DJH: With the shocking election of Scott Brown behind us, I can get back to building out “Who Stole My Career?” Thus far, most of my posts have been about political and economic news that affects struggling private sector worker’s careers. And while I plan to keep that coming, the fact is, that’s only one piece of the puzzle. Over the coming weeks, I’ll be building out pages on survival strategies and adding a section with vital resources like recommended books and more.
But today, I want to cover my first entry in another section called threats called:
Those Insidious Real Estate Taxes
I’m not sure which body slam hurts regular Americans planning for their future more; realizing that someone stole their career (and that they may need to look for a whole new way to make a living after the age of 50), or discovering that their state and local government has targeted their nearly paid off home as their newest source of tax revenue.
I just paid my real estate tax bill in Massachusetts. Not only was it almost double what it was in 2008, but it works out to over $16,000/year. My house is a summer home, on private dirt road that the town doesn’t maintain. I filed for an abatement, but the so did 500 other citizens in this small town of 5,000 (that’s right, 10% of the residents filed for a Real Estate Tax Abatement). Due to the unprecedented number of abatements requests, the town declared that they don’t have the resources to review them! All 500 of us must now appeal to the state, which means we must hire a lawyer, hire an appraiser, and pay for them to appear in Boston – which I’ve done. I asked my lawyer when our abatement appeal would be heard and she said “it could take years.”
I’m not sharing this story to win your sympathy; I’ll survive. Rather, I’m telling you this to warn you that just because you pay off your mortgage doesn’t mean you won’t still have to pay $1,500/month to live in the house you own.
Not only that, unlike your old 30 year fixed mortgage, this monthly payment is far from fixed. As illustrated in my story, the town can jack it up by 25%, 50%, or in my case 100%, whenever they want. And when they want is during a recession, when sales tax and business tax collections are down. For someone trying to make ends meet, that’s one heck of a body slam.
So, when you start thinking about your retirement plans, take a close look at the place you’re going to live in and consider your future real estate taxes. If it’s somewhere like Massachusetts, where the population is shrinking and the government payroll is loaded up with bloated (and unfunded) pension obligations, run, don’t walk to a lower cost state.
Here is story I found that provides a good starting point on the subject of Real Estate Taxes.
Dave
Study Shows Property Tax Rate in Each State
(http://retirementliving.com/RLpropertytaxrate.html)
Property taxes accounted for about 22% of state and local government revenue in 2005, according to a study by economists at the National Association of Home Builders (NAHB). The analysis is important for comparing the affordability of housing and the cost of living in general, and is helpful for those planning to relocate or retire in another state.
Natalia Siniavskaia, the author of the report, notes that it is often difficult to compare effective tax rates on residential real estate based on state and local government data because local jurisdictions follow different assessment, administration and reporting procedures, and 37 states also collect property taxes on the state level. However, expansion of information collected by the U.S. Census Bureau at the request of NAHB has provided more data for counties and metropolitan areas.
State and local governments in New Jersey and New Hampshire rely on property taxes for their revenue more than governments in any other state, the study finds. New Hampshire, a state that does not tax wages and salaries, derives almost 43% of statewide government revenue from property taxes. New Jersey derives 35%.
In a recent development since the NAHB study was completed, New Jersey passed legislation that reduces property taxes for about 95% of all homeowners. Starting in 2007, homeowners will receive a 20% tax credit (incomes up to $100,000), a 15% tax credit (incomes between $100,000 and $150,000, and a 10% tax credit (incomes between $150,000 and $250,000) up to a maximum of $2,000.
The six New England states are among the 10 states most dependent on property taxes as a source of government revenue, according to the report. On the other hand, Delaware, New Mexico and southern states such as Alabama, Arkansas and Louisiana derive no more than 9% to 11% of statewide revenue from property taxes.
The study finds a strong correlation between the extent to which state and local governments rely on property taxes to fund local services and the amount of real estate taxes they collect per home. While state median property taxes per home reflect home values to a certain extent, the correlation is not as strong.
Among other findings of the study:
- The state with the highest median real estate taxes is New Jersey, where more than 50% of all households pay more than $5,352 in property taxes per home. States like California, Hawaii and the District of Columbia have higher home values than New Jersey but on average collect significantly less real estate taxes per property. The state with the second highest property taxes, New Hampshire, collects a median of $3,920, or $1,432 less per home than New Jersey.
- At the low end of the spectrum, states in the South Census Region — such as Arkansas, Mississippi, West Virginia, Alabama and Louisiana — have median real estate taxes that don’t even reach $500. In Louisiana, half of all households pay less than $175 in taxes per home.
- With its generous homestead exemption, Louisiana has the lowest real estate tax rate in the nation, at $1.72 per $1,000 of home value. Two states with the highest effective tax rates are Wisconsin and Texas, where rates exceed $18 per $1,000 of property value.
- Median home values in the highest tax rate states — Wisconsin and Texas — are well below the national average. But the three states (including Washington, D.C.) with the most expensive homes — California, Hawaii and the District of Columbia — have some of the lowest property tax rates in the nation — $4.77, $2.04 and $3.76 per $1,000 of value, respectively.
- Niagara, N.Y. is the county with the highest effective median tax rate, with a rate of $28.12 per $1,000 of value. New York stands out for having the most diverse tax rates across the state. At the low end, Kings County has a tax rate of $4.79 per $1,000 of value, almost six times lower than in Niagara.
- Among states where there is data covering more than two counties, Nebraska has the most consistent tax rates across its counties.
- St. Bernard Parish, La.; Maui, Hawaii; and Apache County, Ariz. have the lowest median tax rates among all counties – $1.35, $1.62 and $1.64 per $1,000 of value, respectively.
To read the report and view a map and two tables showing the property tax burden in each state, click here.
