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Abolish property taxes
Thomas Molitor
I’ve been out knocking on doors in my House District 23 and trying to win over Republican voters in a three-way primary race while at the same time trying to avoid dog bites at the doorstep. House District 23 has five precincts in Sandoval County and 10 precincts in Bernalillo County.
This week, I happened to hit the streets of the Northwest Heights the same day the Bernalillo County assessor office mailed its “notice of valuation” to homeowners.
It wasn’t dog bites I had to politely perform a political pirouette away from this week; rather, it was irate taxpayers wanting to know why their rates continue to be hiked after three straight years of dropping house values.
A friend of mine from my college days as an economics major tells me he thinks one of the most fundamentally unfair and destructive taxes levied is the property tax. Without any regard to your income, he says, if you own a home you are subject to a tax on the value of that home. The value is determined by what goes on in your community.
Accordingly, if someone in your neighborhood sells his or her home, your home’s value is affected by the sales price. If prices are rising, then the value of your home rises. However, if values start falling, like they have pretty much in every community in America these past three years, the government seems to ignore the decline.
A tax magnet
For a homeowner, a house can be a tax magnet that creates an economic hardship for its owner. For example, in Sandoval County this year we (I live in Corrales) have the county government levying a property tax, a flood control district levying a property tax, a bond issue for a new hospital levying a property tax, as well as the predictable bite coming from schools and fire districts.
I’m not a CPA or a tax attorney, nor have I ever had to balance a municipal or county budget, but the disconnect between actual income and the property tax rate seems really damaging in these tough economic times for New Mexicans.
My friend (who went on to get a Ph.D in economics and so has a lot of time to think about such matters) is trying to convince me that the property tax needs to be abolished.
He argues the fundamental idea behind the property tax is antiquated and only relevant in the time when we were an agrarian society. In the 1800s, when there was no income tax and it was considered none of the government’s business how much money anybody made, the property tax served as a proxy for one’s income. This made a lot of sense then, because it was logical to assume that the citizen farming 80 acres had a higher income than one farming 40 acres.
Today, however, the homes of most Americans are not their source of income, but merely where they live. Why, then, he argues, take more money from a citizen with a 3, 500-square-foot house than one with a 1,200-square-foot house?
It would seem that one of the elementary principles of prudent taxation is that, in order to avoid harming citizens, taxes should take into consideration the individual’s ability to pay. Today, one’s ability to pay depends far more on one’s income than on the size of one’s home. He says, “to continue taxing people as if their house were generating their income is absurd.”
He may have a point.
Pay up or lose your home
Regardless of whether a person is employed or unemployed, or living on Social Security, the taxing jurisdictions can raise money to satisfy budgetary shortfalls and, if you don’t pay, you lose your home.
In the Southwest, the property tax system has been used to tax minorities out of their neighborhood so affluent residents can “gentrify” areas. Few of the original Hispanic residents can continue to afford their homes, some of which have been in their families for more than 100 years, because the property tax is based on the valuations of the fancy new homes being built in adjacent neighborhoods.
It does follow that property taxes do jeopardize homeownership. On the surface, it appears once a person has paid off the mortgage on his or her house, then he or she owns it free and clear, but this isn’t so. If the homeowner falls on hard times or is on a fixed income that gets eroded by tax hikes or inflation and can’t pay his or her property taxes, the sheriff comes and confiscates the house.
In reality, a person doesn’t really “own” his or her home completely, but in effect “rents” it from the local government that permits him or her to keep it only so long as the “owner” continues to pay taxes on it.
Hiding from the drop in property values
Would the revenue from our income tax and sales tax be able to cover the total loss of property tax revenue?
Hardly. But there are a lot of tax reform schemes floating out there that do merit policy discussion in next year’s legislation session: income tax vs. consumption tax vs. sales tax vs. flat tax vs. means tax. Though, admittedly, understanding how eliminating one affects the others does get my head spinning.
But the main message people have been telling me as I walk my district is simply that we have more government than we can afford and that the state and counties look to the home and to the homeowner inside to fund its expanding activities.
One could make a strong argument that property tax-based governments are hiding from the massive drop in property values, and as a result, are living on borrowed time until, finally, the real world of the 20 percent to 35 percent decline in home values catches up with them in Bernalillo and Sandoval Counties.
Meanwhile, a lot of people are being put to the wall to pay rising property taxes when their incomes are a fraction of what they used to be.
Any wonder why people are so angry about government?
Molitor is a Republican candidate for the state House of Representatives, District 23.
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The complete un-seriousness of the “NO TAXES, EVAH!!!” crowd never ceases to amaze me, especially in a state like ours that is one of the lowest in terms of property taxes in the nation. Why do they have the shamelessness to wallow in their “I don’t WANT to share my cookies!!” self pitying laments? Perhaps because they know that their positions are so absurd that their more responsible fellow citizens will simply ignore them, and would never let the subsequent total collapse of infrastructure and school funding happen, allowing them to continue to educate their children, drive on our roads, and pay our EMS responders to come to their homes when they’re having a heart attack.
BTW, in Las Cruces, we should be discussing RAISING our property tax rates, not cutting them. I pay more for my homeowner’s insurance premiums every year than I do property tax, and when I see that Las Cruces Public Schools is having to cut teaching positions in spite of having already leaned down it’s administrative overhead in the past two years, I’d gladly pay $100 bucks a year more so our kids can get decent educations. I want our kids to have world class educations and opportunities, not be relegated to being waiters and gas station attendants serving the no tax crowd all their lives.
