Questioning tax valuation
Every few years the Nebraska Legislature finds itself in the middle of a tax-reform discussion. The 2007 version of that debate was much like those of previous years. While such considerations attempt to weigh the differences in sales, income and property taxes, reform proposals too often focus on the percentage or trade off between the types of taxes. The property tax on real property (land and buildings), however, most often emerges as the most disliked of the three major sources of tax revenue. The source of this dislike, I believe, is the lack of input or control that the taxpayer has over property taxes, particularly the real property tax.
All up and down the Great Plains, many stories emerge showing examples of the frustrations that citizens have with methods utilized to determine the value of real property and to collect the taxes on their property and buildings. In last year’s U.S. Senate race, both of Nebraska’s candidates became the center of a political debate over how their Nebraska real property was valued and taxed. While both candidates got past the tax questions and moved on to other campaign issues, many readers were left perplexed as to why these two were singled out for scrutiny while other taxpayers were not put under the same microscope. This was particularly true over the dust-up over the so-called greenbelt tax reduction. This is a law that many states have enacted whereby property lying in the path of urban development can continue to be taxed at a lower value rather than its higher speculative value. The purpose of these laws is to prevent urban sprawl by allowing the owners to hold on to their rural properties while paying modest land taxes. What emerged, at least in Nebraska, is a confounding set of policies that are different in each of the 93 counties. Within individual counties, debates raged among elected officials as to who qualifies for a greenbelt designation. Other Great Plains states have similar systems of taxation and valuation which that lead to confounding results. In Texas, national financial services giant, Fidelity Investments’s customer-services operation (the national financial services giant) customer- services operation grazes 24 longhorn cattle on the property in order to qualify for an agricultural exemption, thereby reducing real property taxes by more than $300,000. Needless to say, such a result seems hard to justify given the purpose of these original tax laws.
In Nebraska, the recently concluded real-property-valuation protest season saw at least one county board grant more than half of a record number of property-valuation protests. How can this be unless the existing system is broken? Will not the elected county assessors in those counties be forced to raise those the “reduced” valuations on those properties as soon as state law permits? In a large city in Nebraska, officials recently paid almost double the assessed valuation for two urban parcels of land. Did they pay too much or was the valuation wrong?
While future governors and state legislators are debating tax cuts, I propose that they think about reforming the basic system of real property valuation assessment and tax collection, by examining the first step in that process: the way that government assigns a monetary value to real property. We need a real-property appraisal system in Nebraska that treats us like adults and allows us to fairly participate in the process. We need a system that is not subject to regional variations. We also need a system that will circumvent local elected officials who have no courage to strictly enforce an unpopular law. We need a system that does not cost millions of dollars for costly oversight, administration and ongoing appraisal fees.
My proposal is to implement the self-appraisal system. Once each year, the county assessor would send each of us a valuation postcard. We would merely write in the value of our real property, notarize it and mail it back. Our real-property taxes are then based on that self-declared value. Each year we get a chance to change the value.
Who knows the value of property better than the owner? What could be easier? No appraisals. No visits by government employees. No haggling. No appeals. No angry phone calls or threats. I believe 85 percent of us would be more honest and accurate than the current system is. And think of all the government expense we could eliminate. We would even feel we had regained some control over our own government. I believe all but a few Nebraskans would be honest about their real-property values. But what about those who would try to beat the system? I offer several proposals:
*Condemnation awards would automatically be based on the value on file with the assessor. There would be no need to dispute or appeal condemnation amounts.
*Insurance losses (such as fire, flood, tornado, etc.) would be capped at the amount on file at the assessor’s office. If my home was insured for $125,000, but I had valued it at $100,000, my insurance carrier would only have to pay me $100,000 in the event of a total loss.
*A windfall-profits tax would be imposed on me if I sold my real property for an amount in excess of its declared value. The windfall-profits tax would be designed and implemented so the taxes I would have paid (in prior years) would be recaptured, plus interest, plus a penalty. The details of the formula, including the period of retroactivity, would have to be worked out by the legislature or county board. Back to my original insurance-coverage example: If I sold my home for $125,000, after I had sworn it was worth only $100,000 why would I care if $5,000 to $10,000 of my $25,000 windfall profit went to pay back taxes, interest and penalty?
If I truly did not “know” the value of my property, I would have other ways to establish a value. I could have the property appraised by a professional. I could request that the assessor appraise my property. Likewise, any taxpayer could ask the assessor to review my valuation if he suspected I was undervaluing my property.
The existing real-property tax system is terribly expensive and broken. The frustration taxpayers feel only adds to the pervasive attitude that our government is drifting further away from the citizens. Let’s begin the debate on how best to correct these problems by trusting the people upon which our form of government is built.
Delicious
• 
Digg
• 
StumbleUpon
• 
Propeller
• 
Reddit
• 
Magnoliacom
• 
Newsvine
• 
Furl
• 
Facebook
• 
Google
• 
Yahoo
• 
Technorati
• 
Icerocket
Post new comment