Saturday, July 14, 2012

Pensions and Property Taxes

One factor in my personal decision to rent rather than own a house, is my fear that property is a sitting duck for any government short of funds.  I worry that all the pension crises at every level of government will cause massive increases in property taxes, since, as opposed to yourself and your income, you can't move the location of your property.  I think my logic has merit, and a piece in the WSJ corroborates it, though not exactly in the manner I'd envisioned.

 Bankrupt and quasi-bankrupt municipalities are considering hiking the transfer taxes on properties.  This, in an attempt to prevent people from leaving and thus remaining as taxpayers.  I expect such taxes (and the desperation they reveal) will knock down property prices in those locales.
Ultimately, however, the biggest victims of the city's fiscal crisis are taxpayers. Despite paring public services, the city projects $45 million annual deficits for the next five years. Since further service reductions could endanger public safety and cause an exodus of residents, the city manager and its director of finance suggest that the city explore raising revenues. Their recent budget analysis recommends increasing the property transfer tax by nearly 500%.

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