I love view, you tax me…

Orford, New Hampshire, is a cozy, lovely little town in New Hampshire along the Connecticut River Valley, about half an hour north of Lebanon and Hanover (home of Dartmouth College). It’s a quiet little place, with its biggest claim to fame being that it was the adopted home of former governor and right-wing whacko ex-southerner, the late Meldrim Thompson (who wanted the National Guard equipped with nuclear weapons and briefly considered declaring war on Maine — but those tales are for another time). I spent over half my life within half an hour of Orford, and have been to and through it numerous times, and never did I think it would be the epicenter of a huge controversy.

But it is.

Recently, the town reassessed all the property for tax purposes. And in what’s become a major point of contention, factored into the values were their “views.” Some found their assessed values going up by six figures, with corresponding hikes in property taxes — and our tax rates are pretty damned high already.

To quote the newspaper about one particular example:

Selectman David Bischoff, who also voted against the new valuation, could not be reached for comment yesterday. A one-room cabin he owns in a remote cow pasture that is two miles from the nearest electric line and has no phone service, no water and no septic system, was valued at $22,900 — plus $140,000 for its view of nearby hills and distant mountains.

Others have chimed in on this notion, among them a fellow New Hampshire blogger who, unlike me, actually owns property, has spoken out against it several times. But lack of qualifications has never stopped me from opining before, and I’m not about to start now.

It seems to me that property taxes should be on your property. If you have to pay a tax on what you own, it should solely be on what you actually own. You don’t own your view — all you’re seeing is other people’s property, and (in theory) they could do whatever they like with what you’re viewing, and you have no say in it.

(Yes, there have been exceptions, where someone sues over a fence that blocks their ocean view or the like, but those aren’t quite the same.)

The only way I would ever accept a “view tax” would be if the taxing authority would guarantee that absolutely nothing would ever happen to “my” view — no trees cut down, no buildings put up, no forest fires, no foggy mornings, no blights or gypsy moth infestations to denude the trees, no changes whatsoever. And since they can’t guarantee that, then they have no business charging me for it.

We New Hampshirites tend to be an ornery bunch. We don’t like to make fusses, but when you bother us too much and try too hard to take what we work for, we fight back — and hard. Right now Orford’s selectmen are defying a state order to use those new and “improved” assessments, and I suspect there will be some very ugly fights in Concord over this issue — and I hope Orford wins.

Liberals and bright, shiny objects
This has to be a sign of the Apocalypse...
  • Rodney Dill

    Its also double taxation, If you have a good view, such as, Ocean or lake, or for other reasons and your property is more desireable than other locations, then it should have a higher market value. The view already is built into any market value of the property. Sounds like a scheme to get around some of the property assessment caps that some places have.

  • GeneK

    What would be the “veiw tax” on a blind property owner?

  • PTG

    Will there be some relief for the blind or near-blind? Or should they move to where their valuable views won’t be wasted. Ever heard of the old legal theory of “ancient lights”? I wonder if this scheme will also make it to the first year law school property classses: already but a chronicle of lost rights.

    More likely, the powers that be want the property taxed until the old owners give up and sell. Then the land will go to developers who will sell that view to folks who can better ‘afford’ it.

  • NtvAmrcn

    They don’t need to wait for that anymore with he Kelo decision. What is becomming of our Republic?

  • Oh, FTLOG

    Will the taxes go down when the owner of the mountainside you’re being taxed to view puts in a windmill farm? Yeah, right!

    What if you promise not to look?

  • Retread

    This can’t last very long, the definition of a desirable view is too subjective. OTOH, home owners’ associations have been nibbling around the fringes of this for years.

    How long before they try instituting a sound tax, birdsong and the like?

  • If a cute college student moves in next door and starts sunbathing topless, ain’t no way I’m telling my county tax assessor.

  • ed

    Hmmm.

    Sorry McGehee, that was me.

    I guess you need some glasses and I need a haltertop for my man-boobies.

