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Sime: It’s Time for Virginia to limit property tax increases

Posted by Stephen on March 26, 2007

Op-ed  By Arin Sime

When is a tax hike not a tax hike?

When it is disguised as an assessment increase!

In Virginia, the property taxes you pay are calculated by taking the most recent tax assessment of your home and multiplying it by your locality’s tax rate.  To come up with the property assessment, they attempt to compare your home to similar homes that have sold in the last year, and then guess what someone would be willing to pay for your home.

Most of the time your property will go up in value, which sounds wonderful, until you get your tax bill.

I recently received my new property assessment and my home has gone up 30% in value according to my county – the same as it did two years ago, and by almost exactly the county average.  This means my monthly mortgage payment will go up another $60, just like it did last time.  If my home were paid off, or I lived on a fixed income, or I had lived in this county all my life and had no mortgage, this tax increase would be even more noticeable.  Instead of having to write the County a check for $2400 each year, I would have to write a $3120 check.

Because I have a mortgage, I have the “pleasure” of watching my bank automatically increase my monthly payments so they can keep enough money in an escrow account to pay local taxes.  That way I won’t be troubled with the realization of how much I pay in taxes.

Sometimes ignorance is bliss.  And that’s probably the way your local government would prefer it.

In the General Assembly this year, a bill was killed in committee that would have stopped local governments from hiding these tax increases.

Yes, they are hiding something from you.  When people complain about rising assessments also raising taxes, the politicians get to act very compassionate.  “Gosh, we feel so bad that we’re going to lower your taxes!”  Then, they will lower the tax rate a couple cents, and pat each other on the back.

But when you receive your next tax bill, it still goes up!

In my county (Albemarle) two years ago, they lowered the tax rate by 4 cents, to $0.72 per $100 of assessed value.  This was called a “tax cut.”  But it was only a cut in the tax rate, which is an important difference.  According to our local Libertarian Party calculations, they would have had to cut the tax rate to $0.60 per $100, just to break even with the increased taxes collected due to rising assessments!  Even after they “cut taxes”, a $350,000 home would still have to pay $420 more in taxes each year.

Local politicians love this.  When citizens get angry about rising taxes, the politicians can shift the blame to rising assessments and ignore the fact that they have increased government budgets at double digit rates.

HJ559 in this year’s General Assembly would have ended this shell game.  Property taxation is a function of local government, but the method of taxation is controlled by the Virginia Constitution.  HJ559 would have amended it to make property taxes based on the “acquisition value” of your home, instead of the “assessed value.”

Under acquisition value based taxation, every year the taxable value of your home is based on the amount you actually paid for it.  HJ559 would have limited the rate of increase of your tax assessment to be the rate of inflation plus 1%.  So you would typically see your taxes go up no more than 5 or 6 percent, instead of 30% on average.  You could budget for a relatively fixed increase each time, and rest assured that you won’t see your taxes explode.

The acquisition value used to calculate taxes on your home would be updated when you sell it.  That purchase price becomes the new acquisition value.  Presumably the taxes the new owners will pay are going to be significantly larger than what you were paying; however the new owners know that going into the purchase of the home and can budget for it.  And from that point forward, their acquisition value would not go up more than the rate of inflation plus 1%, and so they can be confident their property values will not drastically affect their taxes.

Does any of this mean that local governments have to stop spending money on education or roads from current levels, or that local government’s tax base would not increase over time?  No.  At the time the bill takes effect, your most recent assessment becomes your “acquisition value” base, and so local governments will not see any drastic reduction in their budget.

But it does mean that in the future, if the politicians really believe that the local budget must increase at double digit rates, they can’t hide that increase in assessments.  Instead they will have to be honest and open with citizens, and say they want to increase your taxes.  More honest politicians?  That’s something we can all agree is a good thing.  Well, all of us but the politicians.

Arin Sime is the Libertarian Party candidate for Virginia State Senate in the 24th District. For more information about his campaign, please visit www.ArinSime.com.

For more information about the fight to change property taxation in Virginia, you may also want to check out www.Votors.org.

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One Response to “Sime: It’s Time for Virginia to limit property tax increases”

  1. antonpavel said

    Great blog ,it does seem whimsical how they arrive at their assessments. I have lived in Florida and Virginia. The housing crash was initially brought on be the excessive taxes on new homes in Florida. Not the bad loans. A landlord couldn’t afford to lease out the property at a low enough price to attract tenants. Check out how we are all Serfs because of excessive Taxes.
    The more money the government has the GDP shrinks buying power drops and we become Serfs at best Slaves at worst.

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