Tag: property tax

Property Taxes Are Theft

Governor Ron DeSantis of Florida has an absolutely thrilling idea, one I never imagined I would see unfold in my lifetime. He is putting on the ballot next year a referendum that would abolish or restrict local governments from taxing owner-occupied homes.

That’s right, he wants to get rid of the property tax, saving residents some $3,400 a year and fundamentally disrupting the way schools and local governments are financed.

Texas is considering the same path.

If this really happens, I can easily predict more of a demographic shift out of the Northeast and Northwest to the South and Texas. If this spreads to more states, it would amount to a revolution in public finance.

It’s long overdue. These tax schemes are brutal on home ownership. Indeed, it’s hard to say that you are ever really the owner of your home if you are having to pay rent to the government every year.

It’s especially a problem in an environment when the home valuation goes up every year and so does the tax you owe on the place. You have done nothing but lived there and enjoyed life. It is entirely paid off. Meanwhile, the government keeps coming after you with ever more pressing demands for money.

You cannot really say you are an owner of anything under these conditions. Of course when I hear about how this will save $3,400 on average in Florida, I nearly faint. In my area of the country, this would be pennies. Property taxes in New England can be $20K–40K and that is not unusual.

These taxes fund schools that people don’t use. That’s how public schooling in this country came to be financed. The system of school districts really is a system of tax districts. That’s why they are so heavily enforced. Live on this side of the street instead of that one and your taxes can be completely different. It’s all to fund the public schools, whether you use them or not.

Friends of mine are paying $30K in property taxes plus $70K per kid for private schools for three kids.

If that kind of expenditure shocks and amazes you, you are not alone. I find it all unfathomable but that’s how New England works.

It’s a different world in Texas and Florida. Here you have new experiments in school choice. The plans are different but they generally let the parent use the money that would otherwise go to the public school for private schools, charter schools, or homeschools, either in the form of direct payments or deductions from the tax bill overall.

We might ask how all of this is happening now. The answer traces to the school closures of 2020 and 2021 which dramatically reduced confidence in the public schooling system and hence the way they are financed. If millions of people are homeschooling and millions more are attending newly established private schools, the political pressure for ever-higher property taxes is thereby reduced.

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The Disturbing Truth About the Home You Think You Own

The North Dakota Referendum That Could Have Changed Everything

In 2012, North Dakota held a referendum to become the first US state to abolish property taxes.

The measure aimed to amend the state constitution, eliminating property taxes and requiring the government to find alternative revenue sources.

Proponents argued that property taxes were unnecessary since North Dakota already had ample income from state taxes and oil revenues. They also pointed out that property taxes disproportionately burdened low-income homeowners and senior citizens. Eliminating them, they claimed, would provide financial relief, boost economic growth, and attract businesses and residents.

However, a coalition of bureaucrats and special interest groups fought against the referendum.

In the end, voters overwhelmingly rejected the measure—78% chose to keep their property taxes.

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He Lost the Title to His Home Over a Small Property Tax Debt. Years Later, He’s Finally Getting It Back.

A Nebraska man whose house title was seized over a modest property tax debt has finally gotten it back, ending a yearslong legal battle that almost saw him lose his home and all of its value in excess of what he owed the government.

In 2014, Kevin Fair was unable to pay his $588 property tax bill after quitting his job to care for his dying wife, Terry, who had been diagnosed with a debilitating case of multiple sclerosis. The next year, the Scotts Bluff County government quietly sold that debt to a private investor, Continental Resources, which continued to satisfy the Fairs’ property taxes—until 2018, when the company sent the couple a bill for $5,268.

The family would have to pay that total—their tax debt, along with interest and fees—within 90 days, or lose their house. They would also lose all of their equity, even though their home was worth about $55,000 more than what they owed.

That was business as usual in Nebraska, which was one of many states engaging in legalized home equity theft. “People are shocked about how the law actually operates,” Jennifer Gaughan, chief of legal strategy at Legal Aid of Nebraska, told me in 2023. The law was indeed shocking: Local governments were permitted to sell tax debts to investors, without sending correspondence to the debtors. Three years later, as in the Fairs’ case, the investor would mail the property owner the new bill, which, of course, had grown substantially, with 14 percent interest and other fees. If the owner couldn’t pay within 90 days, then the county treasurer would give the title of the house to the investor, who would then take the home, sell it—and keep the change.