    🙂

  • yetanotherjohn

    Rodney hit the nail right on the head. Any value of your “view” would be included in the fair market value of the property. A property with a great view of a valley or the ocean would and should be worth more than one that looks out over a car park or the city dump. But the market already factors that sort of thing into it.
    If that cabin is really worth $162,900, great. In Austin, Texas, they routinely overvalue the property. We even had a company start up who did nothing but protest the value. They were routinely successful because they used the “fair market value” language of the law to knock the valuation down. And the following year, the tax assessors would routinely jack it back up and see it knocked down again. Finally, they recognized that having someone familiar with the law in the business of helping homeowners get a fair valuation was making it hard for them to raise the valuation unfairly (imagine that). So they stopped raising the valuation only for those properies that used the ProTax service. Their intent was clear, try to run ProTax out of business. It may work, but I suspect that ProTax II will show up when they stop.

    Maybe New Hampshire should consider a law that any property tax authority that values the property should be considered to be making an offer on the property. If you think the value is to high, then sell it to the county. After getting a few over priced one room cabins, they may start rethinking some of their valuations.

  • Hangtown Bob

    What if your house overlooks the city dump? Will you get a $140,000 tax credit?

  • ed

    Hmmm.

    Maybe New Hampshire should consider a law that any property tax authority that values the property should be considered to be making an offer on the property. If you think the value is to high, then sell it to the county. After getting a few over priced one room cabins, they may start rethinking some of their valuations.

    That is the most ingenious, evil and anti-fat cat bureaucrat idea I’ve heard recently.

    Sir; you deserve a statue.

  • Nicholas

    I agree with Ed, just don’t put the statue next to my apartment or I might have to pay extra tax for the privilege of being able to look at it…

    It’s all about incentives. And if that’s not a good incentive scheme I don’t know what is.

  • Mark

    What am I missing?

    As a couple others have said, views substantially influence the fair market value of real estate. I am paying dearly for my view of Catalina Island, and even more for the smell of salt air and the sounds of waves crashing and sea lions barking in the morning. If you were to move my house a mile or two inland, its value would drop somewhere between 60 and 75 percent. Why? Because of the change in view, smells and sounds. I have no problem with that, and I assume you don’t either.

    Assessors are supposed to estimate the fair market value of property for tax purposes, correct? If so, then why shouldn’t they consider the same strengths and weaknesses the market would take into account?

    In the example from the newspaper, I question how the $22,900 “value” was determined, and when. It’s hard to imagine any piece of real estate being worth less than a used Toyota Camry. My hunch is the property was purchased for that price 30 years ago and this is the first time a realistic assessment update was done.

    Hell, my ex-wife and I bought a little house on a postage stamp sized lot (with no view) for $285,000 in 1992. I didn’t love the place, so I gave her my share in the divorce about 5 years later. Today, worse houses on worse lots in her neighborhood are actually selling in the low $800,000’s, and she’s complaining about the resultant tax increases. Times change fast and if the assessor hasn’t been around for a few years, it can be a rude awakening. But hey, her mortgage payments are ridiculously low, and she’s sitting on more than a half-million in equity. That ain’t so bad, is it?

    Same with the cabin in New Hampshire. If the assessor did his job right, the owner is now sitting on $160k in equity. If he doesn’t like the tax burden, he should cash in.

  • Neal

    All this is discussion of potential value. There is not actual value until someone either purchases tha property or uses it as surity. My indignation lies in the govornment taxing potential rather than actual value.

  • Mark

    Neal:

    So you’re against all forms of property taxes? Or do advocate fixing the assessment value at the purchace price?

    If the latter is your preference, then assume this: You move into an old neighborhood where you paid $500,000 for the lot. On one side, you have a neighbor who paid $100,000 for an identical lot 15 years ago. On the other side, you have a neighbor who inherited his lot, which was purchased new by his grand parents for $7,500. You’ll be paying far more taxes than either neighbor, yet they have similar lots and they make the same use of public services. Is that fair?

    The reason I brought up the inherited lot is because I anticipate you will remind me that the lot was assessed for estate tax and capital gains purposes, and the basis was adjusted at the time of inheritance. Of course, those considerations are also based on “potential value,” so you’d probably advocate leaving the assessed value at $7,500 while yours is $500,000.

    A third possibility would be to assess property taxes based on the last purchase price, but to also recoup for artificially low assesments through a local capital gains tax when the property is resold. In other words, if you sell at an increased value, you pay a sort of retroactive “property tax” based on the sale price. Nah, you wouldn’t like that, either.

    It seems “potential value” is the only workable and fair solution, doesn’t it? After all, banks recognize “potential value” when they offer second and third mortgages and other forms of home equity loans, when what you really want is to pay cash for your yacht or sports car or world cruise or whatever.

