A particular thought went through my mind, both when I read your earlier post and when I read the article this morning in The Post: services are rising at the same rate as my assessments, which is why it's imperative that, in this circumstance, that the income tax rate be reduced to more accurately reflect the actual level of services provided to the taxpayers.

The value of my house here in Loudoun County has more than doubled during the eight years I've owned it. My taxes have also more than doubled over the same time period, because the tax rate has actually increased over what it was when I bought the property.

I guaran-damn-tee you that the services I receive haven't come close to doubling in that timeframe.

Anything less than zero-based budgeting is a travesty, and amounts to governmental theft from the taxpayers. When assessments rise, local governments must be reduced to reflect the actual level of services provided.

Grr....after the colon in my first sentence above, it should read "services aren't rising at the same rate..."

Proofread, Boyd. Proofread. You're your own editor.

Boyd -

A. Loudon County may be very different from the district, but taxes here aren't keeping up with the property values, not even close.

B. How do you quantify services?

C. Up until this last year, most state and local governments were in a fiscal crisis because of spare tax rolls from other sources of revenue. This would account for the lag in services.

In Arlington property values and assessments have risen substantially. Property tax rates have not come down. The county is reaping a huge windfall in tax receipts with no increase in services and no increase in the population it serves. This is the situation across the Washington region.
What I find remarkable is that the WaPo story doesn't address this at all. The sense of the story is that if your property increases in value then you should pay more property tax even if this means the county realizes a huge increase in tax receipts. Of course, this is the WaPo position on all taxes. Maybe I shouldn't be surprised.

I repeat:

How do you quantify services? What has been the income and sales tax revenue in the past 4 years?

You are complaining about taxes rising on six figure leaps in home values. If property values rise, it's perfectly reasonable to pay an increase in property taxes, as this is how property taxes are assessed. This isn't so much a liberal - conservative thing.

What, are they not picking up your trash in Arlington? Not mowing vacant lots? School buses not running? Rioting in the streets?

That being said, my main point is that it's ridiculous for people to whine that they can't afford their property tax increases of $1k, when they've just made $250k pn their house.

Bill:

They didn't just make $250k on their house. Those are phantom gains, unrealized income - what's the rationale for taking real money out of my pocket based on a gain that exists only in the minds of a county bureaucrat?

For the complete ranting rebuttal to those who claim the only proper response to getting a big property tax bill is to bend over and say "thank you sir, may I have another", I invite you to check out thoughtsonline

Steve -

1. Those are phantom gains, unrealized income - what's the rationale for taking real money out of my pocket based on a gain that exists only in the minds of a county bureaucrat?

Heh. A couple of things:

1. Property values may get hot and then retract, but they tend to stabilize. In any event, when a home doubles in value the retraction doesn't revert the market back to where it started, unless you are in the most speculative edge of the market and there is a sudden change in interest rates or other calamity.

2. The assessmnents that I've experienced don't even come close to keeping up with the pace of property values.

An example. A condo bought in the DC market for $150k 3 years ago was assessed at about $80k at the time of its purchase. That condo could have appreciated to $230-270k, but the assessments only went up to $120k.

This is not profit in the mind of some county bureaucrat, it's real live appreciation that's here to stay - at least to a great extent. And if you tap the huge new equity in your house instead of just sitting on it, you can make vast sums of wealth on investments during the hot re market.

I'm not up on the market in the outer burbs, but as long as assessments don't push up to the hottest values in the market, an increase in property taxes is a very reasonable course of action. And complaining about it just strikes me as the general complaints about taxes in general. Such complaint require context and specifics, as nobody likes to pay money to the govt.

tell me - what exactly do you consider a big property tax bill? $1500? $2000? What?

House price rises are largely fictive for those who don't own more than one domicile. The only way of realising your capital gains is to sell up and live in a tent. However, it's an astonishingly productive credit instrument: the second mortgage is a driver of God knows how much innovation and enterprise. And it's a pretty benign risk for the lender - collateral the size of a house is tricky to run off with.