“It’s usually elderly people…people who own their homes outright who don’t have a mortgage, and there’s usually some kind of intervening situation,” said Gaughan. “It’s not just poverty. It’s illness, or something happens in their lives….And then they don’t have notice of it. And then [the home] is being taken.”

The Fairs sued, arguing that losing the equity in their house in excess of what they owed violated the 5th Amendment’s Takings Clause, which promises that the government cannot take private property “without just compensation.” The pair lost multiple times, including at the Nebraska Supreme Court. 

The U.S. Supreme Court considered the issue in 2023. The plaintiff in that case, an elderly woman named Geraldine Tyler, accrued a $2,300 property tax debt on her condo in Hennepin County, Minnesota, after some neighborhood incidents, including a nearby shooting, prompted her to move to a retirement community. Unable to finance both her rent and her debt—the total bill came to $15,000 with penalties, interest, and fees—the local government seized her condo, sold it for $40,000, and kept the $25,000 profit. The U.S. Court of Appeals for the 8th Circuit ruled that was fine.

The high court’s justices unanimously disagreed. “A taxpayer who loses her $40,000 house to the State to fulfill a $15,000 tax debt has made a far greater contribution to the public fisc than she owed,” Chief Justice John Roberts wrote. “The taxpayer must render unto Caesar what is Caesar’s, but no more.” Tyler was 94 years old when the decision came down.

With that ruling in mind, Nebraska’s top court reconsidered its previous decision and ruled that Fair would not have to sacrifice the additional equity in excess of his debt. Whether or not he would be able to retain his title, however, remained unclear, until late last month when he came to an amicable agreement with Continental Resources.

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North Carolina counties demand full property tax payments — even for homes wiped out by Helene

Residents of several counties in North Carolina are still on the hook for the full payment of their property taxes, officials warn, even if their homes were destroyed by Hurricane Helene.

In late September, Helene battered the mountainous region of Western North Carolina and the surrounding states, causing massive floods that swept many structures away or left them in a pile of rubble. As a result, some residents remain in RVs or even tents, despite winter temperatures, as Blaze News previously reported.

Though the devastation in the area is unprecedented, state law requires property tax payments to be paid by midnight on January 6, no matter what. So county leaders say their hands are tied.

“Please be aware: North Carolina law does not allow property tax waivers or exceptions due to natural disasters,” read an online statement from Buncombe County, one of those hardest hit by Helene. “Regardless of circumstances stemming from Hurricane Helene, property taxes are still due by Jan. 6. The Tax Office is here to help you figure out a plan, so please contact us as soon as possible.”

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Property Tax Anger is Growing Across America

Americans are growing increasingly frustrated at property tax levels, a new poll has shown.

According to a new UChicago Harris/AP-NORC poll, around two thirds of Americans surveyed believe their property tax rate is too high. The poll was conducted in 2023, between December 14 to 18, with 1,024 participants across all 50 states and the District of Columbia.

The survey found 69 percent of adults in the U.S. believe their property tax rates were “unfair”, with 27 percent saying they were “about right”, and 3 percent claiming they are taxed too little.

Across the country, property taxes, also known as real-estate taxes, are imposed at a local level, with homeowners in each state paying different amounts. Property taxes go back into local communities, helping to pay for infrastructure improvements, public services and schooling. According to retail lender Rocket Mortgage, the highest rates are applied in New Jersey, Illinois and New Hampshire, whereas the lowest taxes are paid in Hawaii, Alabama and Colorado.

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Get Ready to Be Hammered by Property Taxes

There have been very few points of financial solace in the past few years apart from rising financial markets. Part of that has been an incredible increase in home valuations. This comes from inflation, yes, but also from shifts in supply and demand for home purchases. Demand is as it always was but realizing it is another matter.

