Sunday, August 12, 2007

Are you an unwilling buyer?

Revaluation is a process by which the latest market values are applied to all property. (Market values = values resulting from the actions of a willing buyer and a willing seller.)

Prior to frequent revaluations, a person could buy a home at a high price and simply continue to pay taxes on an old, usually lower assessed value - clearly unfair to existing owners.

Simply reassessing that one property would be very unfair to the new buyer however, since the tax rate was based on those lower values and would be much too high when applied to a market value.

Revaluation attempts to solve this unfairness. By updating market values for the entire community and calculating a tax rate based on those market values the resulting tax is indeed fair to all new owners.

However, revaluations produce two classes of existing owners; those with higher taxes and those with lower taxes, typically a ratio of two to one. The two thirds who pay more taxes pay much more in total than the tax levy increase, the excess being used to offset the reductions given to the other one third.

[e.g. In 2004, North Kingstown owners of property over $5 million in value received reductions averaging 18%!]

The impact of revaluation can be devastating for many of the two thirds who become unwilling buyers, obliged to pay taxes as if they were willing and able to pay market price for their homes, the same as new owners.

Sadly, many people, often the most vulnerable, old and young, are being forced from their homes, not because community tax levies are rising too high and too fast, but because the real estate market has made them unwilling buyers!

Try this little exercise:

Ask your town manager what the percentage increase in the tax levy was the year after your last revaluation.

Next, determine the percentage increase in your tax bill for that year.

If your tax bill increased more than the tax levy, all of the money you paid in excess of the tax levy increase was given to other tax payers in the form of their lower tax bills. This is not fair distribution.

Property taxes are supposed to represent our fair share of the tax burden. Instead, they're just a gamble.

Check out R.I.G.H.T.

Or maybe it's just me.