Property taxes are a perennial favorite of newspapers to do articles about. They're always on the rise, especially at rates exceeding inflation, making homeownership ever more difficult, especially for those on fixed incomes and there's never a solution that feels workable that's proposed. Sure, there's caps on how fast they can be risen and relief in the form of rebates is sometimes done, but the crux of these articles appears to be senior citizens who are said to be priced out of their own homes of many years due to rising property taxation.
Now, for the sake of argument, let's assume property taxation is a necessary evil. I know there's a contingent who believe it should be outlawed as they see such taxation as un-American or confiscatory but that's a whole different debate. Here I'm gonna take the "Property Taxes Are Necessary" road and offer, not so much a solution, but at least one that keeps the plight of fixed-income senior citizens in mind.
I think the root problem of property taxes is assessment. Properties (I'm only vouching for New Jersey here) are assigned a "fair market value" by an assessor and it is that value which determines your tax which is calculated as a percentage per $1000 in value. The assessment part is actually my contention. I'm one of those people who believes an item has no value until it is sold so my proposal would be to assess property taxes based on its last known value. After all, how can you tell me my house is worth more than I paid for it if I have no intention of selling it? This way if you bought a home in the 1960s for $40,000 and are still living there, your property taxes would be calculated using that value. When the house is sold, it would be sold for whatever it would get in 2012 and the property taxes would then be calculated based on that new value. Think of it as a form of rent control that doubles as a means to reward loyalty. Since inflation is omnipresent in our lives, the longer you stay put, the less each year the burden would be on you provided you don't move.
And yes, I would provide exceptions as well as a means for the state to challenge the value of a house. Firstly, if a house is inherited, it would only be fair to the state to have an assessor come by and determine the fair market value of the house. Its last known value is lost when its last known owner passes or transfers the deed. Secondly, if a house is sold suspiciously below market value, the state should have a right to challenge the sale. If the state wins, then an assessor comes by and determines the fair market value. If the state loses, bonus for you. Thirdly, additions to the home (but not routine maintenance) would be added to the home's value. That only seems fair and what constitutes an addition would be left to the municipalities to decide. Finally, this method I think acts as a dampener for real estate speculation. If you overpay for a house, you're gonna be paying extra in property taxes as a result giving a buyer pause when bidding up a property.
I think this method should work since it is unusual, especially these days, for people to remain in a single home for a lifetime and even if a town becomes a whole town of never-sells, the percentage per $1000 in value can always be adjusted to compensate. That way, it puts a natural limit on how beneficial staying put can be. If too many people stick around, property taxes will start to rise but if only a few people do, you will be rewarded with lower taxes year after year as inflation raises the sale prices of the homes around you.
I don't see why this could not be done.
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