Taxes and Fees
Basing property assessment on income is not a novel proposal
By Lee Chowaniec
Dec 9, 2008, 16:24

Jack Beilman had a Letter to the Editor published on SUWNY recently that favored basing property assessments on income. Although this writer is a not a proponent of such process, it was disturbing to see others casting disparaging remarks at Beilman for an “outlandish” proposal.

Some wrote comments that they never heard of basing assessments on income with the reason being that it made no sense to do. Not true, as by the examples sent me and by others that wanted to know if such process was used or suggested by municipalities.

The following was sent me gorja, a SUWNY message board writer who really does his or her homework.

Example #1

I was "googling" property tax based on income and found that in Vermont, their education (school) tax is partially based on income. No explanation of what happens to a family who had high income jobs and lost them due to the economy when it's based on the previous year's AGI. No where can I find any pros or cons of this taxation method.

="http://www.state.vt.us/tax/pvrfaq.shtml"

http://www.leg.state.vt.us/jfo/Reports/2006-12%20Analysis%20of%20an%20Income%20Based%20Education%20Propert%20Tax.pdf

From the FAQ on Vermont's education tax site:
http://www.state.vt.us/tax/pvrfaq.shtml#7

It says on material with my tax bill that some people are able to pay their education tax based on income rather than on the value of their property. How does that work?

There is a property tax adjustment worksheet on the Tax Department website. It can be used to estimate the property tax adjustment credit.

Click the link below:
http://www.state.vt.us/tax/pdf.word.excel/pvr/hs-122calc.xls

The classification of property as homestead assures that a Vermont resident will not pay more than the statutorily established percentage of household inc ome for property taxes on his or her house site (house and up to two acres). The difference between the taxpayer’s property tax bill and the property tax based on household income is paid by the State in the form of a property tax adjustment credit.

The money is paid directly to the Town. The Town then issues the homeowner a property tax bill for the net due. The property tax adjustment calculation uses prior year household income and prior year property taxes.

Example #2

It seems that a NY assemblywoman had proposed income based taxation in NYS back in 2005. In her continuing effort to ease the ever-increasing burden of property taxes in the North Country, Assemblywoman Teresa Sayward (R-Willsboro) is drafting legislation that bases real property taxes on each owner's gross income. The proposal comes at a time when many homeowners are wondering if they can afford to remain in their homes.

"I hear it time and time again - the heavy burden of property taxes is literally driving people from their homes," said Sayward. "It's heartbreaking to see a low- or fixed-income family have to sell their home because the government spends and taxes way too much."

Sayward's proposal puts a cap on the real property tax based on a household's gross income. The income scale is indexed to the Consumer Price Index to account for inflation and changes in the standard of living. The scale follows:

Household Gross Income Cap on Real Property Tax

$50,000 or less, 3% of household gross income

More than $50,000 but less than or equal to $100,000, 5% of household gross income

More than $100,000 but less than or equal to $150,000, 6% of household gross income

More than $150,000 but less than or equal to $200,000, 7% of household gross income

More than $200,000 No limitation

The legislation requires taxpayers to file their income taxes as usual, but with the understanding that any amount paid over the real property tax cap would be returned in the form of a personal income tax credit.

The School Tax Relief (STAR) program would not be affected by the bill and it still would be used to reduce a homeowner's school tax burden.

Sayward noted the credit would only be available to New York state residents for their primary homes and would be claimed on their state income tax returns.

Keene Town Supervisor Tom Both, who is chairman of the Essex County Tax Relief Subcommittee, said, "This is a major step forward in providing property tax relief for working Adirondackers and, indeed, for all New Yorkers."

"This bill more truly reflects an individual's ability to pay his or her property tax bill," said Sayward. "Too many people living in homes they worked hard to pay off are finding their homes suddenly unaffordable. The same goes for every homeowner who bought a home expecting to pay a certain amount each month for a mortgage and taxes and who now face outrageous tax payments much higher than they ever expected.

"The problem is a bloated state government in Albany forcing localities to pay for all sorts of programs they have no control over. This cap on real property taxes would immediately help alleviate our state's property tax burden and bring government spending under control."
http://assembly.state.ny.us/member_files/113/20051220a/

Comment

I know Jack Beilman well enough to know he is no fool and his reasoning for advocating basing property assessment on income. If this was a perfect world where everyone was employed, where there was no fear of job loss and where every property owner acted fiscally responsible, then this method might make sense. We live in no such world.

Mr. Beilman holds that market value can never be determined until such time the property is sold. That may be theoretically true; however, in all honesty we all have a good sense of what our properties are worth.

I agree with gorja who wrote me: “Assessment by income isn't as equitable as assessment based on 100% market value. Too many variables, situations and circumstances exist in today’s world of financial crisis.”

“You could have a couple with children with a good income purchase a $300,000 home and maybe pay a $1200 a month mortgage payment and have to sock away $825 a month for property taxes and unable to save a dime. Then have the lady next door die and leave her $300,000 home to her nephew with a lower income and no mortgage payment and not have to sock away the full $825 per month for his taxes.”

“Income based assessments would eventually end up like the welfare - food stamp system. The ones that work tirelessly eat hamburger helper and the entitlement people eat porterhouse steak. Assess at 100% market value and increase the exemption amount a little more for the seniors on fixed incomes.”

As stated before by this writer, municipalities’ oft-times use the reval system as a money- grab. Real tax rate increases are obfuscated by the increase in total town valuation. Assessment based on 100% market value, if done honestly and credibly, is still the best process.



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