.

@ Lynch. You want old people to die in debt from accrued property taxes, taxes that are only for the benefit of other people.......and make it so that the heirs are forced to sell the family home or farm to cough up the money. Really. Eff that!!

Chip S. said...

Dying in debt is the best revenge!

Eff the banks!!

PatCA said...

In CA property tax rates are set by the state, collected, and then doled out by them, so we are already under the control of an absent landlord. (As Drew states, so is ND.)

The ND governor is making the same mistake Moonbeam did his first time around -- ignoring the crisis until it overtakes him.

I don't think the problem is so much about taxing property, but the ending list of taxable items or taxable situations has gone mad and must be stopped. Any way possible.

Darrell said...

You know what makes economic activity go down? Fucking taxes.
Stop trying to get into my wallet and forget about my property and whether a fatter wallet is waiting in the wings to pay even more taxes on my land. You can't have it. As long as I own my home, I should be able to rest in peace there while I'm still alive.

Chip S. said...

You know what makes economic activity go down? Fucking taxes.

Fucking taxes particularly make sexual activity go down.

AJ Lynch said...

DBQ:
1- is there some kind of guarantee, of which I am unaware, that says people can die with their home asset value intact?
2- paying taxes for things we don't use? How about the childless as I asked above or people who don't use public transit or don't use the highways?

As Patca commented, the problem is the endless list of things govt thinks it should provide.

Drew said...

Chip S: Partially agree. The key word is voluntary. Voluntary participation in the economic engine which feeds the tax system. If I have more income to spend I most likely will -- I like spending money. I like 'stuff' :)

What really pisses me off is never really 'owning' property. You will always have a landlord with property taxes. You can bust your ass for 30 years to pay off a mortgage but you still do not 'own' your property. Ever. That is wrong and immoral.

I have no issue with funding necessary govt spending through income and sales taxes. Both of these have to be voted on to be raised in ND.

I do have issue with feeding fat phucking govt spend junkies using property owners who are essentially slaves in their own homes -- junkies who can raise the rates via assessments without voter approval.

Terry said...

Look back 10 years ago in Ca when Gray Davis and Dem run legislature gave huge benefit increases to state workers (state police and corrections, 90% of final year pay for retirement at age 50 and 30 years of service with full medical and cost of living increases). All based on Dot Com tax revenues which quickly dried up when the bubble burst. N. Dakota should keep the current property tax system and avoid this type of calamity.

SGT Ted said...

The statements of the Chamber of Commerce guy really shows his contempt for his fellow citizens. "You voters are too stupid to know how to fund your government. You need us to tell you how."

More like "Oh shit, the jig is up and they're on to us!"

Dust Bunny Queen said...

Dying in debt is the best revenge!

Eff the banks!!


It isn't about the banks, it is about being able to control and retain the fruits of your own labor.

Hypothetical without prop 13: I bought a house on 10 acres in a now upscale area like Walnut Creek in 1975 for 65K and today it is worth about 1 million (still even discounted for today's deflated values). Walnut Creek used to be a rural area on a windy 2 lane road that few people wanted to live in. It is now a very expensive suburb.

So...because I was smart enough to buy my house. Paid for it and an now a retired person. Because property values have skyrocketed and because the greedy guts who have moved into the area want to fund everything under the sun with property taxes......you think I should die in debt. I can't afford 10K in property taxes every single year!!! You think I should accrue 10K in property taxes every year and my children should be forced to sell the ranch? The county should be salivating over my death so they can sweep in like the vultures that they are and pick my carcass clean?

This is your idea of how we should be as a culture? As a country.

True story: My father lives in a house in Pacific Grove that was purchased in the early 1960' at $45K cash. (That was a lot back then) The house is now worth [market value] probably 2M. Fortunately, Prop 13 makes it affordable to still live in the home ..>BUT....They can't sell and buy something else because the NEW taxes would be more than they could afford. So even though they would like to move....they can't. Stuck until they die.

At least then the house won't have to be sold to give all the money to the government.

SGT Ted said...

