IF YOU THOUGHT KAINE WAS BAD ON TAXES…

Kaine’s tax solutions are lame but Kilgore’s are worse.

First: Kilgore and Shear in today’s The Washington Post say:
“If local governments want more money, he said, their leaders should be forced to openly increase tax rates, not rely on rising assessments to fuel what he called “backdoor” tax increases.”

Barnie send Kilgore, his staff and Mike Shear a copy of that law you cited in response to our question. Kilgore is a lawyer and was the Attorney General?

It gets worse: “No Virginian should be forced out of his or her home because of runaway property assessments.,” Kilgore said. “My plan is an honest (sic) plan that attacks the real problem: skyrocketing property tax assessments that result in higher reals estate taxes paid by you.”

Those who trust the market should really be upset with a proposed constitutional amendment that gets government into the business of second guessing the market with assessment escalation caps. One thing Virginia has is a fair full value tax assessment system. Once the assessed value wonders away from the market value, regardless of how well meaning it sounds, the Commonwealth is on the way to a New Jersey-like mess.

The reason property values are going up so fast is dysfunctional human settlement pattern. Public agencies and private enterprises are working together to build the wrong size houses in the wrong location. See Five “Critical Realities That Will Shape the Future” and “Wild Abandonment.”

In a democracy with a market economy what do you do when the price goes up too fast? Build more of what people want: modest sized homes with quality support close to jobs. Anyone who reads our columns knows the problem is not lack of land. It is lack of leadership that is willing to foster Fundamental Change.

Next Kilgore (and Kaine) are using the Gilmore ploy. Campaign on something the governor can not deliver (e.g. the car tax which became just an unfair burden transfer.) The legislature passes the laws and two legislatures have to pass a constitutional amendment and then the voters get a shot. By that time whomever is elected will be a one-legged duck.

Both Kilgore and Kaine are running for governor, not the chief of legislation. They will have 10s of thousands of employees who spend billions of dollars to do the states work. How will they make government run better? Jim Bacon raises some very good questions about state programs in need of help.

As we noted in an earlier post, functional government costs money. Dysfunctional government costs more money. The Kilgore/Kaine ideas suggest how some who are complaining about taxes might pay less. They do not address who pays more to cover the cost of current dysfunctions or for the future expansion of state, regional and community needs if current trends continue. They do not address how to lower the demand for services or provide them more effeciently.

Finally to solve transportation problems Kilgore proposes “regional transportation authorities.” The problem is an imbalance between transport system capacity and land use generated travel demand. A regional authority has merit only if it is an element of a system that addresses the real problem. (Of course, just raising taxes to generate more money without addressing demand generation will not solve the problem either.)

EMR


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  1. Salt Lick Avatar
    Salt Lick

    “If local governments want more money, he said, their leaders should be forced to openly increase tax rates, not rely on rising assessments to fuel what he called “backdoor” tax increases.”

    Excuse me? What is wrong with that? I’d happily take instruction.

    I had an acre of land reassessed recently and the assessment was ridiculously out of line. The acre doesn’t perk and other than a strip about 50 X 100 feet, it’s all steep hillside. Asssessed value — $24,000 — for land that can’t be used for anything other than raising goats.

    The more I read this blog the more I get the feeling you guys are out of touch with the life of the common Joe.

  2. E M Risse Avatar
    E M Risse

    Salt Lick:

    There are two issue here:

    First: As the earlier “INFORMATION PLEASE, BARNIE” post and following notes document, there is already a law (Sec 58. 1-3321) that requires a municipality to do just what Kilgore says he wants to see happen. In summary, a local government cannot raise taxes by expanding the assesments without going through the regular process to set the tax rate. The Post and both Kilgore and Kaine missed this current reality in their opening posions.

    Second. We defended the full value assesment process as much less prone to mistakes than ones with government fudge factors. That was Barnies point as well. That said, there may be faulty individual assesments. You can challenge them, convey an easement for your goat farm or take many other steps to bring down the assesment to what it is really worth. Knowing nothing of the lot, we cannot speculate on the value but depending on the context, there are many parcels that would be worth $24,000 more to be an acre larger, even without any specific use on the site.

    We are common Joes who expect those running for public office to have a clue about the real world and not expect us to fall for “car tax” political smoke screens.

