Saturday, November 22, 2008

The Subprime Mess and Property Taxes

Maybe it doesn't seem like there is a connection between the worldwide financial meltdown and our property taxes but both suffer from the same delusion.

The sub-prime mortgage meltdown has been blamed for the worst financial crash since the great depression. What happened? In a word, people were treating the market values of homes as if they were real money. When the market said a home was worth umpteen dollars people acted as if they really had umpteen dollars. But the dollar value was in fact NOT REAL. The value of a home, or other property, becomes real only when a buyer is willing to pay you umpteen dollars - only then is it worth it.

The market driven housing bubble continued to expand and people continued to act as if those inflated prices were real cash and they borrowed against those values. When reality set in and housing prices began to fall back, people panicked and began selling, further driving down prices. The cascade was devastating to the entire financial structure as people began to understand that they were spending an illusion.

Property taxes are much the same. Property owners pay their taxes on the same illusion that drove the housing bubble - the market price of homes. The bizarre result after revaluations is that about a third of property owners pay LOWER taxes. That is not a misprint, I said lower! These decreases are paid for by the rest whose market values have increased more than the tax levy. Some owners saw their taxes double! We are being taxed on an illusion.

In times such as these it would not be surprising that the more modestly valued homes might even see their values increase more than the high priced homes and the results would devastate moderate income people. This entire system of property taxes suffers from the same illusion as the sub-prime mortgage frenzy. Isn't it time to change the system and distribute the property tax burden in a fair manner?

Please see our website for a different way to pay our tax levies in a fair and reasonable manner and maybe even attract new businesses at the same time.

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