I have a question for people who know how American housing works. Are property taxes based on current price? If so, who sets current price? Also does property tax fill the coffers of local municipalities or the state?
Second, it's very unpopular to have the value overestimated or even objectively correct. The people in charge of those decisions are elected officials and property taxes are a sure way to piss off your constituents. So they tend to be lowballed.
I bought an empty lot a number of years ago, using the agent we used to close on our house. I had that agent find and contact the owner to see if I could buy it, and he volunteered to sell it at the assessed value. I told the agent 'sold', but then he talked to his friends and they clearly told him he was crazy, which is true. He asked for about 12% more and I didn't even blink.
Usually there are various discounts and deductions depending on the taxing entity. E.g. for your primary residence you deduct $100k off the value. Value growth YoY is capped at 10%. If you are over 65 the tax owed is capped until you die. X% off for disabled veterans, etc etc.
People complain about the amount they are paying, but I've never heard serious complaints the system is unfair or corrupt (though I'm sure it exists somewhere). The assessors use the statistics they know about your house, sq. ft., lot size, etc as well as neighborhood "comps" for what similar houses have sold for. Also there is a lengthy and formal protest period every year.
In Texas there is a cottage industry of lawyers that will protest your property value for you. Sign some documents and they will send letters and show up at protest proceedings and send you a bill for 30% of the tax they saved you. No money out of pocket and nothing owed if you don't save money.
> Are property taxes based on current price?
Yes, except in California due to Prop 13, where your assessed value is decided when you purchase the property (or revalued when it is significantly rebuilt) and increases by at-most 2% annually (below inflation).
From the discussion, most states that people comment on work similarly to ca.bc:
The provincial assessment authority sets a 'value for property tax purposes' that loosely tracks the actual market value. Then, the local authority (city/district/town) sets the total taxes and this is distributed pro-rata over the overall property assessed value within that authority's jurisdiction.
California seems to be an exception as near as I can tell (from a long distance and not particularly caught up in it): Prop 13 locks in the value (more or less, no idea as to if there's a COL adjustment) as of either the passing of the prop or the recent sale (hence the case that new buyers pay way more than the folks next door who bought in 1967).
The us.ca idea seems intended to solve the problem of 'house-rich/cash-poor'. The ca.bc (yes, confusing abbreviations) solution is to allow the owner of a principal residence to defer property taxes as a lien on the property, payable on sale (at a favourable interest rate).
The price is set by local government. They offer an assessment, you are given notice, and it can be appealed.
Different agencies have very different approaches.
How much property tax you pay is based less on your the rate, and more on the assessment philosophy.
Lower rates tend to correspond to more aggressive assessment, and higher rates with more lenient assessment.
The taxes go mostly to the local school district and water district. These are very specialized local governments that focus on one service.
Collection is done by the city or country, depending on … things. They get a very small cut, but not much.
Cities are funded by sales tax. Counties are funded by state revenues (I live in a “weak county” state where counties are agents of the state). State revenues are funded by income tax.
So
speciality districts = real estate tax,
municipalities = sales tax,
counties = mostly state revenue,
state = income tax,
federal government = income tax and magical debt
Everything except federal varies in state by state basis.
I think though that commercial properties got the best deal, because they can own a property for a much longer period of time.
It also gives an advantage to renting over buying, as rental properties generally have less money going to taxes than buying a new house.
I've heard from many people moving into a neighborhood, paying significantly more taxes than their neighbors, who have been there for years or decades.
Technically, it was created for people who owned homes (and other real estate) at the time the law was passed, and their heirs.
The longer you have owned a property, the more of a tax break you get at the expense of a person who bought property more recently. Basically, it created a society where long term land owners and their heirs have even more of a step up than newer or prospective land owners.
And the longer you own property in CA, the more incentive you have to support prop 13. Quite an innovative way of creating a class divide.
The supporters are explicitly non-partisan:
https://www.hjta.org/about-hjta/paccommittees/
The main issue is that while they were setting this up, they also arranged for a 66% voter threshold for renewing things like school funding.
Most districts around here are only 60-66% progressive, which means the schools are chronically underfunded (funding is 47th in the nation, despite California being one of the richest states).
They’re usually based on sales price and then also “reassessed” every couple / few years by the PVA (property value administrator) which now usually means using some sort of algorithm based on recent sales and whatever else. Then you’re given a chance to appeal the value with evidence showing why it doesn’t fit your specific situation before the tax payment is due. At least this is how it works in my area.
This is on a county level in my state.