    EMR

  3. Anonymous Avatar
    Anonymous

    If you are right and the reason property values are going up so fast is dysfunctional human settlement pattern, then all hope of ever having a functional settlement pattern is lost becase home values are most people’s greatest source of wealth.

    How do you propose to create Fundamental Change that people will see as an attempt to impoverish them?

    Salt lick is right, you are out of touch. As many homes as we see built, we are still building at the lowest rate in thirty years, as compared to population growth.

    Right now, it almost doesn’t matter what you build, where, or how preposterous it is, it will sell. Not issuing enough housing permits is a prime example of dysfunctional government costing us all money.

    Salt Lick, be careful, before long they won’t let you raise goats on it either – goats defecate you know. If you think I’m kidding, check out King County Washington where 65% of your property is required to be left in natural habitat, which goats destroy.

    Given modern technology, there is no need for a perk requirement. There should be a sanitation standard, but how you meet it is up to you.

    If you build more of what people want you will build 15% affordable housing, 15% what you call functional housing, and the rest will be large lots in the country.

    Evidently, the people who buy those things have no qualms about paying the taxes, and the government says anything under $750,000 doesn’t pay its way, so why not let them have at it? At least they’ll be subsidising the rest of us.

    Ray Hyde
    Delaplane

  4. Salt Lick Avatar
    Salt Lick

    Thanks very much EMR and Ray for the information. I am honestly just trying to understand the issues you are raising. As I’ve said before, I’m as community-spirited as the next fellow, and certainly willing to part with my money when I’m shown something is vital to the growth of Virginia.

    EMR said “…a local government cannot raise taxes by expanding the assesments without going through the regular process to set the tax rate. The Post and both Kilgore and Kaine missed this current reality in their opening posions.”

    Well, I don’t feel quite as dumb if even WaPo failed to mention this. Nevertheless, I never saw a notice of a “regular process” to raise assessments. It came as a surprise in the mail. I pay relatively close attention to the news, but perhaps this oversite is my own fault.

    “Second. We defended the full value assesment process as much less prone to mistakes than ones with government fudge factors. That was Barnies point as well. That said, there may be faulty individual assesments.”

    My perception was that there were many folks unhappy over assessments in Montgomery County. And the same is happening in Floyd right now. I guess this must be happening everywhere and that is why Kilgore and Kaine started their campaigns this way. They saw the issue. Hmmm.

    “You can challenge them, convey an easement for your goat farm or take many other steps to bring down the assesment to what it is really worth.”

    Ray — Perk is a sometimes a problem. About 1 feet under the surface of my land is nothing but giant bolders.

    EMR — It’s extremely annoying and time consuming to have to go down and explain to some idiot who has never even seen your land why the assessment is far too high. What an aggravating experience — to beg your government not to cheat you with a high assessment. I felt like a mideveal peasant. And the notion that I have to give government an easement on my land just to keep from receiving an unfair assessment strikes me as extortion. I doubt I’m alone in that, so while you may be right about what needs to be done, I think you have a long way toward bringing the average citizen over to your camp.

    I’ll keep listening, and thanks again for taking the time to answer my post.

  5. I love it. People are unhappy when the value of their homes is falling, when it’s stagnant, and even when it’s rising. They’re also get peeved when assessed values lag the increase in their home value, but god forbid when assessed values get too high and taxes on their property go up. In other words, people are a tough bunch to satisfy, especially if you’re a politician running for high office!

    Now, how about we hear a clear definition of the REAL problem here, combined with a REAL solution. And what is that REAL problem? Very simple: it’s the inability of people on fixed incomes (i.e., the elderly), plus lower-income/poor folks, to pay taxes on homes they’ve lived in for years simply due to rapidly rising home values/assessments. If we want to help those people, why don’t we just do that? How about someone propose targeting assistance SPECIFICALLY to the people who really need it? Ah, but I forget, this is political siilly season and the “pander bears” are out in force!

  6. Barnie Day Avatar
    Barnie Day

    Salt Lick: In perhaps 25 years of very close proximity to this process, I have seen maybe 1 in 1000 cases where the land owner would willingly sell his property for the assessed value. Would you?

