Taxation has always been the bane of our existence. It is never popular in any form, though we may acknowledge that it is the lubricant without which governmental mechanisms cannot function and that it is one of life’s “necessary evils.”
Constitutions which authorize the levying of taxes always attempt to require them to be equitable and uniform (though you may have more success in joining the Monte Pythons in pursuit of the Holy Grail!). At local levels of government that which is both ubiquitous and universally reviled is the real estate property tax; it is almost guaranteed to be inequitable and non-uniform.
Assuming it takes a given amount of total revenue to run any governmental entity, it should infuriate those who pay their fair share when others do not, for one reason or another; it only adds to the burden the rest must pay. The variable conditions that affect assessments virtually assure that the real estate property tax will not be uniformly assessed and that some taxpayers will pay more than their fair share.
In Montgomery County (PA) alone there are hundreds of thousands of separate real estate tracts, and trying to determine what the actual value of each tract is for taxing purposes at any given moment is daunting, vexatious, and truly impossible, principally because values are constantly in flux. Appraisers who determine the property values which become the assessments for tax purposes must have special skills, and each tract requires substantial research before it can be fairly evaluated. To do the entire County can take years (as it has), and over that period any number of conditions can cause fluctuation, so that a tract’s value established at the beginning of the process might be substantially altered by the time the process is completed years later. (Note that although real estate taxes are imposed by townships, cities, boroughs, school districts, and counties, property assessmentsare made by counties. The tax due is determined by multiplying the assessed value by the millage imposed by a municipality.)
Not only can general economic conditions have a dramatic effect on values over a relatively short period, but changing circumstances might have an even greater effect. After a farm of 100 acres is appraised, it might be rezoned for dense condominium development and may suddenly be worth ten times its assessed value. Or the same tract in a bucolic neighborhood might suddenly be in the path of a new highway interchange. Or it might be across the street from a massive new shopping development which elevates all property values in the area. So, not only must the appraisers slog through this enormous list of properties, one-by-one, but they must constantly look back to adjust their valuation fairly.
Then there are the appraisers. This is as much an art as it is a science; opinions among them can vary, and objective guidelines can only have limited effectiveness. Further, if the project is to appraise hundreds of thousands of tracts at a given “moment,” many appraisers must be engaged to do the work, and the potential for discrepancies grows as their numbers increase.
In spite of all the problems, assume that one day the county-wide assessments are finally completed (at an enormous cost, we should observe). Assume also that on that date, you live in a home that has been assessed at $100,000 by the county and that the assessments are intended to be at full market value; the home on the adjoining lot which is substantially identical to yours (and is also assessed at $100,000) is then sold for $200,000. What are the assessors to do, leave the neighbor’s $100,000 assessment in place when the market value is clearly double that, or increase the assessment to $200,00 to reflect the sale? And what of your assessment? If the neighbor’s home’s assessment is increased to $200,000, should yours be increased accordingly since the actual market value has been established by the sale? And what of all of the other properties in the neighborhood?
Then there is the question of fairness. Is it fair to impose the same tax on a retired couple with a very low income and no children as that on the next door family with a substantial income and four children in the public schools just because their homes carry the same assessment?
All of these difficulties have not deterred municipalities. They always have (and probably always will) employ this tax. The best that we can hope for is that elected officials will be forced to minimize the vast inequities spawned by this flawed system by constant pressure from the electorate.
A recent decision (Clifton v. Allegheny County) by the Allegheny Court of Common Pleas may create some new standards for determining assessments. In a county-wide reassessment which apparently took nearly three years to complete, the County chose 2002 as the base year for determining all properties’ fair market value. Taxpayers challenged the county-wide reassessment, comparing the 2005 values of two municipalities in the County. In the three-year period, values had appreciated by 35% in one municipality while in the other they had declined by 18%. Based at least in part on that illustration the Court struck down the reassessment.
The decision seems to be well-grounded with such a manifest disparity; but, you might ask, if it took the County the three years between 2002 and 2005 to complete a county-wide reassessment (not an unreasonable period for a county as complex as Allegheny), how else could it have been made equitable? A solution certainly is not readily apparent, but the decision is before the Supreme Court, and we can hardly wait to see what its sagacity will produce. The facts clearly illustrate the inherent difficulties in levying a tax based on real estate values.