West Virginia Property Owners Punished by Tax Assessments

Taxes are bad. They make cost of living higher, they force private citizens to go about their business in a different way than what is best for them, they reduce overall economic activity and they often come with the legal authority for government to invade our privacy. As this blog has reported repeatedly, our politicians are also willing to abandon their ethical standards in pursuit of more revenue, something they willingly demonstrate by taxing addictive behavior, i.e., taxes on alcohol, tobacco, gambling and even legalized marijuana.

Another highly unethical aspect of taxes is that they can drive people from their homes. Law abiding citizens can be forced to sell or give up their homes for no other reason than that they could not give government what government demanded. This is an absurd and of course morally unacceptable consequence of property taxes. Thankfully, as the people of California demonstrated with Proposition 13 some three decades ago, there are remedies for this type of power abuse by spending-addicted politicians. Unfortunately, awareness of this solution still has not reached all corners of our country, West Virginia being one of them. The Charleston Daily Mail reports on the non-sensical property tax assessments in Kanawha County – assessments that could very well cost some law-abiding residents their homes:

Kanawha County commissioners fielded questions from residents upset about their increased property tax assessments during Thursday’s meeting. … One of the residents, Jo Ann McCoy, 62, of Mink Shoals, asked why the assessment on her 10-year-old home increased $17,400 to $184,200 this year. McCoy said she purchased the home for $151,000 and had been told by Realtors that she could not get that amount if she sold the structure today. She asked Duffield and the commissioners why her assessment has increased if property values are down. Duffield said the county uses a state-mandated formula that takes home construction costs averaged from 50 homes and cross references it with the amount that homes sell for in the specific area to determine the fair market value. … County assessors … have been reappraising homes based on sales from the previous year. Until about 2008, homes continued to increase in value every year. Therefore, the sales data was always a year out of date when the assessors reappraised the homes … Commission President Kent Carper … touted a property tax cap the Kanawha County Commission has attempted to pass through the Legislature for more than 10 years. The proposed bill would cap increases at 10 percent.

There are three things wrong with this type of property tax assessment. First, it bases the increase of the property value on market prices, not the taxpayer’s ability to pay the tax. Just because my house becomes 20 percent more valuable on the market does not mean that my income, from which I pay property taxes, goes up 20 percent. There is, in other words, zero correlation between the increase in the tax and my ability to pay it.

Secondly, the one-year lag in prices used for assessment means that property taxes continue to rise at the most sensitive moment of a recession: when it begins and people are hurled into uncertainty about their jobs and their personal finances. This way property taxes add insult to injury and on the margin contribute to more home sales and thereby plunging property values. More taxpayers are forced to leave the jurisdiction where the property tax is collected. This one-year lag is necessary for the property tax model that the state of West Virginia mandates, but that does not make it the right model. On the contrary, it only reinforces the point that this property tax model is flawed and does more harm than good.

Third, the model is very rigid. There is very little that can be done within it to mitigate its negative properties. The only remedy that the commissioners of Kanawha County could come up with is to cap the increase in assessments at ten percent. But even a ten-percent increase in property taxes from one year to the next is a bigger increase than the increase that most people see in their paychecks over four years (let’s keep in mind that property taxes are paid with income that has already been tarnished by federal, state and local income taxes).

The lack of ties between tax burden and ability to pay, the assessment data lag and the rigidity of the model are enough arguments to do away with this property tax model. New York has recently moved in the direction of California’s Proposition 13 model. Perhaps it is time for West Virginia to do the same?