  7. Salt Lick Avatar
    Salt Lick

    Well, Barnie, I may be missing something, not being too quick on the business end of life, but no, I would not sell my one acre for the assessed value. It borders my home. Like I said, the only thing it could be used for would be running cattle or goats.(Years ago, when my old neighbors died on a similar piece of property, they had to use dynamite to make a grave to put them in.) I prefer to keep it so my wife can walk her dogs there. That’s my choice; why should I have to pay extra for that? From my viewpoint, the attempt to raise the assessment to a level reflecting possible residential use was just a cheap trick to pry more money out of me.

  8. Barnie Day Avatar
    Barnie Day

    Salt Lick: I understand your position completely. I wouldn’t sell mine in similar circumstances either. But the point is that the assessment does not, in fact, over value your property. You think it is worth more than that. If you think it is worth more than the assessor thinks it is worth, tell me again what your complaint is.

  9. Anonymous Avatar
    Anonymous

    I have heard, but not verified that in Australia they use a system where each owner places his own assessment, and the government has the right to buy the land for the assessed value.

    In practice this works out to where people assess their property at 5% under what they would sell it for, because the governments transaction costs are higher than that.

    Had the car tax used that system it might not have been so despised. I have NEVER owned a vehicle that I would not gladly have sold for its assessed value.

    Salt Lick: Assesments can rise without public notice, but the tax rate is supposed to be reset in such a way that the dollar amount of tax does not increase by more than 1%. In practice this means that the government advertises a meating where anew tax rate is set and when the meeting is held few citizens show up: the tax rate is set wherever county administrators figure they can get away with it.

    A problem occurs when county expenses and assessments go up faster than income. That necessarily means you will have to give up on something else to pay for government “services” which more and more frequently are becoming dis-services. This affects not just the elderly and poor: relative to my assessment and tax increases my salary is a fixed income. Even though it has gone up by more than average, it is far outstripped by my property tax increases, and I have had to make adjustments in other spending and saving as a result.

    I can’t determine whether this is a net benefit for the community or not. It depends on a) how you value government services and b) whether you think public servants are doing their job.

    In Fauquier county the Department of Community Development is growing four times as fast as the county population. Their job is supposedly housing permits, but they spend more time denying permits than they do approving them, so we are paying for a dis-service. They also spend time, as you suggest, extorting easements and other concessions out of people, which they have no intention of paying for.

    By not building on your property, the county claims you are saving them something like $2700 per year, EMR claims the savings is much more. If you are providing the service of maintaining open space to the county’s benefit, I figure they owe you at least the interest on what they claim you are saving them.

    I disagree with EMR on the valuation. On the face of it $24000 for an acre of unusable land is too high. I had and acre of similar land (steep and swampy) in Fairfax and it was assessed at $5000. Even considering the assessment increases since then it would only be $12,000 today. However, since I managed to build on it, it is now assesssed at $107,000. It would appear that either the county missed the boat previously and underassessed the value, or else they are charging a lot of money for “improvements” to the lot. Those improvements amount to connecting to already present water and sewer.

    The real screw job revolves around what the county considers unusable. Even though you don’t perk, there are well proven alternatives to conventional septic, but they are nearly all dis-allowed as “experimental”.

    Even if you had another adjoining one acre lot, the county would refuse you the right to additional density there – you would get no credit for not building on environmentally sensitive areas.

    It is true you can appeal the assessment, but the process is stacked against you, unless many people appeal.

    I, for one, don’t complain when the assessment goes up – that’s one reason why I bought the place. I also believe that one reason the prices are going up is artificial restrictions on building, combined with poorly conceived and poorly targeted job growth inducements.

    To the extent that my good fortune in rising assessments is based on someone else’s misfortune in being priced out of the market, I recognize these conditions as unfair. Fortunately for me, I’m on the minority side here: there are plenty of people campaigning against more density who allow me the dichotomous position of feeling bad for others less fortunate and lucky for myself.

    Ray Hyde
    Delaplane

  10. Salt Lick Avatar
    Salt Lick

    Thanks Barnie and Ray for the comments. I suppose I’m getting an education cheap here, and thank you for that. I’m focusing on my own situation because it’s the only example I have.

    Barnie wrote: “..the point is that the assessment does not, in fact, over value your property. You think it is worth more than that. If you think it is worth more than the assessor thinks it is worth, tell me again what your complaint is.”