IOW, the Chamber of Commerce has gotten itself into a very cozy relationship with government and advocates using tax money to purchase things so private businesses won't have to fund it. They know that the reduction in money going into government will be reduced and there won't be any gravy left to be doled out.

T J Sawyer said...

The biggest problem with the property tax is that it is, to a large extent, arbitrary.

Assessors and the government make an implied claim that they can value a property to an accuracy of 1% or better. - a silly claim at best.

If three or four fools overpay for property in my neighborhood, my alleged value goes up and so do my taxes relative to an identical home a mile away. Strike two.

An accurate evaluation of value requires a government inspection of my home. If I won't cooperate, the assessor takes a guess and I am required to "prove my innocence" before the local board of review.

And none of the above addresses the relative value of business property versus residential, and dare I mention churches?

PatCA said...

"They can't sell and buy something else because the NEW taxes would be more than they could afford."

In my suburb, the same is true. I think the city would love for us to sell; the new owners would be paying four times the taxes.

Sort of explains the indifference of our city to its citizens. They are hoping we all sell!

AJ Lynch said...

DBQ- I favor laws like Prop 13 that freeze property assessments at the last selling price.

With all due respect, your Dad could sell his current home for $2MM and buy a less expensive property for cash but could not afford the taxes on the new home after he pockets a nice profit?

Mitch H. said...

Boom economies are no basis for long-term tax policy. I'm a Republican, and I don't love either taxes in general or property taxes in particular, but this strikes me as seriously imprudent. It's the sort of behavioral tic which causes so many lottery winners to end up in bankruptcy court.

AJ Lynch said...

Mitch make a good point about revising tax policy expecting a boom to last forever.

Dust Bunny Queen said...


1- is there some kind of guarantee, of which I am unaware, that says people can die with their home asset value intact?


Of course not. That is called market forces. The value of housing on the market is always changing.

We are talking about the government raping you for tax money and leaving you destitute and to the point where, if in your scenario the taxes accrue and pile up and UP, the home owner cannot sell their home.

2- paying taxes for things we don't use? How about the childless as I asked above or people who don't use public transit or don't use the highways?

User taxes and user fees. If I don't use public transit and will never ever use public transit, why should I be forced to pay for it. We DO pay taxes everytime we buy gasoline to support the highways. User taxes and user fees.

Childless people are not using the schools. Schools should also be user fees. We need to change the funding of the entire school system.

And before the usual moron steps in about the forests and fires in my area. We are being assessed a $150 per structure fee in the Cal Fire area ..EVEN while we are also assessed a property tax fee for the local fire departments and are in no danger whatsoever of being in a forest fire, being in the middle of a valley.

SO....I get to pay property taxes for fire protection, which I don't mind at all..... and am now extorted by the State for a fee for something that I will never need. BTW: most forest fires in this area are started by CDF (Can't Deal with Fire) through controlled burns that get out of control.

At this point most of us are good with the fires just burning since we are no longer allowed access on roads(they really can't stop us)and they have totally killed the timber industry and really could give a rats behind about spotted owls. Let it burn. It would get rid of the pot farms and meth labs staffed by mexican gangs. Upside.

SGT Ted said...

I do have issue with feeding fat phucking govt spend junkies using property owners who are essentially slaves in their own homes -- junkies who can raise the rates via assessments without voter approval.

This is the issue, loud and clear.

It should be applied to ALL taxing authority, especially in this age of Pro-Government Special Interests voting themselves money from the citizens they are supposed to be serving and buttraping our wallets every time we stand up.

State and local governments across the nation have not even tried to reduce expenditures to match their reduced incomes due to citizens making less money. They just seek yet more money through higher taxes.

The would-be ruling class of government employee unions, the politicians that solicit their support and the other private organizations, both crony corporatist and crony socialist, that exist to extract tax money from citizens need to be de-funded and de-fanged by voters.

Darrell said...

How are lottery winners spending wildly anything like people who want to live in the homes they own without that shadow rent payment? Find some other shit to tax or spend the money more wisely, reevaluating every person on the payroll and every expenditure made.
When did anyone ever tell us they were going to pay public pensioneers anything near their final salary? Why didn't they fully fund this bullshit?

cubanbob said...

