Asymmetrical Information

Interesting idea, but in New York, the assessment only has to be within 10% of the market value. That actually provides a lot of leeway with the current market prices. And while I couldn't sell my house for the assessed value, I likely could sell it for 10% less.

The real problem in NY is state expenditures. In most states, education is the #1 expense; in NY it is #2, behind Medicaid. Add to that generous salaries to state workers (outside the NY Metropolitan area, that is) and the sheer number of state workers (2nd highest number of state workers per capita in the country), so with the state pushing expenditures down to the county level (25% of Medicaid is paid for by the counties and from 20% to 80% of education is paid for by property taxes), it's no wonder that assessments have to increase every year.

My proposal: The government can assess property value any way it likes, but the owner can sell it at public auction and get exactly the assessed value.

Example: Consider a house assessed at $500k. If it auctions for $475k, the gov't has to write a check for $25k. If it auctions for $525k, the owner has to write a check for $25k.

While we're at it, tie the assessed value into eminent domain. For ten years after an eminent domain seizure, if the property is taxed on its value, the government must pay the original owner the highest assessed value.

Credit is due to Dick Netkin, who was a professor of public administration at NYU. Netkin proposed that property owners would make their own assessment, but they would be required to sell to anyone who offered that amount. In effect, the tax rolls would be a real estate listing service, and goverrnment would not have to spend anything, either dollars or political capital, on tax assessment.

I oppose any requirement for anyone to sell his house. Since when does the government get to set the conditions of sale? It's bad enough that they can set an assessed value. Talk about a slippery slope!

I like the idea but I think the buyout would have to be more like 70-80% of the assessed value with an option to require a reassement within a year of the proposed buyout. Otherwise you would create an incentive for people to let houses fall into disrepair and then sell them to the gov't at a profit after their market value depreciates the assessed value.

The other incentive, though, would be for gov't's to keep assessments low but raise rates. In NJ it appears many houses are assessed for a value below market yet property taxes are a major pain.

I think property taxes tend to be inefficient, regressive and harmful to those in the least secure financial boats (I'm thinking of those on fixed incomes). They also, IMO, encourage local gov't bloat. NJ has high property taxes because it has as many towns, townships, municipalities etc. as California. With each town comes a mayor, a police chief, an assistant police chief and so on down the line.

The disrepair issue can be addressed by the requirement of selling within a short period after the assessment. Netkin's proposal will clearly lead to overassessment, i.e. setting value at the reservation price rather than the market value. Property taxes are actually efficient: the property is not going anywhere. Its not obvious to me that people on fixed incomes are harmed by property appreciation: their wealth goes up, and there are various measures they can take to draw down this wealth. Others have argued that efficiency is the last thing we want in a tax system, since it is not painful enough when Big Brother decides he wants to raise rates. If there are economies of scale in town administration, why aren't there options for towns to "merge"?

There are economies of scale in town administration and some merging and sharing of resources does happen (my town, for example, has always used the neighboring town's middle and High School rather than build its own and recently they choose to merge their police dept. with another towns' thereby saving one to two officers off the payroll). The problem is that it doesn't happen enough and there are entrenched interests in keeping it from happening. If you merge half the towns you are going to lay off half of the state's mayors, firechiefs and so on!

Houses are assessed once every ten years or so in NJ so I'm not sure how useful your rule would be unless the towns considered reassessments more often. Perhaps, as was suggested on the other blogs comments, this can be addressed by having people self-assess their homes with a requirement that they sell to anyone offering something like 120% of their self-assessed price. Then you counter the incentives against each other. Assess too low to save on property taxes and you run the risk of someone else buying your house to turn a profit, assess to high and you'll overpay property taxes.

I still remain a property tax sceptic. I don't see any evidence that the more local gov't spending done by property taxes are more efficient than other types of gov't spending. On the state level sales taxes and income taxes, IMO, are easier to collect. If the issue is that you feel local communities are better spenders than the state gov't then create revenue sharing where state tax funds are divided among counties and towns based on some sensible formula.

Just for the record, Robert Heinlein proposed the "owner sets his own tax value but has to sell for certain percentage over that if a buyer comes along" method in his book, _The Number of the Beast_, back in 1986.

A fairly awful book, but with some interesting ideas.

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