As home values fall, property tax revolt brews

Assessments can be political, as a recent Supreme Court case in Nevada showed. The court ruled that dramatic differences in assessments in different counties bordering Lake Tahoe suggested that more than just the real value of the homes and properties was taken into account.

“Politicians … put pressure on the local assessor to keep that value as high as possible so they don’t have to raise the tax rate,” says Cook of the Institute for Professionals in Taxation.

Given what’s happening now, however, elected officials will be under increasing pressure to debate publicly the prospect of higher taxes to fund government, Cook says. Many states’ expenditures were growing by 10 percent a year before the recession began.

“If house prices are down 30 percent in any given market, then the property tax rate has got to go up ... or the government’s got to shrink by 30 percent – something’s got to give,” says John Baen, a real estate expert at the University of North Texas in Denton. “Any taxing authority taxing real estate is always [eager] to increase values based on a few select sales of some cherry-picked, high-priced properties … yet on the way down they’re slow to react.”

Atlanta IT specialist Jacquay Waller stood in line this week at the Fulton County government complex. He bought his house in the Sandtown neighborhood for $350,000 two years ago. The county assessed it at $380,000. If he were to sell it today, Mr. Waller doesn’t think he’d get more than $250,000, based on comparable sales in the neighborhood.

“I just don’t believe the assessment,” says Waller. “I just don’t want to pay more in taxes on an amount that I could never sell it for.”

In good times, few people worried about their assessments and even saw high valuations as a good omen for their properties. Now, especially for those homeowners who bought at the height of the market, those values are a burden.

“People who bought in recent times at the highest prices are the ones whose values have fallen tremendously,” says Tom Richardson, a tax attorney in Ann Arbor, Mich., which has seen a record number of tax appeals this year. “It’s the people who have taken the worst hit who are now at risk.

Along with looming tax increases, those shaky valuations are forcing a secondary standoff between government and the people, says Sharron Angle, a former Nevada assemblywoman: “When people don’t feel like they can spend money because the government is going to tax them, and [homeowners] need money to forestall whatever attack the government is going to make on their pocketbook, it pits the government against the people and stagnates the economy.”

The National Taxpayer Union, an antitax lobbying group in Washington, claims that as many as 60 percent of homes in the US are overassessed. For the 722,000 homes in New Jersey that are potentially overassessed, average savings on the tax bill could equal nearly $2,000, according to the website EasyTaxFix.com.

“It’s a muddled situation out there with what is a house’s true value right now,” says Verenda Smith, a spokeswoman for the Federation of Tax Administrators in Washington. “Everything is just an educated guess.”

“The standard wisdom is that homeowners win on the upside and lose on the downside and over time that evens out,” she says. “But they don’t want to hear that it evens out when they’re worried about their job and their house value.”

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