There is a problem with taxes rising commensurate with property values: the price of a house is a value, whereas a tax is a revenue flow. It's like comparing Bill Gates's wealth with Luxembourg's GDP. My parents bought their house in 1978 for £14,500. It's worth about £200,000 (~$370,000) today. But their income hasn't risen thirteen times in that interval. A tax based purely on property prices would bankrupt them.

David -

A tax based purely on property prices would bankrupt them.

Correct. This all depends on context.

House price rises are largely fictive for those who don't own more than one domicile. The only way of realising your capital gains is to sell up and live in a tent. However, it's an astonishingly productive credit instrument: the second mortgage is a driver of God knows how much innovation and enterprise.

The second part of your paragraph is my main point - it's strikingly cheap capital. The fact that people are too ill-informed or scared to use it strikes me as an argument that should be made by nanny-staters. Unrealized gain? Maybe in someone else's view.

Put that cheap money to work!

How do you quantify services?

You asked that question at least twice (I'm unwilling to conduct a diligent search right now, due to my close acquaintance with that bottle of Scotch wiskey sitting on the counter), and I'm wondering why you don't answer it yourself. "It can't be quantified, so take a hefty percentage of the unrealized value of the property in this municipality. They'll never be able to dispute it."

As you will undoubtedly agree, that argument is hogwash, which is why I wonder why you offer it, Bill.

If you're just going to talk about the District, please say so and most of us will shut up. You're not going to get any argument about the ability of the DC government to conduct the most basic of governmental activities.

But since you haven't qualified it that way (and the author of today's Post article was clearly talking about a much broader universe than the District), don't crouch behind the incompentence of your local government when you're making sweeping arguments about a subject that applies to municipalities across the entire United States.

One assumption that you're making (despite your protestations to the opposite) is that assessed property values are grossly understated. Lemme tell you, that ain't the case in Virginia, and I suspect that there are many other places where that's also true. Our assessed values lag due to the cyclical nature of the assessments, but at most, they're a year behind, and they'll catch up next year.

Quantify services? If I don't notice a difference, how did my services improve? Granted, many folks just expect government to provide everything, so the only time they notice a change is if a service gets cut. Trust me (and I think you know me well enough to realize this), that's not the case with me.

I know what services are supplied by the County to my family. I don't ask that taxes remain level if the cost of government goes up (many more details are involved here, but that's the thrust of my point). When Loudoun County maintains a steady tax rate with the huge increase of property values, it's a windfall for the county, with little or no benefit to me as a taxpayer.

For the record, I feel confident that there will be a significant reduction in the tax rate for the upcoming year in my county. I have a very, very good friend on the Board of Supervisors (with whom I have not discussed this over the past year), who will discover a tremendous degradation in our relationship if that doesn't happen. And the grief he'll get from me will pale in comparison to that he'll receive from others.

The bottom line: huge increases in property assessments must accompany some combination of reduction of tax rates, or increase in service. Without that, the government is sticking its greedy hand into our pockets and stealing our money. It's as simple as that.

My apologies for the above misspellings. I blame the whisky (which I couldn't even manage to spell coreckly abuv).

It must be bedtime.

Hugs and kisses, Bill.

Ok Boyd, don't argue on Whisky, it makes you mean. And that makes the Baby Jesus cry.

re: "quantify services"

As you will undoubtedly agree, that argument is hogwash, which is why I wonder why you offer it, Bill.

Well let me be more specific - not as a dollar value, but more specifically. "Our services have gone down/diminished." What the heck does that MEAN? Examples? This argument is also hogwash, because it's so vague. I just wanted an idea of what you are complaining about.

As for my argument on property taxes being specific to the District, my update clarifies that my experience is with DC and Florida, and the original article that I referred to was specifically discussing people on fixed incomes whining about new tax burdens in gentrifying areas of DC - on homes that just made them relatively wealthy.

So this argument can go different ways depending on the context of what area you are talking about. In DC, I maintain that it's ridiculous to complain about $1800 in annual taxes on a property worth $300,000, when the taxes WERE $1000 and the property doubled in value.

