 I don’t know about you, but I can’t afford many more tax cuts.
If you can’t relate to that statement, perhaps I should explain. I like tax cuts as much as the next guy. Real tax cuts. The kind where I pay less money. So when some elected or appointed official tells me he’s reducing my taxes, I expect to have a little more cash left in my pocket at the end of the day. Only it doesn’t always work that way.
You see, when it comes to property taxes, two factors make up the equation that determines your tax bill: the tax rate and the value of the property. You can drop the tax rate all you want, but a jump in property value can wipe out the savings from a decreased rate.
That’s what’s happening in my city right now. The announced proposed tax rate shaves a fraction of a penny (per $100 of property value) from last year’s rate. That sounds good. At a glance, it seems like you will pay a few bucks less than you did the previous year. But when you realize that property values have gone up quite a bit, you find out that you’re actually paying more in taxes – perhaps a good bit more.
Here’s the math on a hypothetical but very plausible example. Say the tax rate for a city is 0.425 (that’s 42.5 cents per $100 of property value). Property taxes for the city on a $200,000 home would total $850. Now let’s see what happens if the city lowers the tax rate half a cent to 0.420 but the home’s taxable value goes up 6% to $212,000. Your half-penny tax-rate cut just cost you $40. If the home’s taxable value had instead jumped to $220,000 (the maximum in one year with the 10% cap – and a not-unlikely scenario in many areas of the state with appreciating property values), you’re now paying an additional $74 for your tax-rate cut.
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Too often homeowners lay the blame for increasing taxes at the feet of appraisers. True, some appraisal-district estimates come in too high. When that happens to you, you should appeal your appraisal – and if you’re not satisfied with the appraisal review board’s decision, you can file for binding arbitration. But a lot of the time, the appraisal is pretty close to what that property would fetch on the market.
While thousands of homeowners protest their appraisals, I don’t hear too much griping about the local officials who set the tax rates. No one is stopping city councils, city managers, mayors, school officials, and others from lowering the tax rate to a level that would keep tax revenue at the same amount as the previous year. Of course, sometimes there are legitimate reasons to raise taxes. Sometimes not.
So what’s to be done about this? Newspapers and other media often tell it like it is –showing the net effect of the property-tax rate and the new average property values in the area. There’s also a safeguard in state law that gives citizens the ability to circulate a petition to call for an election to roll back or limit a tax increase if the total revenue will go up more than 8% over the previous year. Also, taxing authorities must publish their rates and hold budget hearings.
If you want to act, you must first get informed. Find out the proposed tax rate in your area and how much the overall tax revenue will increase. Attend the budget meetings. Look at the actual budget. And if you don’t like paying more taxes when your tax rate stays the same or goes down, let your local officials know.
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