Property taxes are generally levied by cities, counties and other local-level administrative bodies. They are the primary source of revenue at these levels of government. These taxes pay the lion’s share of the expenses for basic services provided by a city or county:
- Local road maintenance/signs/lights
- Utilities infrastructure (water/wastewater/trash are typically city-administered; electrical and telecom it handled more directly by providers but government has a hand in it)
- Local first responders (police/fire/EMS)
- Local government offices (courts, county clerk, commissioner, animal control)
- Mass transit subsidies (lowers the ticket price to encourage ridership by making everyone pay a little from their other taxes whether they ride or not)
- Municipal facilities (parks, pools, etc)
- Public schools and interscholastic facilities (teachers’ salaries, building maintenance/upkeep, administration, athletic facilities)
There are federal dollars, other revenue sources, and “usage fees” (vehicle registration, utility bills, trash fees) as well, but a lot of that money covers larger-scale infrastructure development such as interstate highways and specialized earmarks. Property taxes are the main funding for the day-to-day government operations at the most visible level to the average resident.
The theory behind using a property tax instead of some other form of taxation, like income or sales taxes, is that the value of the property and the quality of services provided to the resident of that property are interrelated.
The property is valuable in part because the infrastructure is well-maintained and nearby schools and hospitals are good, and by the same token, affluent residents expect high-quality services. Property taxes are also easier to levy, because most of the work can be done by the property assessor, including monitoring recent sale prices, drive-byes through neighborhoods, calculating a value and an assessment number and sending that information to the taxing authority which then bills the taxpayer. That’s opposed to sales taxes, which businesses operating in the jurisdiction have to calculate, collect and turn over, or income taxes which require residents to fill out paperwork to calculate how much they owe.
When you buy land in the U.S. and a state, you are still a citizen or resident of that State and the U.S., and subject to their laws. You’re not creating your own country when you buy a house. The government protects and defends your rights to use your property. The government also charges you for the facilities and services they provide in your area and your state, which are then your privilege to use. Obviously roads aren’t free; a one-mile stretch could cost as much as $15 million to expand it from two lane to four lane.
Even if you don’t own a home; you’ve already been paying property taxes. You think your landlord’s just going to take the property taxes for the whole apartment complex on the chin? He’s out to make money, and doing that requires charging a sufficient amount to cover costs, including taxes he incurs. You just never see “allocated property taxes” as an item on your rent statement, just like you don’t see “allocated landowner mortgage”, “allocated facilities maintenance” or “allocated gross margin.” You know you’re paying someone else’s financing with a little extra on the side to boot when you rent. That’s why many people want to buy a house.
Unfortunately, not being able to pay these taxes is a grim reality for some people, old and young, and government generally doesn’t go easy on delinquent homeowners. After medical bills and mortgage delinquency, property tax delinquency is the number three reason for bankruptcy, and only a mortgage or property tax delinquency can cause your home to be seized and sold. Retirement planners figure property taxes into cost of living, and they do often advise a downgrade from the big house you raised your children in to something smaller.
There really isn’t a way to structure a completely “pay-as-you-go” metropolitan area, and you wouldn’t want to live in it if there were. Imagine every strip of asphalt in the county being a toll road where your transponder or license plate was scanned and you were billed at each intersection. In addition to being a huge invasion of privacy, the cost to maintain this network (and your cost to use it) would skyrocket. Imagine 911 asking for a credit card number before dispatching police, fire or emergency medical services. (Ambulance services already do bill on a per-event basis, but you’d be surprised how few people pay and how little power a county EMS has to enforce collection; without a property tax and Medicaid to cover the difference, EMS service could not be provided in most counties).
So if you want to pay less taxes your only choice is to have less services or a less valuable piece of property. Downsizing may or may not be possible given that our local market is growing at a record pace. Many folks don’t want to move because we are a darn great community in which to live. The other option may be to cut services. Care in choosing the ones to cut is vital. A loss of the wrong service could be more disastrous that paying a higher property tax bill.