As for this:

The bottom line: huge increases in property assessments must accompany some combination of reduction of tax rates, or increase in service. Without that, the government is sticking its greedy hand into our pockets and stealing our money. It's as simple as that.

No disagreement on that argument's face, It's just important to understand:

A. Inflation and specific increases in cost of services

B. shortfalls in things like income tax because of unemployment and recession

C. What the level of service is, as measured by what you consider an increase or decrease.

Now drink a glass of water before you hit the hay. And put some aloe on that spanking I just gave you. (kidding, kidding) :-)

First of all, real estate gains may be technically unrealized, but increases in home values, especially in a primary residence, are much more stable than something like the stock market.

While I admire your blog generally, this statement is absolutely unforgivable. I can liquidate my unrealized gains in about 15 seconds for (nearly) exactly their "paper worth." So can just about anyone else short of Bill Gates. Can I do the same with my real estate? You honestly believe that real estate, which is not only unique but also local and subject to local market forces, is "more stable" than securities, which are not only homogeneous but also national or even global?

Again, unforgivable.

Heh. Now who's gettin' spanked?

Kip, Kip, Kip, come sit on papa's knee:

can liquidate my unrealized gains in about 15 seconds for (nearly) exactly their "paper worth." So can just about anyone else short of Bill Gates. Can I do the same with my real estate?

Depends on where you live. In the markets that I have specified, where demand far outstrips supply, you can unload a nice piece of real estate in 30-60 days. This doesn't count the "liquidity" of low interest equity loans.

And have fun with those capital gains taxes, Kipster. Primary residences can be sold with no tax liability up to $250k. Investment property can be rolled over into more investment property with no tax burden, allowing an incremental development of wealth into larger holdings. And the whole way, the equity is accessible on finished property in the form of equity loans. Which I could go buy stocks with, if I were so inclined.

You honestly believe that real estate, which is not only unique but also local and subject to local market forces, is "more stable" than securities, which are not only homogeneous but also national or even global?

Again, depends on the area. But in a word, with wise choices, yes. And are you talking about mutual funds or individual stocks? Enron? A NASDAQ index fund from 1995-2005? A DOW or S&P index fund?

How do those "stable" securities compare to the appreciation of real estate in the same 10 year time period? Not very well. Horribly, in fact. Disastrously.

What about over 20 years? 30?

Average real estate gains tend to run at 6% over long terms, across all markets. Last I remember, the markets return 9, but fluctuate WILDLY in comparison. In hot real estate markets in prime areas, not only are the average long-term gains higher, but the spurts can be fantastic, and the real estate tends to hold much of the value in a retraction (think a domicile in Midtown Manhattan or NW DC).

Also, if a real estate investor plays back and forth between investment rental property and residential, he/she can insulate him/herself from market shifts - when interest rates are low and buying is hot, one can buy and sell spec homes or undeveloped land, for example. When interest rates are high and renting is popular, one should be in multi-unit rental properties, building equity at an accelerated pace. Remember that investment property tax benefit? The equity can be transferred between investment vehicles tax free. Sweet!

Try shifting gains tax free with hot stocks or hot sectors. You can't..

In addition, you are bizarrely discussing "liquidity" when you started the argument with "stability." This is kind of odd, though certainly not "unforgivable."

And finally - stocks are cool, I own them - but unless you are gambling with stocks on margin, you are realizing returns on actual outlay of capital. In real estate it almost always behooves you to play with the house's money (in huge chunks) and realize double-digit returns off of capital taken out at low, low interest. on money that was never yours to begin with.

I'm no richie-rich, but in the past 5 years stocks are for SUCKERS. I personally find individual stocks like a craps game, and index fund somewhat better but certainly not as stable as a nice piece of real estate in an area with favorable long-term demographics.

Rememeber that national average of 6%? It's sunk by that shack in teh rust belts of West Virginia.

Heh. Now who's gettin' spanked?

Kip is. Kip is getting spanked. Will you loan him some of that ointment?