    OK, I _think_ I’m understanding what you are saying (like I said, I am business-challenged), but let me make sure. Are you are saying that because I won’t sell my land, that shows it’s worth more to me than $24,000? And if next year the government looks at the map and says my lot is worth $50,000 and I still won’t sell, that means it’s worth more than $50,000 to me? Or in other words, I need to either sell the land (if I can) to avoid the tax and be happy with my profit, or pay the tax and be happy I own such a valuable dog-walking pen?

    If that is what you are saying, I suppose one of my “complaints” is that I’m being taxed on a potential that may never happen. I don’t intend to sell that land for the use the county _thinks_ it can be used for. So if I live another 20 years without selling the land, using it for its present purpose (and I assure you my wife will get some more d*mn dogs after these die), I’m paying additional taxes based not on what I’m using the land for, but a potential that may never occur. In a sense, the government is assessing the value of the land has to IT, not me. Like the infamous cases occurring now where localities are seizing land by immiment domain for shopping centers to increase tax revenue.

    Another “complaint” I have is that this system places citizens under the thumbs of their government. I never saw anyone come out and look at my land. No one ever contacted me to talk about it. It was just assessed from an office. And then the burden of disproving the assessment fell on __me__ ,to take the time from work, argue with the government officials, etc, to dispute it. As Ray notes, the process is stacked against you.

    I guess I’ve been living a sheltered life. One day I’m up in the mountains with a rock-farm where my dogs can poop, the next day I’m rich (on paper) and have to spend time proving it’s not so.

    Is this really the best way to levy taxes? It strikes me as such a broad-brush, slip-shod way of doing things. Government by bludgeon. To my mind, private property, especially real estate owned by the average citizen, has long been recognized as the cornerstone of democracy. My guess is this notion, vaguely felt by the citizenry, is feeding the Kilgore and Kaine plans. I don’t know a lot about the specifics of things like a flat-tax, but this incident with property assessment has got me interested in it.

    Ray — Yes, you are absolutely right about the “screw job” on “unusable” land. My acre in question was sliced off the original lot by the lady who sold me my house. She thought she was going to build on it. She couldn’t get “perk” approval for any system and sold the lot back to me. Once the acre was split off, goverment got real interested in it as a potential residential lot. As for services, I get no “new services” from the county that I can see. I have a good, deep well. I have a septic system. The road is about the same. I guess they did upgrade the keeper of the greenbox station – he used to be 80, now he’s 67.

    Thanks again. I hope I’ve repaid your time with some insight into the mind of the “hoi polloi.” That’s French for “mountain redneck.”

  11. Anonymous Avatar
    Anonymous

    Taht being the case, you an do a “boundary adjustment and add the space for the rock farm back onto your present lot: the “boundary” disappears. Without the “option” of building on the lot, which is unbuildable anyway, the “value” will go down. You will have lost the opportunity to sell land you don’t plan on selling, but you will save on taxes.

  12. Anonymous Avatar
    Anonymous

    You could also give the land away to a non-profit and take a big tax deduction for the gift. The county would get no tax, and you could still walk the dogs, if you set that up as a condition of the gift.

    I’d be willing to bet that if you give the land to Habitat, the county would find a way to let them build, rather than find themselves in your current position: having non-productive property.

  13. Housing prices are shooting up because interest rates are so low, correct? People can afford to pay $350k for a house at a low interest rate when in the past they could only have afforded to pay $250k at a higher rate.

  14. Salt Lick Avatar
    Salt Lick

    Well, thanks for all the advice. I’m thinking I may be able to beat the system with dog condos.

  15. Anonymous Avatar
    Anonymous

    Interest rates have been part of the equation, certainly, but no one signs up for a half million dollar mortgage just because the rates are low – they also have to want the house, so demand is still a major driver.

    Low interest rates just make the demand easier to afford.

    Also, many people have tapped part of the paper equity in their homes for other purchases. Housing and housing financed purchases have been about all that has kept the economy going through the last recession.

    If things go South, bankers are going to own a lot of homes, under the new bankruptcy law.

  16. Anonymous Avatar
    Anonymous

    Dog Condo’s – I love it.

    It’s far too easy for a county administrator to come out against homes, but what administrator could possibly come out against dogs!

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