Those green postcards hit very close to home in the recession
The property tax is Washington state’s oldest tax, predating statehood by 36 years. Which means we have been complaining about it for a century and a half.
Lately, part of that conversation is about declining assessed values. I’m not sure how I feel about it.
I don’t feel less wealthy, even though the assessor and his calculators think one of my assets is worth 40 percent less than it was just five years ago. Because we bought our house 20 years ago, the ups and downs in assessed value are on paper, not in any bank account.
My house is still worth more than we paid for it (presuming someone would want to buy it). So I read my green postcard as an academic exercise, wondering how low it will go before the inevitable (I think) recovery of the market.
Other homeowners see the postcard as more evidence of what the Great Recession has wrought. They bought near the peak of the market and now have a house that isn’t worth what they paid.
The real estate crash has led many into foreclosure. Even those who have hung on are less able to take advantage of one of the few benefits of the crash – lower interest rates. Any hope that the market is recovering, that their home value has caught up enough to qualify for a refinance, is dashed by the black type on the green postcard.
(I need to qualify this gloom with a reminder that assessed value for tax purposes rarely equates to – and is usually well below – market value. Banks care about appraisals, not assessed value.)
Because of the complexities of the property tax system, months separate the value notice and the tax statement. The value notice just arrived; the bill comes in February – a perverse Valentine’s Day card.
That leaves a lot of time to speculate – often incorrectly – about what the valuation will do to tax bills. Many assume that a lower assessed value means lower taxes, forgetting the inverse relationship between values and tax rates.
Generally (and it is always risky to try to simplify property taxes), as assessed values decrease significantly, the rate per thousand increases. The same is true when assessed values go through dramatic increases. That’s because each of the governments that get a chunk of the property tax are allowed to get the same dollar amount they received the year before plus 1 percent. If the total assessed value of a district is down, the rate per thousand can increase to make up the difference in dollar amount.
For the most part, governments don’t see windfalls from increasing values, nor do they risk shortfalls during declines. The boom and bust for government treasuries is produced instead by new construction. When construction falls off, public treasuries suffer. And so-called junior taxing districts, like fire districts, are now at risk of hitting their maximum rates and will get less.
Back when I first paid property taxes in Pierce County, the rate per thousand in my Tacoma neighborhood was $18.28. At the peak of the market in 2008, it was $11.68. As the assessed value has declined, the rate per thousand has been climbing back up – to $15.77 for taxes due this year.
That doesn’t mean that some property owners haven’t seen declines in what they owe in property taxes. Again, in general, if a piece of property declines in value more than the average, the owner will likely pay less dollar-for-dollar. If the value declines less than the average, that owner could still pay more. And approved special levies increase everyone’s taxes, whether they voted yes or no.
While no one wants to hear this right now, Washington compares pretty well to other states in property taxes. The conservative Tax Foundation puts Washington in the middle of the pack – 23rd when using taxes as a percentage of home value, 26th in state and local property taxes per capita.
And current taxes are about one-third what those territorial property owners paid in the mid- to late 1800s, thanks to a series of property tax revolts that began with the Great Depression and ended – for now at least – on the eve of the Great Recession.
Not that hearing someone say it could be and has been worse is much comfort right now.
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