  • Mark, you’re comparing two radically different states/areas. I’m from a rural part of PA, and around here houses go for, oh, $75K or so – full-sized houses with a bit of land. However, If I drive about 40 miles north of here I could buy an even nicer house than what I live in now for about $40K. Why? Because there are no jobs up there and people are bailing out, but I could still do it if I wanted.

    It could be that in that particular section of NH the houses are even cheaper for whatever reason.

  • Mark

    About that one room cabin:

    How large is the lot? Does the property extend to the electric lines two miles away? Obviously it’s not the cabin being assessed, it’s the land.

    In my town, there are bare lots 50-75 feet wide and 100-150 feet deep selling for a million dollars in some areas. Also, many people buy houses in coastal areas without regard for the existing houses or other improvements. Once they take possession, they demolish the house and completely rebuild. Clearly, it’s the location, location, location of the land driving the values, while the existence of a dwelling is secondary, at best.

    Hell, the demolition and removal costs for a one room cabin are extremely low, so that is probably a bonus value to the buyer who will want to build a nice house to take advantage of the view.

  • mesablue

    Hmmm.

    Maybe New Hampshire should consider a law that any property tax authority that values the property should be considered to be making an offer on the property. If you think the value is to high, then sell it to the county. After getting a few over priced one room cabins, they may start rethinking some of their valuations.
    That is the most ingenious, evil and anti-fat cat bureaucrat idea I’ve heard recently.

    Sir; you deserve a statue.

    Or a statute.

  • Mark

    SilverB

    But how are the market forces and tax policies different? Whether the property has a fair market value of $1million or $10k, the same forces support those values. Whether the predominating factor is a proximity to the job market, or schools, or services, or view or whatever, the assessor should be able to use the same tools as the market to estimate a fair market value. I don’t see how the ability to fairly assess value differs if you move from a Southern California beach to a New Hampshire cow pasture. Obviously the numbers will change, but not the process.

  • Mark, you are partly right. The general concept of property taxation is the same throughout the US and Canada, it’s a tax on uncapitalized future income, i.e. the potential sale price of a property. Most states mandate that property is valued at what it could sell for in the open market, whether it does or ever will. However, the actual practices of property taxation vary wildly from state to state. CA for example taxes based on the last sales price, unless values go down, then the value is reduced. In an inflationary market, this causes a person who recently purchased their home to have a tax bill 2 or 3 times that of their neighbor who bought an identical house 20 years ago.

  • John

    The problem here is the issue of bifurcating the “view tax” from the whole property tax. While it sounds absurd, it is actually perfectly rational.

    A taxing jurisdiction, among other things, is responsible for raising revenue. Property tax valuations across the country are being challenged, litigated, and voted on.

    A property’s view is part and parcel of the asset’s value. A house next to a landfill is less valuable than a house with a nice view. Why is this so hard to understand?

    It is not double taxation. Should your view change for the worse, then you can appeal to the taxing jurisdiction for a value reconsideration. They are not taxing “potential” value, they are attempting to approximate “actual” value. Agree or disagree about their methods or conclusions, but let’s call this what it is, which is valuation.

    While requiring the jurisdiction to purchase your property should you think it is overvalued sounds attractive, we all know it’s a non-starter for obvious practical reasons.

  • susan

    Mark,
    I am in the lending industry and see appraisals all the time… you are talking about one part of the country that is NOT TYPICAL of the rest of the US. Replacement cost of a dwelling nearly everywhere in the US is MORE than land cost. While you are right about the land being the bulk of the price of the cabin, it doesn’t apply in most other cases.
    The view is part of the market value, so either the tax were not assesed at market value before the view was taken into account, or now the state is double taxing.
    It sounds to me like the land in question is basically unimproved – a cabin with no utilities is really no more than a shed. How can unimproved land have a view???

  • Mark

    John,

    But is the “view tax” really being bifurcated–or were the assessors simply given a new set of guildlines with the goal of having their assessements better approximate actual market forces? I find it hard to believe the assessor’s office would issue statements with line items for “land,” “improvements,” and “view.” Not only should “view” be treated as an integral component of the first two rather than listed separately, but what a bone-headed political move that would be for the city or county!

    While view should definitely count, the presentation was idiotic if it attempted to isolate and itemize its value.

