Thursday, March 4, 2010

Too Much Tax

Screwed Left, Right and Center

I have have home in Baltimore, MD and the property taxes are very high...approx. 2.25 percent of assessed value. I did file a protest to the assessed value and they did give me a minor reduction...maybe 15%. Baltimore property taxes are very complex and just weird. They re-asses every three years and scale up to a new assessed value at the 3rd year, so in my case they just kept the 2008 value and fixed that for the next three years, 2010, 11, 12. Then after that, there is cap (if this is your primary residence) of maximum 4% per year.

What is so strange for me is that the taxes are so outrageously high in the USA. For the last ten years I have spent 10 out of 12 months of the year in France and Spain. My home in Spain is worth quite a lot and the yearly property tax bill for 2009 was 168 Euros...that is not a typo...about 200 U.S. dollars on a property that is worth in the order of many hundreds of thousands of Euros... In France same story...a little higher then Spain but in the same ball park. Why? Seriously. What has happened in the US? I thought France and Spain we socialist and America was capitalist. How come the Americans (that's me too) are getting screwed right left and center and they just take it?

Mr. Ritholtz, of all the comments to this posting not one person has seen the elephant in the room. Why should we pay 1 to 2.5 percent of our properties value per year to our municipality. Why should we share with them the value of our homes? They don't do this in France and Spain and the school system, fire and police system and roads and hospital are BETTER here then in the U.S. Obviously they are getting the revenue in a different manner. Look into it because it makes no sense what so ever to give 2 percent of your homes value to your local government.

A close friend lives in New York. She and her husband have a beautiful house on the water about a half hour outside the city. She is a top surgeon and he is a pathologist. They make a very good living. Their house over the last 15 years has gone up in value. She just recently told me that they will have to sell their house once they retire because they will not be able to afford the property taxes once they no longer have these big salaries. WTF? Currently they are paying over 95K per year in property tax. one is going to shed any tears, they are well off but when the are Forced by property taxes to sell their home then they will have to pay another tax on the capital gains... They would of loved to remain in there home and spend the rest of their lives there...but they can not afford to. The are millionaires and they can't afford to remain in there home because of taxes. They are seriously thinking of moving to Europe because of the extreme taxes that are now common practice in the U.S. I estimate that the value of their New York area home here in Southern Spain their property taxes would be around 1500 Euros per year. When you sell a property in Spain the government takes a tax of 18 percent right off the top. Now before you start screaming socialism...If you don't sell you don't pay. It encourages people to live in their homes longer and discourages speculation. It is a better system.

Everything in the U.S. is crazy expensive. My two brothers and I are organizing a 80th birthday party for our mother in NYC. Sit down dinner for 60 at a Manhattan restaurant. Negotiated a fair deal (very expensive by Spanish standards but's NYC). But on top of this price I was just informed will be tax, i think 9 percent and the TIP. WTF!!??? Why do I have to pay the god darn waiters, why not have the god darn owner do that. In Spain there is no tipping. None. Matter of fact here in the south it is an insult. As if the waiter or barman needs your charity to live. OK, when in Rome do as the Romans...I tell my brothers fine, 10% tip. NO, not good enough. I am told we must leave 20 to 25 % tip if we don't want to insult the staff. So tax and tip adds 34% on top of the already heavily inflated meal tab. It's about 100 dollars per person, before tips and tax, and I calculated about 15 to 20 dollars in food and booze cost. Here in Spain the restaurants mark up about 300% on food and wine, not 500%. We Americans Are Getting Skewed, left right and center.

Why have the taxes in the US gone insane. Property tax, income tax, tax on goods and services...where is all this money going? How come I get a sneaky feeling that the money that is being stolen from me is somehow ending up in Lloyd Blankfein's greedy little hands?

When are we going to stop being screwed by our government?

Unless you’re an idiot — like me — if you own a home, you probably should have grieved your property taxes over the last couple of years, maybe even more than once. It’s almost a sure thing that your municipality has been assessing your home at more than what it’s worth — and that you’ve been paying your taxes on that inflated value. (Many tax bills, like mine, include the value at which the municipality is carrying your property.)

I speculated that grievances, and the reduced assessments that I figured went along with them, were going to be yet another problem for already-strapped municipalities and that, given the state of the real estate market, this would play out nationwide. Looks like perhaps I was wrong:

I live in a community of about 5,500 households and a smattering of commerical businesses. Curious about what was going on with regard to grievances, I filed a Freedom of Information Act (FOIA) request. This is what I got back (all calculations are mine):

In 2008, there were a total of 227 grievances filed (ed. note: both residential and commercial; unknown the number of each). Of the 227 grievances filed, a total of 64 assessments (28%) were reduced by the Board of Assessment Review.

In 2009, there were a total of 551 grievances filed (+143% over ‘08). Of the 551 total filed, 41 assessments (7.5%) were reduced by the Board of Assessment Review.

Here are my three takeaways:

1) That even in 2009 only 10% of property owners grieved their assessments. The other 90% are apparently idiots like me.

2) That in 2008 only 28% of those who grieved got relief and,

3) That in 2009 only 7.5% of those who grieved got relief. What kind of sick joke is that?

I suspect it’s possible that municipalities have been digging in, denying grievances in the hope of hanging on to one of their main streams of revenue. After all, how far is the typical homeowner willing to go to shave some bucks off his tax bill? Probably not all the way to court, with its attendant attorneys fees and inconveniences.

Any interesting stories out there?

wnsrfr Says:

March 4th, 2010 at 1:48 pm
Assessments are all relative…the only time you truly have a grievance is when your property is over-valued MORE than others with similar homes.