But then, I’m a “socialist”.
http://legis.state.nm.us/lcs/_session.aspx?Chamber=H&LegType=M&LegNo=42&year=09
The Governor said in his state of the state:
I also ask this legislature to address three more important issues:
1. Our tax code is hitting too many homeowners with unfair increases—sometimes two or three times as much as their neighbors—I will send this legislature a proposal to move us toward a fair and equitable property tax system.
The Tax Lightning issue…..
http://www.santafenewmexican.com/Local%20News/Contentious-property–tax-law–may-see-fix
But in Santa Fe, we also have an issue with long time residents in traditional communities, like Agua Fria Village, having land and home values rise uncontrollably—not because of something they have done like improvements or additions, but because of unchecked speculation. As houses are flipped—everyone’s valuation is subject to being raised. For instance, if Tom Ford builds his $20 million dollar mansion on 20 acres and you have a $200,000 home on 20 acres next to him then the average for your block is $10.1 million dollars and in simplistic terms the Assessor has interpreted that he has the right to raise your valuation to this level. This valuation method is utilized on vacant land and people in Agua Fria are quickly becoming unable to hold onto lands in their family since 1693. The Assessor is saying that land in Agua Fria should be valued at between $260,000 an acre (the price Lowe’s paid) and $250,000 an acre (the price Aldea charges). This land is being held by the elderly for family transfers to the next generation. The Assessor’s response is “sell the land to pay the taxes because you are not utilizing it to its full potential.” This is exactly what drove the farmers (Hispanic people) off their Canyon Road farms. As the multi-million dollar art galleries advanced the only original owner is the Rios Wood Yard.
Rep. Jim Trujillo attempted to correct this problem with this House Memorial 42 in 2009:
http://legis.state.nm.us/lcs/_session.aspx?Chamber=H&LegType=M&LegNo=42&year=09
As a student of history, I can assure you that our move from agrarian to industrial society in this country brought with it many taxes that we feel are unfair. How ever the property tax does supply funds to give a great deal of our infrastructure and I don’t think one could find too many people who would give up the fire departments, schools, street paving, etc. that is funded by the property tax.
I do however agree in concept that to raise the taxes as property values decrease is unfair to the homeowner. Most of the people who own homes in the Dona Ana county area have seen a 3% increase over the last two years, while the value of the homes have gone down. This is not fair to the homeowner, and is not a trap that he has made for himself. It is the officials who run our county. Teh Tax Assessor values the home at an increased value, while the value is less. Where is the justice or equality in this?
When the John Q Public has to tighten his belt in economic hard times, so should the county, state and federal government do the same. There could also be put in place laws that should stop the payment of property taxes when a person reaches the age of 70 years, alleviating the burden of losing their home because of less income, just as tax breaks are given to persons who have served their country.
The elderly have served their country too, as workers who spent their lives filling the fields of employment and buying a home to live in for the small amount of time they have left. You have to look at the circumstances that would take away that home and give it back to the lender, because of taxes that have risen without added value. There are no clear-cut answers to what or how we could get rid of the homeowner tax, since we have become so indelibly ingrained in the system, but reasonable taxation should be a norm and it is not.
I am glad ‘mwfolsom’ has the money to pay out for the increased taxes (though value of homes has decreased over the last four years) but many elderly and less affluent do not have that luxury. We are tied to what we receive in retirement by the jobs we worked at and the amount of money we could put aside. This should not be a discouragement for a blue-collar worker for instance to be forced out of his home by taxes that have risen beyond his means.
Take a look at El Paso, Texas. The taxes they pay on a home there is extremely high, and also has risen over the last few years though property value is down. Yet the city complains it hasn’t enough money to build new parks, schools, etc. Maybe they should downsize or delay what they are trying to build for the time the economy is in the toilet. We as taxpayers cannot keep paying higher and higher taxes and expect to survive, no matter how much money you have. We need to think of ways that we can supply what we need without all the amenities we have in good times.
Mr. Molitor:
As I understand it all those taxes you list are voter approved so they can also be stopped by the voters in the future.
It would be very helpful if you would ask yourself and those that want to get rid of property taxes which Gov. services you would get rid of – should we close the public schools or hospitals or stop paving roads? Those are some of the reasons we pay those taxes and if you want to stop paying them it would strengthen your case if you explain which services you wish to get rid of -
As for the rest of your commentary I have many issues with it however I’m especially struck by the following two sentences:
Why, then, he argues, take more money from a citizen with a 3, 500-square-foot house than one with a 1,200-square-foot house?
and in the next paragraph we see this:
It would seem that one of the elementary principles of prudent taxation is that, in order to avoid harming citizens, taxes should take into consideration the individual’s ability to pay.
Sadly I find a logical disjunction between the two ideas – being a home owner I can pretty well assure you that in the same neighborhood a 3,500 sq foot home will be substantially more valuable and have a much higher resale value than a 1,200 sq foot home so why shouldn’t its owners pay more taxes? Isn’t it fair to assume that those bought the larger homes have more disposable income than those that live in smaller ones? Wouldn’t it have been prudent for those buying these larger homes or any home for that matter to inquire into how much taxes they would pay on a yearly basis? It looks to me that what we have is lots of people who bought homes that they simply couldn’t afford hoping to “flip” them at a future date. Mr. Market has turned on them and now they are caught in a nasty trap of their own making so they look for scapegoats – in this case NM’s relatively low property taxes. They knew about these taxes when they bought the home and didn’t mind when they were “making money” on the deal but now that the tides have turned they wish to change the rules of the game.