  • Mark

    Susan:

    “The view is part of the market value, so either the tax were not assesed at market value before the view was taken into account”

    This is what I suspect happened.

    “or now the state is double taxing.”

    I sincerely doubt it.

    “How can unimproved land have a view???”

    There are two empty lots a couple blocks from me. They are on bluffs overlooking the pacific ocean, with Catalina Island directly offshore. The lots protrude toward the ocean slightly, so as you stand on the bluff you can look up and down the coast. On one side, 3/4 of a mile away, you have full view of a historic lighthouse on the point. On the other side, you can see down toward the new Trump National Golf Course (which killed the best mountain biking around here!). The lots have steep access to rocky beachs and tidepools below. The first thing that strikes you when you walk onto these lots is THE VIEW!!!

  • John

    Mark

    I don’t know if the view tax bifurcation is being done by the taxing jurisdiction, by Jay Tea, or by Jay’s fellow blogger in NH. I doubt they will list the tax as a seperate line item on the tax assessment like land and improvements. I agree the whole issue is boneheaded, but raising revenue is their job.

    susan

    Of course unimproved land has a view. The view comes from location. The dwelling, dealing specifically with this issue of “view tax”, is irrelevant unless of course the dwelling enhances the view via elevation. There are many places where the land is worth far more than the dwelling, especially in waterfront and view properties.

    This where realtors get the adage: Location, location, location.

    And I’ll go out on a limb and make a sweeping generalization of those property owners who think a view tax is unfair: They all will use the assessment in support of a high prop value in order to secure low-interest HELOC’s, or use the assessment to increase the sales price of the view property. Either way they leave the scene with wads of cash.

  • Neal

    Mark,

    I would rather see taxes based on economic activity instead of static capital. But, if we are to tax static capital in the form of property taxes, there should be agreement from all parties as to the value of the property being taxed.

    I your first example, a buyer agrees the value of a property is $100,000 in 1990. He pays taxes on that value. A county assessor comes along later and thinks the property is worth $200,000. The owner is not part of the evaluation. He never agrees to the change in value. He does not enjoy any profit from the change in value. BUT, he is taxed based on the new value declaration. That is what I refer to as “potential value”; and it’s unfair to tax that.

    He can do a number of things with his property to restate the value, converting potential value to actual value. He can take out a loan with the property as surety (normally called a mortgage whether first, second, or third). He could sell some or all of the property. These are transactions recorded with the State that declare, with the owner’s agreement, the current value of the property.

    If the owner dies and leaves the property to an heir, the property is revalued at current market price. That is a process already in place.

    If we are to tax static capital (land not in a transaction), we should at least have the agreement of the owner as to its value. That’s only “fair”.

  • Mark

    Heh,

    John said “wads of cash!” Heh, heh. I think I like that guy!

  • Mark

    Neal,

    Ahhh, I think I’m starting to get your point. You don’t seem concerned about what might be argued to be artificial valuation based on appraisals for mortgages or stepped-up bases for inheritence purposes, or even assessments for taxation, am I right? It can’t be the arguably artificial nature of those because the process is essentially the same for all three, and there is no buyer to ratify the value.

    So, your point seems to boil down to owner involvement in the valuation. One problem with that position is its inconsistency with the inheritence situation–there, the owner takes no part in the valuation but is stuck with estate taxes AND property tax.

    But more importantly, what about the tax disparity in the example I mentioned above? The new guy has a tax burden several times that of his neighbors. Is that fair? Do we want to penalize new home buyers to the benefit of those who are not active in the market? Do we want to penalize young families who finally saved up for their first house, while the old curmudgeon down the street pays almost no taxes, yet makes full use of the paramedic and other public services? The guy who sucks up the most service skates on his contribution simply because he bought sooner? That doesn’t sound fair to me.

    If you’re gonna tax property values, the taxes should be based on actual, current, fair market values. And “view” is an unavoidable commonent of those values.

  • warty

    So, if I plant a hedge that blocks the view, do I get a tax rebate?

  • Synova

    “Do we want to penalize young families who finally saved up for their first house, while the old curmudgeon down the street pays almost no taxes, yet makes full use of the paramedic and other public services?”

    Yes.