Basically, your town has a budget and taxes correspondingly with the needed assessments. Some towns don’t assess on market value, but have a “relative” assessment that the tax rate is based on.

If everyone in your town successfully got a grievance, and reduced their assessment 40%, the town would just increase the tax rate an equal proportion to make the numbers. Not to say there wouldn’t be screaming going on, and that it would be easy, but just close a school here and a firehouse there and pretty soon the new rate is accepted.

In Massachusetts we have Proposition 2 1/2, which is a great tool to keep towns honest…can only raise the budget 2.5% a year (without specific overrides voted on by the residents…for school expansion or to keep the firehouse from closing for example). But even with 2 1/2, the budget is the budget, and if everyone got their assessment slashed in half, the town would just double the rate, since the budget would still be flat…

cpd Says:

March 4th, 2010 at 1:52 pm
My understanding is that property taxes are allocated based on your value relative to the total value of all assessed properties. So, the municipality collecting the taxes isn’t directly impacted by reductions in assessments because all that does is re-allocate the total property tax collection accordingly. So, anyone fighting for an assessment decrease will only be successful in reducing their property tax to the extent their relative proportion of the total assessed values goes down (which certainly can be worthwhile since most people probably don’t bother fighting).

Of course, there is an indirect impact on the tax collecting body – falling assessed values = poor economy = harder to justify current tax levels and tax increases.

jbcblues Says:

March 4th, 2010 at 1:59 pm
I filed the required 3 copies of my appeal of my Mother’s assessment with the Lake COunty (Ill)Board of Review in September 2009. Graciously they arranged a haring I was permotted to attned by telphone (from Washington DC). It began on time. The Board member asled me what did I ahve to say. I replied that in light of my 35 page appeal, I wondered what questions he had for me. He replied he had not read the file.

Since then the Board has (1) denied my appeal , with no explanation ; (2) denied my FOIA requerst for details on the data and methodology they used to deny th appeal; (3) sent me electronically a copy of my file (this after telling me in the fall they did not use email to accpet appeals/communicate–only snail mail) Said file consisted of what I had submitted in Septmeber plus a copy of their denial of my appeal)

When I forardede all of this to the Lake COunty Board of Supervisors, their resposne was We have no control over the Board of Review–most convenient for them b/c otherwise assessments/taxes might have to go down.

Ome understands the frustration/contempt people have for government.

rktbrkr Says:

March 4th, 2010 at 2:43 pm
Take a look at your home insurance bill if you want to trim costs without fighting city hall. I found a definite flaws in my home valuations. Back in the good ole days before real time valuations were available from Zillow etc a lot of homeowners got a once a year rush when they saw their home value had increased at least according to their (replacement) insurance bill. You don’t want to insure dirt so a little analysis is necessary to determine a reasonable split of land vs structure with your valuation, a sanity chceck on what your insurer is billing you.

I have a 100 year old vacation home and I was only insuring it for the mortgage value because the bank required it, at least 100% of the market value was in the land. Without opting for any “inflation protection” or “replacement cost” BS I found Liberty Mutual had been escalating the home’s value. (the value of furnishings is % locked into the home value). I called them up and told them I wanted the coverage reduced to the mortgage value. They refused to do it at first,we argued a while about whose decision it was mine the customer or theirs. Then they said they had to get a manager (from another state) to approve it- so they put me on hold for awhile and finally agreed my number.

My primary residence was even more outrageously valued – pretty close to the land & structure combined! I called Lib Mut again and told them the amount I wanted to insure (no mortgage involved) and asked the rep where in hell they got the value they were billing me – she said didn’t know but refused to the reduce the insured amount until I completed a 20 minute questionnaire over the phone ( was pissed enough to go complete the questionnaire (any stained glass windows?).I’m sure the 20 minute questtionare is pulled out when people want to reduce their values).Surprisingly the questionnaire produced a value much much closer to the value I wanted insured than what Big Brother Liberty Mutual was imposing.

And don’t believe the BS that construction costs have been going up even while home values have declined.And don’t expect a jackpot payoff if you have been overinsured, they want to cash your checks not issue them to you “oh, you don’t have a video of the contents or receipts, welll” (maybe I should go to a swanky open house and video the contents LOL)

Its Me Says:

March 4th, 2010 at 3:29 pm
My wife and I are in a protracted battle with the property appraiser’s office. We have had six hearings on this over the last two two years. They are not following the State laws and the “adjustment Board” does anything and everything it can to dismiss cases. We suspect the independent Hearing masters are anything but independent.

They now automatically have the Department’s lead attorney in every meeting that we hold with the property appraiser’ office. We have had to go so far as appeal to the County board of reagents to get extensions and keep our issue alive.

The State passes laws actually favoring home owners but the magistrates and attorneys claim ignorance. “You can’t take the law literally. It really doesn’t mean what it says. I helped write these laws and I don’t recall that being the intent.” (dance, dance, dance, deny)

Good Grief! Says:

March 4th, 2010 at 3:34 pm
Our’s went up when prices were dropping. These greedy b@stards did the numbers in 2007, at peak.


I went in with my wife armed with Case Shiller charts, local stats, and a bunch more. The 2 sh*theads (one an appraiser and one a “representative” for the p*ssy county rep) crapped a brick when I told them about the economy.

They knocked our value down a few grand (it had gone up like 60 grand.)

I didn’t bother going through the grievance because these people are greedy whores who just aren’t smart enough to work for the big scumbags who profess to be doing God’s work.

One thing about the mafia – at least they are honest about what they do, they don’t put Jesus fish on their doors and play saint while they are shafting you. I have a LOT more respect for them.

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