THE PROPERTY TAX CRISIS
Property taxes can be traced back to ancient times, with the foundation of our current structure being passed through to the original colonies from England. Although, the methods employed by local taxing districts have undergone several changes, they all share the same basic model; the tax base must expand through new taxable units, the property value within the taxing district must continually appreciate or tax ratios for the district must be raised to cover pre budgeted costs of local government services.
As with any form of government left unattended, the legislative budgets for municipalities have always outpaced property tax receipts. During the recent real estate cycle, the increased revenue realized through appreciation to home values allowed the growth of local government through new public jobs and programs, which must now be funded. These unfunded items are always expected to be offset from future tax revenue, as estimated by local assessors through mass appraisal techniques. The values of homes within the district move higher and thus the assessment for each property yields higher tax receipts. What if.....
What if all the excess created through artificially low interest rates and unregulated lending caused a major long-term negative disruption in property values? What if home foreclosures and outright abandonment left once flourishing neighborhoods littered with dilapidated structures? What if unemployment started a steady upward march to 11%? What if real estate values experienced their most significant decline since the Great Depression? What if all of these factors collided at once? Or have they?
Property taxes have traditionally been viewed as a proportional tax. As we continue through the early stages of this current recession, property taxes across the nation will rapidly transition into a regressive tax as commercial property owners incorporate tax certiorari (a legal appeal of a real property tax assessment for the purpose of a lower property tax bill) as another portion of their business. Unless changes are made to the State equalization ratios, each successful appeal of commercial property will shift more of the district tax burden to residential homeowners within that district. In response to overall decline in district tax revenue, local assessors will have to increase tax rates to compensate for the reduced commercial tax receipts. As the residential rates rise to close budget gaps, the residential property values in that district become less valuable due to higher taxes.
Inventory and affordability have historically been viewed as the template for real estate value trends. Research clearly establishes that this particular housing cycle is unique and unprecedented. The supply curve shifted outward in the first quarter of 2006, and we have yet to observe a natural stabilization in equilibrium quantity. Although there are many mitigating factors that have caused this extraordinary market condition, an increase in property tax would cause prolonged deterioration. The median housing price as compared to median family income ratio already implies a continued decline to national property values, until eventually establishing a bottom trough during 2011. A solution must be introduced soon to avert a prolonged correction.
Due to the dramatic declines in real estate values, it has been estimated that as many as 50 million property owners in the United States are already being unfairly over-assessed. Many of these same property owners are just now becoming aware of the fact that they can file a grievance with the municipality to challenge the assessed value of their property that was previously determined by the local tax assessor. As a result, practically every municipality will be required to downward adjust real property values. Property owners can achieve favorable result through their own effort if they apply the time required to research local market activity. To achieve the greatest results many homeowners are seeking the services of licensed property tax consultants who typically agree to accept grievance applications on a contingent basis.
To counteract the reduced tax receipts due to mass property devaluation, Good Grievance has begun encouraging local officials to apply direct for federal assistance. Understanding that any direct aid would require a leaner bureaucracy, it would be advisable for local officials to reevaluate in advance of petitioning. The alternative is far worse - a repeating cycle of raising property tax to offset lower property value due to the increase in property tax, and so on.
The current property-assessment model is archaic. A momentous opportunity to consolidate the myriad of assessing districts throughout the country can be achieved through the introduction of available technology. By unifying assessing units at the state level, property owners across the country could save an estimated 2 billion dollars annually. A shared system would not only protect taxpayer money by eliminating the overlapping costs involved with multiple mass-apportion tax systems, but it would further ensure that resources are used wisely for the benefit of the people.
Good Grievance has integrated proprietary technology with a growing list of professionals to create a platform-based centralized property assessment tool. The Good Grievance network provides private sector opportunities for certified appraisers, realtors, mortgage brokers, accountants and many other professionals to offer our memberships to the estimated 65% of all property owners within the United States who are over assessed.
Good Grievance was formed in 2004 to provide affordable solutions to troubled homeowners. The company business model provides an independent property valuation model that virtually eliminates appraisal fraud. Our unique model will provide real-time property data to homeowners, government agencies, lending institutions and other industries that require consistent and accurate property values.
Through our combination of people and technology we have introduced a model that will save both the homeowner and the government tremendous expense as related to property tax. It also provides cost effective forecast models for advance budget planning to further benefit taxpayers. Any projected budget deficit could be recognized and addressed almost 18 months in advance of legislative and voter approval. Additionally, it provides State representatives with ample notice and prior opportunity to enact non specific broad based provisional transaction flow tax instead of escalating the property tax burden.
Good Grievance envisions a network of homeowners across the nation working together as members to reduce the cost of home ownership. Our primary focus is to address current inequity linked to property tax and hazard insurance. Upon achieving critical mass within the member base, the company intends to expand to cooperative purchasing initiatives that could provide significant savings to property owners, such as heating fuel and electric consumption.
This plan provides the ultimate protection for property owners and we are convinced that this bold approach will cost both homeowners and government far less than the alternative - a continuing series of personal financial failures and decreased funds available to support budgetary items and economic expansion.
Comments(7)