    We do. If someone is smart enough to buy a piece of property and hang onto it they deserve to benefit from this wise investment in their own retirement. The old curmudgeon down the street pays almost no taxes but if he also can support himself on very little income. Would you rather he lost his house, Mark? Because that’s what you’re asking for. Would you rather than he sold his property and moved “up” like the real estate agents want you to do so that when he reached retirement his mortgage and taxes suck up his savings and retirement checks? Then it’s not just services he uses, he ends up entirely on welfare.

    Yeah, it’s tough for young couples with children.

    Especially when they have to worry about their parents in addition to worrying about their children. If *they* are able to hold on to their property, they can expect to have lower payments (due to normal inflation) and *if* their property doesn’t keep getting reassessed upward, maybe they will have more money for those college payments, too.

    Long term property ownership is a general community good. It makes for neat neighborhoods with old folks living next to new families and babies. It promotes stability in the community. People know their neighbors. Old folks can stay in their homes.

    Upping taxes so that people are forced to sell is moronic, short sighted, and immoral. Sometimes it’s outright theft. You know that the libertarians are right on this one… there is no property *ownership* there is only property rental.

  • Mark

    Synova,

    That’s why Prop 13 was passed here in California–specifically to protect the old folks.

    But, I disagree with it for several reasons.

    Not only does it fail to raise revenue on actual property values, which is a purported goal of property taxation schemes, but it artificially promotes social values that are not universally accepted. Who says it’s good for society to mix old and young in neighborhoods? The old people don’t want noisy kids around, and the young familys don’t want to see their property values drop because their aging neighbors leave their homes in disrepair. Whatever, the values are debatable, but I don’t believe the taxing authorities should be making those social decisions. Fairness in taxation should be their goal.

    What is more important is the artificial effect it has on the market as a whole. If old folks with half million dollar houses cannot afford to pay their taxes, they should sell and move. Or they should use their equity to pay the taxes. That’s life. Move over and let those who can afford to live there move in.

    Artificially supporting these folks at the expense of new families is ludicrous. That’s welfare borne by those who arguably most in need of incentives.

    Also, don’t forget that it’s not just the elderly holding onto old property. What about billionaire speculators? Rental properties? Folks with multiple homes? They’re all skating at the expense of people who are actually participating in the market. If I have to pay my share, they should too.

  • John

    Upping taxes so that people are forced to sell is moronic, short sighted, and immoral.

    I would agree with that statement, but fortunately it’s not the case. Taxes are not raised in order to force a property sale. They are to be assessed in an equitable manner. I’m trying to stay clear of using the term “fair” because in all my years of being a tax accountant, very rarely do I find the word “fair” in the various federal, state or local tax codes.

    Here in my town, we give the elderly (over 65) a property tax assessed value reduction of $150,000. We also give them an exepmtion from paying our 5% sales tax. They get to ride the bus for free. All very cool things, as the seniors deserve it and are to be revered in the community.

    But every year we read about the local hard-luck cases, the eldery couple who has lived in their waterfront home for 30 years who can’t afford the taxes. Poppycock. Of course they can afford the taxes. They just don’t like the added cost which stems from their windfall of wealth.

    They’ll be screaming alot louder next year when they do away with the federal tax deduction for real-estate taxes, state income taxes and sales tax.

  • Mark

    John touches on a point I was going to make, but didn’t.

    If people feel its a good idea to allow the elderly to escape the tax consequences of their wealth, then abatements or adjustments can be made. However, I would prefer that those adjustments be made on a demonstrated need basis, rather than an arbitrary age cutoff.

    I think it is VERY important not to let the billionaire speculators and rental property owners skate on their taxes just because they held on to the property for a while. To do so is not equitable, because it arbitrarily targets new purchasers for no valid reason.

    If property is to be taxed, I see no reason why recently purchased property should be taxed more than old stagnant property. Current fair market value should be the determining factor. To do otherwise is inconsistent with the rationale for property taxation in the first place.

    Look, I hate taxes probably more than the next guy. I simply do not want to pay a disproportionately higher share than others similarly situated.

    And John, when it comes to taxes, “fair” and “equitable” are fairly synonymous in my book. I think it’s the liberal proponents of progressive taxes that think “equitable” is unfair.

  • Synova

    Property is not necessarily wealth.

    Particularly in areas with no jobs where property is eventually seized for lack of paying taxes… the government can’t even sell the property, so not only was it not bringing in an *income* for the people who owned it, they couldn’t have sold it if they wanted to.