There are no really good solutions but the least bad one would be eliminating the property tax, eliminate the state income tax and replace both with a local income tax from dollar one with a set percentage rebated to the state. The same with sales taxes. At least with an income tax it has some relationship with what the taxpayer can pay in any given year. Property taxes, not so. In states like CA and FL property tax caps do help keep the owner from getting taxed out of their home.
The problem with an income tax is frst defining what is income for tax purposes and how far a scope outside the taxing district does revenue earned is subject to tax.
And as usual, the moocher class will complain about the 'unfairness' of it all.

Chip S. said...

DBQ said...

...I was smart enough to buy my house. Paid for it and an now a retired person. Because property values have skyrocketed and because the greedy guts who have moved into the area want to fund everything under the sun with property taxes......you think I should die in debt.

No. I think you should sell, take your huge, tax-exempt capital gain and move to another isolated area like Walnut Creek used to be.

Then invest the difference in municipal bonds and live off the interest. Then you'll die with positive net wealth and pay no income taxes.

But since your concern is paying taxes on your skyrocketing property value, what if the local gov offered you this deal: Pay no higher property taxes in your lifetime, with the proviso that your estate must sell the property back to the local gov at its original purchase price.

"No thanks," I'm guessing. You'd prefer to keep 100% of the capital gains. Again... who wouldn't?

And what's your problem with dying in debt? That just means you got a free loan from somebody. Unless, of course, you're taking the view of someone who stands to inherit property and doesn't want to pay off those debts. Which, again, isn't surprising. It's just not much of a basis for deciding on tax policy unless the policy is no taxes at all.

PatCA nicely illustrates the desirability of local responsibility for property taxes. Too bad that ship seems to have sailed in many places.

I've got nothing more to add here.

Drew said...

Mitch H: This has nothing to do with boom or bust economies. It has to do with unethical taxation and govt entities spending like drunken sailors.

If a boom goes bust, then you only spend what you take in. It is not that hard.

Hell, the U.S. is going to face that reality whether we like it or not real soon. Taxes will never, can never, solve that problem.

SGT Ted said...

Chip,

The conflict of interest and potential for government corruption in giving them the control over private property in lieu of paying more taxes is the issue.

Because, while individuals have to reduce their expenditures to match actual income, it seems that governments think themselves exempt from it. All these tax challenges aren't happening in a vacuum.

People are finally getting wise to a government that exists for its own sake that veiws citizens as cash cows that exist to send in money to pay for lots of gold plated self serving bullshit. Thats the real issue.

Government was instrumental in causing the real estate bubble, which resulting tax money was promptly spent. Now that income has dried up because of defaults and the resultant lower property assessment of resold houses and governments cannot seem to cut spending down to match income. Thats what reliance on property tax revenue bought us. The issue isn't the funding, its the spending.

ken in sc said...

Maybe local government should be funded by pledge drives. I bet we'd get much better service if it was. They could send you a tote bag.

Dust Bunny Queen said...

"With all due respect, your Dad could sell his current home for $2MM and buy a less expensive property for cash but could not afford the taxes on the new home after he pockets a nice profit?"

When you sell your primary residence, you can make up to $250,000 in profit if you're a single owner, twice that if you're married, and not owe any capital gains taxes. You would owe the taxes on the net gain.

Possibly: but by the time you take out real estate commission on the selling and capital gains taxes, which are currently only 15% but due to go up to 25%. Commission on the purchase and new property taxes at the current purchase price, which would probably be about 1M or more to get something similar to what they have now and in an area where they would want to live. The funds left over to invest at today's currently extremely low rates the income would be enough to probably cover the new property taxes and have some left over.

However, the investment opportunities with little risk that suitable for people of their age are just not available. You buy bonds, you might as well set your money on fire, and they are not comfortable with a heavy stock laden portfolio.

The reality is that while they would like to move somewhere else, warmer, the costs are too much and they decided to just stay put, travel a lot and pass the asset on at a stepped up value and let the heirs sell.

Each person's situation is different and they should be able to make those decisions without government extortion and coercion.

ken in sc said...

