Wednesday, October 10, 2007

Should we roll up the moving trucks?

Today's Journal Sentinel recounts an increase in property tax delinquencies in Milwaukee County. The usual suspects are rounded up to blame the unlikely. It's a weak economy and "minimal" wage increases that are eaten up by price increases. But the economy is booming and wages are increasing. It's "predatory lending" (i.e., foolishly lending money to people who could not pay it back so they could by homes they cannot afford). That may be closer to the mark but it seems that even that would not lead to foreclosures without flat or slightly declining housing prices. After the run up in values, we seem to be in an inevitable period of adjustment.

County officials apparently think the cause is all sorts of things that are not increases in property taxes and maybe they are right about that. Scott Walker has done a good job of keeping the county tax flat and state law has helped with school levies. Just think of how bad it could have been.

But, if too many people are having trouble paying their taxes, doesn't that suggest that local government ought not contribute to the problem by raising them? Wisconsin in general and Milwaukee County in particular have extraordinarily high property tax rates. Monthly escrows for property taxes are quite often material in relation to - and sometimes even higher than - monthly mortgage payments.

I understand that Milwaukee County government in particular would like to spend all sorts of money on things that it cannot. As everyone now agrees (but did not while it was happening), the people who formerly ran county government - the AFSME heroes and denizens of Democratic clubs - treated county government as a personal piggy bank for years. That party is over and the hangover is ugly.

But raising property taxes into that will cause real pain for people who aren't particularly wealthy. I sure hope Sen. Lena Taylor finds time to address that.

5 comments:

Dad29 said...

If one purchased a home in (say) 1995 for $220K, paying proptax on a $220K property was figured into the cashflow equation at the time.

But then along come the re-assessments, and a huge inflation in property prices--and you have a significant increase in proptax not entirely justified by the actual value of the home.

So unless disposable income rose at a rate sufficient to cover inflation 'ex-tax' AND the inflation of proptax, the wheels separate from the cart.

Not to mention that AMT does not credit State income, children, or proptax payments--thus, the disposable-income numbers have to run up very fast.

Lee Hollowhead said...

How much tax money is being funneled into the Ament corruption scandal. How much in tax money is going to the Baldwins alone.
That money is not there to be spent on the parks etc etc etc etc.
The left would have you believe Scott Walker is the bad guy.
Imagine injecting back into County govt. the amounts being used to pay off the Ament scandal, and "wallah" (sic). No problem.
Let's be honest shall we.
(I know asking a liberal to be honest is like asking for the sun to come up in the west)

Anonymous said...

City of Milwaukee's reassessments were flat this year -- or went down. So if lenders correctly readjusted for that (and homeowners knew to check that), escrow payments ought not be going up much, if at all.

So where in the county are property taxes going up so much that this would happen? Of course, property taxes can go up for reasons other than reassessment -- maybe MATC's constant increases, with higher pay than in the UW but no (as with the legislature over the UW) oversight?

Joe C. said...

Dad,

"paying proptax on a $220K property was figured into the cashflow equation at the time..."

Individuals buying a home should be aware that an increase in the value of real estate results in higher taxes.

This is the problem with (effectively) making the property tax the sole source of financing for local government.

"But then along come the re-assessments, and a huge inflation in property prices--and you have a significant increase in proptax not entirely justified by the actual value of the home."

It is the market's valuation, not yours, that dictates the property's value.

Of course, there was irrational exuberance. Low interest rates, easy credit, and ridiculous financing mechanisms conspired to drive up the demand for housing. Constant supply, with increased demand, means higher prices.

And, remember, the valuation can be reduced on appeal...if the property owner has evidence that the market will not sustain the supposed value.

Anonymous said...

If a $200-$300 increase in property taxes are causing folks to default on their mortgages, the borrowers clearly borrowed more money than they should have and the banks were negligent in approving the loan. Whatever happened to holding individuals (and businesses) responsible for their decisions? Or don't conservatives believe in that any more?