    A home does not generate wealth (until and unless it’s sold) and while some homes are much much nicer than other homes, how nice the home is says absolutely nothing about a persons ability to pay. Add in this “view tax” and a frugal person making prudent plans for their own upkeep is screwed if they happen to have a place that someone else might find desirable. People with nicer homes paid more for them and have *certainly* paid more in taxes than the person with a less nice home. Either way a home is necessary shelter. If someone provides that for themselves they should be rewarded rather than punished.

  • Mark

    Synova:

    “Particularly in areas with no jobs where property is eventually seized for lack of paying taxes… the government can’t even sell the property, so not only was it not bringing in an *income* for the people who owned it, they couldn’t have sold it if they wanted to.”

    If that’s the case, then the fair market value is next to nothing, correct? In that case, you petition your taxing authority to re-assess the house to reflect the lack of value. The taxes decline as a result. That’s simple.

    With regard to the “view tax,” there really is no such thing. Views are built into fair market value, just as depressed real estate markets or the absence of jobs are built into fair market value.

    It is very difficult to imagine someone saddled with property taxes when the real estate market is so depressed they could not even sell. That tells me the house is assessed for far more than its value, and that’s correctable. And, the key to correction is not found in artificially and arbitrarily suppressing assessment value to some ancient purchase price. The property could be worth more or less than that, and be taxed accordingly. The point I’ve been making concerns property that is assessed far below it’s value. Both are wrong, and both *should* be correctable. In Cal. with it’s Prop 13, the under-assessments are not corrected sufficiently.

  • John

    Well of course property is wealth. There is an arbitrary line drawn here in terms of liquidity, but I will not agree that equity in a home is less wealthy than money in the bank. It’s only a matter of how quick one can access the wealth.

    Which nowadays is pretty darn quick in terms of loans. Any elderly taxpayer in dire need of affording the tax increase in their prop can tap the equity using the tax assessment instead of a paid appraisal and get oodles of cash for not only their taxes…but an excellent retirement cruise they so richly deserve.

    They just need a pragmatic financial advisor.

  • Mark

    Ok, Synova:

    I just looked at the property tax site Jay linked to.

    Lets assume grandpa had the “misfortune” of his property appreciating from its $10,000 purchase price to a current fair market value of $300,000. If he lives in Jay’s Manchester, his tax burden is only $6,678 per year.

    This is for a guy who makes no mortgage payments, and probably pays very little income tax anymore, but still devours public services like the rest of us. He’s also unlikely to be buying new cars, appliances and other big ticket items, so his sales tax burden is also less than the rest of us. In other words, he’s paying far less than you or I for the same public services, yet his net wealth is growing beyond his initial dreams. Hmmm.

    If grandpa’s income or savings cannot support the tax burden, then he could walk to the bank and borrow enough from his equity to pay the tax burden for more than his remaining lifetime–and at ridiculously low interest rates. Banks salivate over these loans, because they can’t lose.

    But wait! There’s more! Grandpa can file for Low and Moderate Homeowner’s Property Tax Relief from the State of New Hampshire if he can demonstrate a hardship!

    It seems to me that Grandpa will be well taken care of even if tax assessments are updated to reflect a true and current fair market value. To refrain from updating only serves to confer windfalls on those who don’t need the relief, while burdening new purchasers with more than their equitable share of tax liability.

  • Teri

    Getting back to what the post actually says, it reminds me of a Confucious-style story that I read when I was a kid.

    There was a poor student who lived over a restaurant. The owner of the restaurant overheard the student telling a friend, “Even though I only have rice to eat, I always feel full because I can smell the wonderful smells from the restaurant as I eat my rice.”

    The restauarant owner hauled the kid into court, and demanded that the judge make the student pay for the smells from his restauarant.

    The judge asks the student if he has any money. “Yes, your honor, I have these two coins.”

    So the judge tells him to throw his coins from one hand to the other. He tells the restauarant owner, “Now you have heard his money, that is your payment for what he has smelled.”

    That seems to me to be a fitting method to pay for a view as well.

  • Mark

    Sigh, nice story Teri.