BTW, one of the most hated features of the occupation and reconstruction of the South was that carpetbaggers took over local government and raised property taxes to unaffordable levels, dispossed the rightful owners and bought their property at bargain priced tax auctions.

cubanbob said...

All public sector employees and those who are excempt from taxes shouldn't be allowed to vote due to the conflict of interest. I can see an exception for the Armed Forces but other than, no.

Come to think of it the commenter who mentioned about boom and bust cylces and funding in any given year with the taxes available is right. There should be no general obligation bonds and no pensions where the public entity has to set aside the funding. Let each employee put the retire portion as a deduction from their paycheck in to a retirement fund of their own. Just like private sector taxpayers.
If hard times come, layoff public sector staff just like a private enterpise would. Or have the taxpayers vote themselves a tax hike. SO thinking through ND is probably better off getting rid of the property tax and forcing the state and local government to be more cautious in what they pledge in future spending and obligations.

Dust Bunny Queen said...

Good thing you aren't a financial adviser.

No. I think you should sell, take your huge, tax-exempt capital gain and move to another isolated area like Walnut Creek used to be.

Not all the proceeds are tax exempt. Why should I be forced to sell and pay additional capital gains taxes if I don't want to?

Prop 13 has been a godsend for the people in my hypothetical who like their homes and want to stay in their homes, in that at least their property taxes aren't skyrocketing along with the market value of their home.

Sure, you can sell, but at what short term and long term costs.

Then invest the difference in municipal bonds and live off the interest. Then you'll die with positive net wealth and pay no income taxes.

Invest in muni bonds at historically low rates so that when rates go up the value of your portfolio drops like a rock and you are stuck with a low interest rate forever. Unless you like selling your investments at .50 to .35 on the dollar.

And invest in muni bonds in cities and municipalities that are having a hard time staying solvent and are likely to default on the interest as well as the principle.

Anyone who buys bonds today is an idiot. Anyone who buys muni bonds, especially in California is a double moron.

AJ Lynch said...

Sgt Ted wrote:

"People are finally getting wise to a government that exists for its own sake that veiws citizens as cash cows that exist to send in money to pay for lots of gold plated self serving bullshit. Thats the real issue."

Bingo! And I thank God for the internet which has truly enabled us to get wise!

Dust Bunny Queen said...

Nothing personal ChipS. :-)

Just mathematics.

T J Sawyer said...

There is no "real" capital gain associated with the sale of a home. Buy a 3-bedroom home 20 years ago for $100,000. Sell it today for $300,000. What can you buy with the $300,000? A similar 3-bedroom home in the same area. Take out 6% for realtor fees and you can't even buy that.

The home did not appreciate in value - the dollar depreciated.

PatCA said...

All of these solutions to the problem of property taxes, the problem of "fairness" lead me to a basic question: Under what theory does the government have the right to confiscate my money and give it to somebody else? And don't tell me it's moral; millions have died to enforce someone else's definition of morality.

We have gone way, way, way past the notion of supporting a military and building a few railroads.

Carol said...

I can't wait until the next oil bust. Property in E Montana is going to be real cheap again, like the last time they shut down the wells. The Yellowstone Valley is not a bad place, really.

It'll suck to be in ND though.

Joe said...

When I ran my own business, the very worse tax forms were the country property tax assessments. The depreciation schedules made no sense. Hell, even what to list wasn't very clear at times.

Incidentally, the second worse form were those related to workman's compensation.

(Fortunately, I never had to fill out an EIC advance payment form which puts all of these to shame.)

I Callahan said...

Basic govt services have to be funded- if we exempt the elderly from RE taxes, should we exempt the childless from school taxes?

Yes. Why the hell am I paying taxes to send your larvae to school?

Talk about socialism. You get my money because you decided to procreate.

Methadras said...

I called something like this on this blog a while back, but in California. I said that there should be or will be a movement to pay property taxes once upon purchase and that's it. North Dakota has taken this idea way further. I like it. Although the nameless, faceless bureaucrats regardless of where they are will find a way to extract that money from the populace somehow.

AJ Lynch said...

Callahan - are you trying to be funny?