Monday, October 23, 2023

Inflating property values can cause sticker shock about taxes, but it's actually just the local government budget sizes that determines the tax.

In the past few years, property values have shot way up in Bellingham and Whatcom County. When property tax assessments come out, it causes "sticker shock." People are worried that their taxes will skyrocket since their value has skyrocketed.

From my understanding of local government, taxes don't follow property values in lockstep.

Each year, the total amount of taxes is determined by the budgets of local governments; such as state, county and school districts. In some cases the tax, per thousand of valuation, can go down because there are many more thousands of dollars, in valuation, to tax from. If one's value goes way up relative to overall property values in the area, then their share of the taxes do go up, but if all the values go up in similar fashion, the tax just goes up, or down, depending on the size of government budgets.

The total taxes collected only goes up as much as the combined budgets of the taxing governments and districts.

Hopefully people will still vote in favor of quality things, such as the Bellingham Greenways Levy on November's ballot.

Total taxes do go up more gradually, determined by the budgets of the various taxing districts; such as the local school districts, cities and counties.

The state of Washington does impose some restrictions on how much local governments can impose in taxes. Remember Tim Eyman?

I've never been a fan of Tim Eyman since I do think taxes need to go up to maintain the quality of life.

Eyman's initiatives lost in court, but I remember that the State Legislature preserved some of his intent. There are state imposed limits to the total amount of growth in taxes that local governments can impose.

In the long run, taxes do go up as the cost of living, in an area, goes up. For instance; teachers, who work for the government, still need to be able to afford to live in the districts they serve.

In the long run, the inflating cost of real estate, in this area, does push up taxes as the budgets of governments go up. The total budgets of local governments and districts determines how much the taxes are.

I think the property values are just too high; artificially propped up by years of "low interest" printed money. That situation is likely to end in the future as interest rates have gone up.

The handful of years, since the pandemic (2020-2023) have seen property values shoot up even more than the inflation in property values during the 1990-2019 era (admittedly there was a little dip around 2008). The big 2020-2022 mega property value inflation was due to all that extra coronavirus stimulus money in the economy along with low interest rates and high demand for housing in moderate sized cities.

That's my political take for the day

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