I just had this thought, it’s not something you can even easily cash out of, your assessed value could be way off – for example 2 houses in same neighborhood but one is run down and the other updated. Could have a difference in value of 20-30% or more.
Why don’t states get rid of it, and just get the tax money in a different way – realized gains, income/payroll tax (maybe higher percentage), etc.
Just seems off that you bought a house 20 years ago for a price, and then the city/county can apply a formula to estimate your houses worth and charge you based on that. Even though there’s no realized gain based on that assessed value.
Is property tax a form of unrealized gains tax ?
byu/dotsonnn intax
Posted by dotsonnn
10 Comments
not really since you get property tax as soon as you buy it. there’s no unrealized gain at that point.
Ad valorum (“according to value”) taxes, of which property taxes tend to be, are not taxes on gains they’re taxes on value, regardless if it’s a gain, loss, or static.
But yes, since they are taxes on value and there’s no cash flow, they are against unrealized cash flow.
California’s Proposition 13 tried to address that.
No it’s a property tax that is based on the assessed value (not market value). These taxes are usually levied by the county or city for funding services like school, water, police, etc (these agencies also get allocated funds from the state and federal level as well.
I suppose you could think of property tax that way… I personally think of property tax as ***rent***. After all, the government can swoop in at any time and use eminent domain to evict me.
But there’s a large difference between assessed value and price comps in my neighborhood. The current full cash value used for tax purposes is about 85% of what Zillow thinks.
No.
With real estate property taxes you are normally taxed on a calculated percentage of the property value and the same calculation applies to everyone in the tax district. Those values don’t correlate to gains (or losses).
If I buy a house for $600,000, then $600,000 becomes the assessed property value and the tax rate is applied to that amount even though I have $0 capital gain at that point. If the house increase in value next year then my assessment may go up to $650,000 but I’d still pay taxes on the full $650,000. Not just the $50,000 unrealized gain.
Land value tax is the mechanism you are looking for
No. It’s payment for services.
Yes
No, it’s not a tax on gains because it does not depend on how much you paid for the property. You still owe tax even if the property loses value.
You seem to be assuming that tax should be based on income. Taxing accumulated wealth actually makes a lot more sense to most people. A significant chunk of your taxes pay for the military and police. The more stuff you have to protect, the more you benefit from those services. Another large chunk pays interest on debt because the government spent money in the past. The more you’ve benefited from the past economic climate, the more you owe that debt.
Yes. Your yearly payment is correlated to the value of the house.