Property Taxes
Introduction
Property taxes are the taxes payable on properties at a rate which has been collectively decided by the legislature while property assessment refers to the assignment of fiscal value to the real properties.
Do you have a recommendation as to how the government could more equitably assess property taxes?
Property taxes represent a very large source of income to some countries. The US government through its county governments raises a lot of income from property taxes. The basic steps to assess or value properties in view of taxation are the discovery of an appropriate tax base and the recognition of applicable exemptions and tax rates to the valuation standards and eventually the collection of the taxes. While collection of property taxes presents a challenge to most county governments in the US, property assessment is the major issue that draws a lot of attention in the US due to its subjectivity. (Almy, 2006) To increase the collection of taxes, property circuit breakers that connect the tax rates to the landlords or owners income can be applied. The tax rate is capped at a certain percentage of the landlord’s income. Also the introduction of specific thresholds on tax increases to counter or mitigate property value increment due to increases in market prices.
Consider the best way your recommendation could be implemented, keeping in mind the government’s need to plan for budgeting, and the best way to maintain the revenue streams.
To increase the collection of property taxes, a clear policy on property assessment should be adopted that will regulate the assessment and valuation of real properties as its basic cause of uncertainties in the payment of property taxes. (Bahl and Martinez-Vazquez, 2007, p 6)
Discuss how the revenue stream may be made up if the revenues from property taxes have to be decreased. Do you think the government will increase the tax percentage or increase taxes in another area in order to compensate?
Property taxes are utilized for different purposes depending on the needs of some cities or countries. Some countries depend heavily on property taxes while others incorporate it the general fund or make use of in water and waste management projects. The United States county governments raise most of their income on property taxes as compared to other countries. (Brown and Hepworth, 2001)
The Proportion of Tax Revenues collected by the US federal and local Governments in 2012
Sources: CBO historical sources
The revenues from property taxes form a minor percentage of the total taxes on the other type of taxes that make the 6% of the total tax collected by the government. A decrease on the collection of this tax may have an impact on the local county governments and not on the overall US revenue collection. The adjustment on the other taxes will be minimal. The government may increase the other tax brackets to compensate the difference in the reduction of the property tax.
To conclude, the overall effect of property taxes is mostly felt on the local governments in the US as they are charged with the responsibility of determining the rates to be charged, methods of assessment and collection processes.
References
Almy, R. (2006) Improving the Valuation of Large Commercial Properties for Real Estate Tax Purposes, Working Paper, Lincoln Institute of Land Policy, Cambridge, MA.
Bahl, R. and Martinez-Vazquez. (2007) Property Taxes in Developing Countries: Current Practice and Prospects, Working Paper, Lincoln Institute of Land Policy, Cambridge, MA.
Brown, P. and Hepworth, M. (2001) “European Property Taxation: Changing Times”, Land Lines, Volume 13, Number 2, March 2001, Lincoln Institute of Land Policy, Cambridge, MA.
www.CBO historical sources.
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