    Tell me what you think about this:

    Two identical houses on two identical lots reside in the same real estate market, job market, and services market. Everything about the properties are identical, except they’re located two miles apart. One has a panoramic view of the ocean and outlying islands, palm trees, a light house, and other things fit for a painting. The other has the view of an oil refinery on one side, and views of the neighbors’ ugly stucco walls on the other three sides. Do the properties have equal market value?

    Hell no, we all know the ocean view will likely sell for twice the price of the refinery view (if not more). Does anyone have a problem with that? If so, please explain.

    I’m sure some of you personally don’t care about views, or dislike the ocean, or maybe even have an affinity for refinerys. But as a whole, the market is willing to pay a handsome premium for views–and I’m talking about real, 6 or 7 digit, U.S. legal tender. Is there anyone here who cannot or does not accept that?

    If you do accept that obvious fact of life, then please explain why property tax assessments, which are intended to accurately reflect the current fair market value, should ignore what is often the most significant determiner of that value? Really folks, how does that make any logical sense?

    It doesn’t. This whole issue is silly nonsense, and Jay should be flogged for bringing it up.

    The people in New Hampshire are pissed because their taxes were increased, nothing more. That sucks and I share in their grief. Perhaps the assessor’s office is failing to accurately assess fair market value somehow, and that should (and can) be corrected if true. But to argue that views should be disregarded in the assessment process is to remove all realism, and reduce all assessments to a meaningless farce. That would be absurd.

  • cubanbob

    Mark with all due respects your point of view is ridiculous. uncapped property taxes are nothing more than a wealth tax. using your logic every savings account,stock,mutual or bond fund ought to be taxed on any unrealized gain. if it’s ok to tax an unrealized gain on property why not on any other appreciating asset?
    Your point of old grandpa mooching the system is true and pointless. the top ten percent pay more than thirty percent of all the income taxes which means the other seventy percent are moochers. are you in the top ten percent? if not your as much a parasite as grandpa.
    income taxes nasty as they are have a level of fairness that property taxes don’t have, a passing relationship to ability to pay, in other words pay as you go. a property tax on your home that rises every year without any corresponding rise in income is grossly unfair. a capped property tax on your homestead at least blunts the harm to the level of a mortgage, a fixed indebtedness that one incurs based on one’s ability to pay it at the time when the obligation was incurred.
    to use your example of an ocean view near where I live you can buy a home on the ocean, a 1950’s ranch for about 8 million. you could have bought the same house in 1960 for 50 thousand. two similar homes, side by side, same lot size. should grandpa who was smart enough to buy in 1960 be taxed at the eight million dollar current market value as the the guy who just bought the house next door and is shelling out another 5 million in renovations? seems to me the guy who spent the 8 million knew the taxes he was going to incur at this purchase price and can afford to pay otherwise he wouldn’t have bought it.
    back to the original point of the thread, the view from the cabin is the same view the cabin had when it was purchased. the property wasn’t magically improved and neither is it’s value. it’s just another underhanded way to unfairly raise taxes.

  • Nicholas

    You pay income tax. You then use what’s left of your income to buy a house and some land. If you sell it, not only will you pay capital gain tax on any profit, the buyer is buying it with money which has presumably also been income or capital gain taxed.

    Why is this not sufficient tax? Why should something which is outside of this economic activity (i.e. owning the property/living in the house) be taxed, exactly?

    I presume you already pay for the services like water, electricity, sewage, garbage disposal, road maintenance, etc. and of course you pay tax on money you spend on services and upkeep, as do the people you are paying for the services and upkeep. So it’s not like your living in that house is not already generating revenue for the government, correct?

    Not to mention that you probably also live in the house so you can sleep in between working at your job which is also being taxed, both on your end and on your employer’s.

    As far as I can tell this is just another way of the government to get yet another finger in your already digit-heavy pie.

  • Neal

    Mark,

    Your thinking is constrained by the conditioning of the satus quo.

    Let’s take on your arguments one at a time.

    “I think I’m starting to get your point. You don’t seem concerned about what might be argued to be artificial valuation based on appraisals for mortgages or stepped-up bases for inheritence purposes, or even assessments for taxation, am I right?”

    You are correct. That is not the primary concern. The taxation of static capital is the problem.

    “One problem with that position is its inconsistency with the inheritence situation–there, the owner takes no part in the valuation but is stuck with estate taxes AND property tax.”