The problem is on the supply side. In most places around the country, homes are not going on the market at the same and predictable pace they once were. This is for reasons of soaring costs of new mortgages. Many homeowners purchased back when interest rates were absurdly low and negative in real terms, perhaps 2 or 3 percent.

Selling now means paying huge capital gains taxes and then applying for a new mortgage at 7.5 percent. The implications of that seemingly small change are actually gigantic, and making it work without paying drastically more in monthly bills means moving to a cheaper area of the country or downsizing the quality and size of the home.

Rather than make that choice, many homeowners are stuck living right where they are even if they would prefer some other job or home elsewhere. They are frozen in place but, hey, at least these people have homes that they own, right?

Not only that but the valuation that you see on Zillow is going up and up. Yay!

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Despite Supreme Court Ruling, States Are Still Confiscating People’s Homes

Horses taught Christine Searle the importance of being fair. Intelligent and innately honest creatures, horses know deceit when they see it. She wishes they could teach that principle to the state of Arizona.

The 70-year-old horse trainer and Arizona native is on the verge of losing her life’s savings over an unpaid $1,607.68 property tax bill.

“I owed them the money. And that’s what they should get—the money I owe them,” Ms. Searle told The Epoch Times.

“I don’t think that they should have the right to take all of it.”

Arizona is one of almost a dozen states that allow creditors to keep all the proceeds from sales of homes foreclosed due to unpaid taxes—known as tax lien sales, according to the Pacific Legal Foundation (PLF).

A 2022 U.S. Supreme Court case out of Minnesota offers some hope to property owners in these situations, but only if a similar case is brought in their state. In the 2022 case, the justices ruled that Minnesota’s practice of keeping all the proceeds of a tax sale constitutes an illegal seizure of property.

“The taxpayer must render to Caesar what is Caesar’s, but no more,” Chief Justice John Roberts wrote in the unanimous decision.

But, under their current laws, 10 states and the District of Columbia have no means of returning the excess proceeds of a home sale; what Mountain States Legal Foundation lawyers representing Ms. Searle call “home equity theft.” The states include Alabama, Arizona, Colorado, Illinois, Massachusetts, Minnesota, New Jersey, New York, Oregon, and South Dakota.

Ms. Searle hopes her case will be the one to set things right in Arizona.

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The Evil of the Residential Property Tax

According to the Case-Shiller index, home prices have increased 44 percent since February 2020. That’s just an average, of course, and some markets have seen increases in prices that are far higher. Even in middle-American housing markets, however—where home prices are supposedly more reasonable than on the coasts—prices have soared. In Cleveland, for example, the index is up 40 percent since early 2020. During the same period, the index rose 50 percent in Atlanta and 33 percent in Chicago. This sort of price inflation is not merely a product of the physical supply of housing. Demand for housing has been greatly inflated by nearly fifteen years of historic lows in interest rates, following by immense flows of newly created money during the Covid Panic. As economist Brendan Brown has noted, even as consumer price growth appeared low from 2008 to 2020, the effects of monetary inflation have long been visible in asset price inflation (e.g., home prices).

It is not at all surprising then that property taxes are rising as well. Fortunately for homeowners, though, property taxes have so far not kept up with market prices. According to an April report on property taxes from housing analytics company ATTOM,

$339.8 billion in property taxes were levied on single-family homes in 2022, up 3.6 percent from $328 billion in 2021. The increase was more than double the 1.6 percent growth in 2021, although smaller than the 5.4 percent increase the prior year.

The report also shows that the average tax on single-family homes in the U.S. increased 3 percent in 2022, to $3,901, after rising 1.8 percent the previous year.

At the individual state and local levels, some property tax hikes have soared. Michigan, for instance, has raised property taxes by levels not seen in 28 years. Some local governments are hiking property taxes by 20 percent or more.  In many areas, however, property tax increases have not even kept up with inflation. So, if home prices are rising at 40 percent or more on average, why are property tax collections not anywhere close? Much of the reason for these relatively modest increases is the fact property tax assessments are not instantaneous, but are only modified at often lengthy intervals. In other words, many homeowners may find that there is still plenty of property-tax related bad news still to come. Realtor.com reports, for example:

Property tax bills have been rising or are slated to go up as local governments capitalize on the surge in home prices over the past few years. And there is little recourse for homeowners stuck with the higher tabs.

“Most people should expect a property tax increase,” says Carl Davis, a research director at the Institute on Taxation and Economic Policy. “We’re seeing [property] assessments catch up with the market right now. That process will continue to unfold over the next few years.” Local governments are facing rising costs just like everyone else. And the wild price growth during the COVID-19 pandemic has presented municipalities with a golden opportunity to do something about it.

Kiplinger’s notes that state and local governments will be doing everything they can to translate rising home prices into more revenue:

Homeowners in areas that have experienced significant appreciation in home values should be prepared for the possibility that their local jurisdiction will raise rates to match higher assessments—even as home sales have leveled off, experts say. For local governments, inflation has driven up the cost of everything from public employees’ salaries to school supplies. In addition, in the wake of the COVID-19 pandemic, commercial property owners are struggling with a large number of vacancies, which has led to a decline in revenue from those sources.

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Can an Unconstitutional Law Force You To Sell Your Home to a Private Investor?

Can the law force you to sell your home to other property owners? What if that law was declared unconstitutional after you agreed to be bound by legislation in place at the time? Those questions, along with the security of private property, are at stake in a case before the Arizona Supreme Court.

In 2018, Jie Cao and Haining Xia purchased a condominium at Dorsey Place in Tempe, Arizona. Over time, PFP Dorsey, an investment company, acquired 90 of the 96 units in the complex. According to the covenants, conditions, and restrictions (CC&Rs) that applied to the complex, owners were subject to state regulations regarding condominiums, and each unit had one vote within the association. That meant that PFP Dorsey controlled 90 out of 96 votes.

At the time, Arizona law (Section 33-1228) allowed an 80 percent supermajority (later increased to 95 percent) to terminate a condominium agreement and to “provide that all the common elements and units of the condominium shall be sold following termination.” PFP Dorsey exercised its votes to force the remaining individual owners to sell their units to the investment company.

Outraged, Jie Cao and Haining Xia sued.

“Defenders of Arizona’s law say it’s necessary to prevent the ‘holdout problem’—property owners who supposedly strategically refuse to sell at market price to compel extra compensation. In theory, such holdouts hinder economic development projects and their alleged trickle‐​down effects,” comment Anastasia P. Boden and Nathaniel Lawson of the Cato Institute. “The fact that some people would rather see private property go to a supposed ‘better use’ can’t justify confiscating it. The Founders were very worried that private interests might coopt government power for their own ends.”

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IN-DEPTH: Losing Your Home Over a Missed $588 Property Tax Bill—In 12 States Government Can Seize Your Home and Keep All Proceeds

It was a dream come true—or rather about to come true—when the Halls bought their forever home. It had everything they needed and more: five bedrooms, four bathrooms, a family room, a dining room, a roomy garage, good schools, and a good neighborhood. Sure, a fixer-upper, but they felt up to it. Prentiss Hall, a home improvement contractor, made it his life project, and everybody lent a hand—his wife, Tawanda, and six children, cousins, and friends.

“We were really excited,” Tawanda told The Epoch Times.

They negotiated the price down to $67,000—a bargain, perhaps, but the home demanded a daunting amount of “tender love and care.”

“The house had been sitting there for a while. I guess it had mold in it, and it needed new windows and doors and electric,” Tawanda said.

“The city made us get all kinds of permits to get the house up to code. So we went in there and just started working.”

It took about a year before they were able to move into the home in the quiet Detroit suburb of Southfield, Michigan. And it was several years before they felt “comfortable” with it, she said.

The result was worth it.

“It was a dream home. It was big enough … for our family to be there, we had plenty of rooms, big enough to have our holiday dinners, and everyone can come and be comfortable,” she said.

For a Detroit girl, it was nice to have a peaceful place to live, away from all the noise and hustle.

“We just hoped and planned to stay and grow and raise grandchildren and, you know,” she paused.

“But—,” her voice trailed into a sigh.

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