Property Tax Illusion
Because it works differently than most other taxes with which we’re familiar, it surprised me when first I learned how property taxes are calculated, at least in Tiverton. In short, the rate is almost an irrelevant statistic. Confusion over that fact has led local Budget Committee and TCC member Tom Parker to pen the following explanation
2009 property revaluations have been mailed out in Tiverton, and if you listen carefully you can hear a collective sigh of relief across the town: “My property value has gone down, my taxes must be going down. Life is good, and I’m safe, at least for the time being, from the insatiable tax demands of the Tiverton government. For once, I can relax…right?” Actually, no. Unfortunately, things are not what they seem. There are two good reasons why you need to pay careful attention.
First, the letter we taxpayers got in the mail was our property revaluation, and, indeed, for many of us it is significantly lower than the previous assessment (my own decreased about $120,000). The tax RATE is the other key component in the final calculation of YOUR property tax bill. The FY2009 tax rate proposed by the Budget Committee is $14.73/1000. This is a $3.47/1000 increase (31%) over the current tax rate of $11.26/1000. So even if your assessment has gone down, your taxes could substantially increase. In my case, even though my assessment decreased $120,000 (14%), I estimate my tax bill will increase by over $1,100 (12%).
The town doesn’t apply the rate to the property values to figure out how much money it has to work with. Rather, it figures out how much money it wants and then divvies the total up among all of the property in town. When property values go down, it doesn’t figure out how to function with less revenue; it simply adjusts the rate to ensure the same revenue as a matter of course, with no votes or political risks necessary.
So the key question, when it comes to revaluations and taxes isn’t whether your house is worth more or less; it’s how it changed compared with all of the other properties in town. If they all decrease by the same percentage, everybody’s taxes stay the same.
It’s true that, in Tiverton, a new methodology will skew taxes toward waterfront properties, this year, which means that recalculations will hurt those homeowners more. But as Tom describes, the huge leap in the rate likely means increase for anybody whose house’s value dropped less than 31%. And that’s before tax-revenue beneficiaries have their whack at the budget during the upcoming financial town meeting this Saturday.
ADDENDUM 05/09/09 5:10 p.m.
The deleted sentence is incorrect. See here for explanation. Apologies for the error.