    You are wrong. The heir has not paid taxes on the property. He aquires the property at the stepped up basis and begins paying taxes at aquisition. The point here is that a recorded transaction has occurred.

    “But more importantly, what about the tax disparity in the example I mentioned above?”

    Why should your transaction affect my tax rate? You have found a property and reached and agreement with the seller. You execute the agreement and record it with the county. How have I, your next door neighbor, been involved? I get a new neighbor, with whom I can enjoy evening conversations. BUT, my finances have not changed at all. Why should my taxes be changed just because you wanted the property next to me?

    Property is a form of wealth. It represents both real and potential value. The real value is its utility. It can be uses to store stuff or it can be lived in. The potential value is the price someone else would be willing to pay for it.

    If we (the community) think it is permitted to tax property, what is the philosophical barrier to taxing the contents of a bank account? In both cases we would be taxing static wealth. This is the crux of my argument. Taxes on static wealth are inherently problematic.

  • Mark

    Whoa people! Try to keep your eye on the ball! Yeah, I’m talking to you, Cubanbob and Nicholas.

    “Mark with all due respects your point of view is ridiculous. uncapped property taxes are nothing more than a wealth tax. using your logic every savings account,stock,mutual or bond fund ought to be taxed on any unrealized gain.”

    I NEVER said I advocate property tax–that is a MUCH different question! We’re taking the existence of property tax as a given here, and applying the traditional and virtually universal rationales behind it, and the uniform application of it. Given that, view is (or at least should) never be excluded from valuation.

    Arguing that wealth should not be taxed, or that income tax should be sufficient, are very separate questions that have not been on the table until now–and they don’t add anything to the debate. There are very real and pragmatic reasons for maintaining a diverse tax structure that does not target only those with current incomes, but those reasons are debatable. I have not entered into that debate here–because it wasn’t raised.

  • Mark

    Cubanbob:

    “back to the original point of the thread, the view from the cabin is the same view the cabin had when it was purchased. the property wasn’t magically improved and neither is it’s value. it’s just another underhanded way to unfairly raise taxes.”

    What? I thought you told me the fair market value increased from $50,000 to $8 million. How can you now say the value hasn’t increased?

  • Mark

    Neal:

    “Your thinking is constrained by the conditioning of the satus quo.”

    And that’s because we’re talking about the status quo of property taxes and their application. We haven’t been talking about whether property taxes are a good idea, we’ve only been talking about the uniform implementation of existing taxes.

    “If we (the community) think it is permitted to tax property, what is the philosophical barrier to taxing the contents of a bank account? In both cases we would be taxing static wealth. This is the crux of my argument. Taxes on static wealth are inherently problematic.”

    I won’t argue with that. I could for the hell of it, but I happen to agree with you on this–I think.

    For that matter, I tend to agree with much of the sentiments of Cubanbob and Nicholas. I have problems with the progressive income tax, but I understand it. I have problems with sales tax, but I understand it. I have problems with property tax, but I understand it. I have major problems with taxation as a means to coerce behavior, but I understand it. I hate taxation with a vengeance, but it is a necessary evil to an extent.

  • Mark

    Cubanbob:

    “income taxes nasty as they are have a level of fairness that property taxes don’t have, a passing relationship to ability to pay, in other words pay as you go. a property tax on your home that rises every year without any corresponding rise in income is grossly unfair.”

    I just HAVE to argue with this one, because it’s my nature.

    Take the very real example of someone who set himself up well and retired at an early age, say in his mid 40’s. His only taxable income is interest from modest savings, so he’s paying little to no income tax.

    HOWEVER, he invested well in the real estate market, and his wealth is skyrocketing. Property in Vegas has been appreciating at better than 34 percent annually, with San Francisco property appreciating in the high 20’s. It is easy to see how $400,000 worth of initial property investments could appreciate to $4 or $5 million over 10 or 15 years.

    With his $4-$5 million in properties, he can run to the bank and virtually write his own loan check for peanuts in interest. Since they’re loans, it’s not “income” so it’s not taxable. He can live off these loans forever, with his property continually appreciating. Yet he never has to pay taxes.

    That scenario is not far fetched–I know that guy.

    That is one reason we have property taxes. It is also one reason we have sales taxes. I can come up with plenty of reasons to abolish both, but I think it’s also important to keep in mind why a mix of taxation schemes serves as a net to catch those with ability to pay.