Housing Complex

Do We Need a Lower Property Tax Limit?

With home values rising, Ward 2 Councilmember Jack Evans introduced legislation yesterday to limit increases in property taxes. Currently, the growth in a homeowner's taxable assessment is limited to 10 percent, lowered from an earlier 25 percent limit. Evans' bill would reduce the cap to 5 percent. It would also eliminate the current 40 percent floor, which requires that people pay tax on at least 40 percent of their property, even if that means an increase of more than 10 percent.

Evans argues that very few D.C. residents see 10 percent increases in their income from year to year, so it's not fair to ask them to pay 10 percent more property tax if their home value goes up or if there's a gap between their property's assessed value and taxable value, as there often is.

But according to Ed Lazere, executive director of the D.C. Fiscal Policy Institute, Evans' legislation would solve a problem that doesn't really exist—and the benefits would go to Evans' Ward 2 constituents a lot more than most other D.C. residents.

Lazere says there are two problems with Evans' legislation, a version of which he also introduced late last year. First, D.C.'s property taxes are already the lowest in the region, due to lower rates and more release mechanisms: According to a DCFPI analysis from last year, a D.C. homeowner with a $500,000 home pays $2,718 in property taxes, versus $5,393 in Prince George's County and $4,688 in Montgomery County.

"It’s not really clear that homeowner property taxes are a problem," Lazere says. "If you're looking at any D.C. tax as too high, you probably wouldn’t put the homeowner property tax on that list."

The second problem is who benefits from Evans' legislation. "Most of the benefits of capping, going from a 10 percent to a 5 percent cap, would go to people who own the most expensive homes," Lazere says. DCFPI, which advocates for both fiscal prudence and policies that benefit low-income residents, found that homes worth over $550,000 would get 65 percent of the benefit, although they represent just 31 percent of D.C. homes.

"If you look at the benefits by ward, it’s even more skewed," