General Question

DaphneT's avatar

Property Taxes - why did they come into being, when did they come into being and what is their purpose?

Asked by DaphneT (5635 points ) March 7th, 2012

As stated, why, when and what for? Can they be reduced to token amounts? Should they? What benefits can come of such reduction?

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11 Answers

JLeslie's avatar

Property Taxes help fund the infastructure in the community. Sewers, public water, schools, emergency services, and whatever else the particular community wants to put into the tax structure. Some add garbage collection, yard waste collection, helps funds community centers, athletic centers, many many things. Some communities leave this to separate fees outside of taxes.

I did a question once on how it bothers me people can lose their houses, their property, for not paying property taxes even if their house is paid in full. I understand why property taxes are levied, but it still bothers me a little.

wundayatta's avatar

They are a way to raise money to pay for the activities of government. I don’t know when they came into being, but I’m sure it was probably before recorded history. The purpose is the reason why. You asked the same question twice.

They can be reduced and eliminated. It’s up to the government to decide. In the US, we elect representatives whose job it is to decide whether or not there should be a property tax and if so, at what level it should be set.

Property taxes are one of the oldest forms of taxes. You are taxed on what you own. A more recent invention is income taxes, although those are pretty old, too. Religious organizations have been instituting taxes or tithes for an awful long time, too. So now that I think of it, I’m not sure that income taxation is actually a newer concept than property taxation.

One problem with property taxation is that you can be property rich and cash poor. If you have no cash, you can be forced to sell property in order to pay the taxes on it. Some would say that this forces people to either use their property to make money, or sell it to those who will use it to make money. It makes the property more productive in the long run.

However, property taxes are regressive in that they charge you the same tax rate regardless of your income.

Do you think property taxes should not have to be paid if you have no income? Is it right to force people to sell property to pay taxes? Should we only have income taxes and no property taxes?

robmandu's avatar

In Texas, we have no state income tax. But the government still has to pay for schools, infrastructure, operations, entitlements, etc., etc. So we have higher rate property taxes as compared to states with income tax.

So… we could reduce property taxes here, but that would likely mean an increase in sales tax or the introduction of income tax or some other way to bring in the necessary government revenue.

rojo's avatar

They will occasionally reduce the property tax rate but this is usually offset by an increase in the property values. I assume so they can raise the rate again in the future.
One thing they have done here over the last couple of years is to raise the value of the land the structure is sitting on since it is hard to justify an increase in property values when housing prices are still down. Last year, the value of my “improvements” (the house, etc.) was devalued by $10,000.00 but the value of the lot it was sitting on was increased by #13,000.00. So my taxes went up. I could not sell this property for what the county has it valued at (I tried) but was told by the appraisal district that actual sales prices in the area are only a part of the criteria used to determine rates and values. I think the main (only) thing that determines it is how much the various entities that need that year.

marinelife's avatar

Here is the history according to Economic History:
“Taxes based on ownership of property were used in ancient times, but the modern tax has roots in feudal obligations owned to British and European kings or landlords. In the fourteenth and fifteenth century, British tax assessors used ownership or occupancy of property to estimate a taxpayer’s ability to pay. In time the tax came to be regarded as a tax on the property itself (in rem).

In 1818, Illinois adopted the first uniformity clause. Missouri followed in 1820, and in 1834 Tennessee replaced a provision requiring that land be taxed at a uniform amount per acre with a provision that land be taxed according to its value (ad valorem). By the end of the century thirty-three states had included uniformity clauses in new constitutions or had amended old ones to include the requirement that all property be taxed equally by value.”

The property tax is unlikely to ever go away.

wundayatta's avatar

@rojo Where I live, property values are supposed to be assessed fairly. They haven’t been for decades. Thus there is a lot of unfairness in the property taxes people pay. This is technically unconstitutional, but no one has sued, yet.

The City is trying to implement a fair assessment system that is based on sales and other data, and is based on computer analysis of data, not the analysis of an assessor. They have been trying to implement this system for what seems like a decade now, with no success. People like the unfair system because poor people pay more and rich people pay less. Rich people can appeal assessments where poor people can’t.

What happens, though, is that the assessment system gives politicians another way to raise taxes. Normally, they have to raise the millage rate, and they have to do it in public. Normally the public protests any attempts to raise tax rates, and the attempts are defeated.

However, with our system, the Mayor could just tell the assessors to raise the assessments en masse. Voila! Increased revenues; no tax increase; and only the rich will protest, but they will do it in private.

Politicians love this because they can champion a freeze on tax rates while still knowing more income is coming. The people only have themselves to blame for the politicians’ behavior. We are the irresponsible ones who are always against tax increases while expecting better schools and whatnot. It’s crazy. Typical. No one really wants to take responsibility for making things better.

I was going to say, “except academics,” but then I realized that academics may do all these studies and make all kinds of recommendations, but they say it isn’t their job to implement the recommendations. The politicians should do that. More passing the buck.

gailcalled's avatar

Half of my property taxes go to the local public schools and the other to the town and county.

I get no water, no plowing, no trash pick up, no town sewer or no fire hydrants. The local fire department is made up of volunteers (I just wrote a $50 donation to them).

The bulk of the town taxes go to the endless and ongoing maintenance of 57 miles of dirt roads.

We have an assessor who holds several open houses for grievances. It is the social event of the season. The town hall is the size of a one-car garage so those of us who wait can hear everything that goes on.

If the town assessor is not willing to lower your assessment, (more often than not) then you can go to the county seat to a slightly higher authority. He accommodates you depending on whether he is aching to get rid of you and go outside for a cigarette.

Ron_C's avatar

When governments began in Europe, the only people that could support public projects were the landowners because the surfs had no property that was not granted to them by their king or lord. Now a days, property tax still pays for public projects, especially public schools. Further renters are also charged this tax either paid by their rent or by other small city levies.

The problem with this tax, today, is that those on fixed income can loose their property. Many states have forgiveness programs for seniors and the disabled but the least progressive stated can and do take over property form people that cannot pay their taxes.

I new a guy that built his own house and also did a beautiful job of landscaping his property. He kept track of his expenses and only paid $5000 for his materials. Unfortunately, his property was appraised at $200k at the same time he got sick and had to retire. Other than Social Security, he had no money coming in.. He had to sell his property to protect it from being taken over for failure to pay taxes.

wundayatta's avatar

@Ron_C Perfect example of a major problem with property taxes compared to income taxes.

Now will someone come up with a justification for property taxes that shows why it is good for the economy?

Ron_C's avatar

@wundayatta in general, property taxes do more good than harm. All that is needed is a tweak to fix the retirement income problem. Personally, I don’t mind paying property tax, of course I will be protected by my state when I finally retire.

robmandu's avatar

@Ron_C, similar to your story, my wife’s family owned several dozen acres of farmland outside of Dallas years ago. As the urban sprawl grew and expanded, it eventually reached and incorporated their property. In a residential-zoned area, property taxes are much, much higher. So eventually, my wife’s family was forced to sell their land bit by bit as they couldn’t generate revenue to keep up with the advancing property tax rates.

And to @gailcalled‘s point, in Dallas and Tarrant counties – and likely most other places, too – the tax assessor determines the value of your property based on what they believe actual market value to be. Every year (or two or three), this value assessment is increased. So, even if the tax rate stays the same, the property owner can pay more in taxes each year.

The counter-balance to this is that the property owner can formally appeal this year’s valuation. It’s a relatively simple process where you go into meet one of the assessor personnel, work with them to identify similar homes that have less value near yours – or bring in your own evidence – and decrease your tax burden for the year that way.

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