Progressive unTaxing

There are two lessons that must be retaught every time a change is made to locales that tax based on the market value of real property. The first is that people don’t have a firm grasp of how taxes are assessed. The second is that people burned by the reassessment, meaning that their taxes will increase, will be outraged.

Nassau County, New York, is engaged in a reassessment, necessitated by myriad failures, both political and factual, but driven by a billion dollar hole produced by successful tax grievances that had to be repaid. The irony here is that half the billion went neither to the county nor the taxpayers, but to the cottage industry of tax grievance representatives, who took a 50% cut of the taxes they saved residents.

When people’s real estate taxes went up, they blamed the county, assuming it reflected a tax increase rather than a redistribution of taxes. In fairness, Nassau County real estate taxes are astronomical, but most of that is based on local school taxes, where per-pupil-spending exceeds $20,000. But since the county handles the assessment, how the pain is spread out comes back to the county, and makes the county the butt of ire.

Facing this huge hole, newly-elected Democratic Nassau County Executive Laura Curran decided to try again and do a complete reassessment of all 400,000 properties. Good intentions aside, such ventures are doomed to be dreaded.

Even if her administration handled every aspect of the reassessment perfectly, the confusion and fear of people destined to see their bills increase significantly were bound to create strife and anger. But making good decisions and executing them competently could have helped ease Nassau through a process that must take place.

And the execution, as one might expect, has its flaws. The taxpayers who make the most noise, and raise the biggest fuss, are invariably the ones whose taxes under the reassessment will go up. So the plan is to simultaneously correct the assessments, but ease the pain in slowly.

Curran is doing the right thing in creating an accurate roll. Now her administration needs to do it right. That means better helping people understand whose bills are changing and why. It means explaining how eliminating the incentive for tax grievance firms to solicit clients means lower rates for everyone. It means getting state legislators to publicly commit to a law that would smooth out increases over five years.

Newsday, in its typically myopic perspective, focuses on only one side of the equation.

Owners whose assessments increase drastically to their fair levels will find their new bills offensive. The best and only defense is open communication and utter competence.

Drastic increases in real estate taxes are, without a doubt, brutal. People will cry about how they can’t afford it, will be forced out of their homes, to eat cat food, to take little Timmy off the iron lung. Each story we hear will be heart wrenching, because nobody tells a story any other way.

But before you take to the parapets, consider that these same poor owners have been underpaying their fair share for years due to under-assessment, which means that someone else was overpaying taxes to make up the difference. If the reassessment is fair, then owners for whom taxes will “drastically” increase are owners who were “drastically” underpaying. It was a sweet deal, but it’s coming to an end.

Yet, the pain won’t be felt immediately, as the scheme is progressive, phasing in the increases over a five-year period. On the flip side, the notifications to homeowners of what their assessment will be, and what will happen to their hypothetical taxes, inform the owners who have been overpaying taxes for years of their “drastic” good fortune in taxes being reduced. Yay, right?

There’s a dirty little problem, however, that neither Curran, Newsday nor anybody else has noticed as yet. This means the people who have been over-assessed, and have been paying more than their fair share in taxes for years, now know what their correct assessment should be and how much in taxes they should be paying. But they will still pay more for the next five years than their fair share in order to ease the pain on other homeowners who have enjoyed years of paying less than their fair share.

So if your real estate taxes this year were $30,000, and you’ve been informed by the county that under reassessment, your corrected taxes should be $20,000, you will get a $2000* reduction (which beats the hell out of an increase, or even the same taxes as before) but still pay $8000 more than you should.

There’s an argument to be made that the pain of having one’s taxes increase is certainly worse than the pain of a decrease. There will also be some who express their willingness to overpay taxes to ease that pain for their neighbors, although it’s never clear that the people who take this position are actually taxpayers and not merely the unduly empathetic who are very good at spending other people’s money.

But this isn’t about sad tears and poor little Timmy. It’s just money, and taxes, and the government taking money it needs from people who shouldn’t be paying it. The owners overpaying taxes have their own uses for their income other than charity for their neighbors who have been free-riding for years. Whether they have their own little Timmy or want to buy a mocha frappuccino really isn’t the government’s business.

None of this has to do with the government raising taxes, per se, which is where too many residents go because they fail to grasp how taxes are assessed and assume any increase in their taxes means the government is just spending more. This is only about paying one’s fair share, about the distribution of the tax burden between homeowners.

Now that Nassau County has admitted that it’s over-assessing some owners, it’s scheme to continue to do so, to take their money even though they concede they don’t owe it, is mere confiscation. What to do about the pain suffered by those who enjoyed years of under-assessment remains a problem, but the cure isn’t to seize five years worth of excess money from those who have been overpaying for years.

*This is oversimplified, as math is hard.

7 thoughts on “Progressive unTaxing

  1. Patrick Maupin

    Finally a case for programmatic law outside of traffic tickets. It should be easy to generate thousands of protests based on unequal assessment, cheaply, using the county’s own data rather than hiring dueling appraisers.

  2. delurking

    Our county is more clever than yours, apparently. Everyone knows roughly what his or her property is worth based on local sales, zillow, etc. Our county just systematically under-values the properties in the official record, then sets the tax rate where they need it to be based on that valuation. Since everyone sees a low official value on paper, there isn’t any push to complain about the valuations. We also have a rule that prevents an individual’s property taxes from rising too fast, but it does not prevent them from falling too fast. Everyone is fat, dumb, and happy.

    1. SHG Post author

      Clever indeed to play upon people’s inability to grasp how property taxes work. Where would we be without people and the pols who prey upon them?

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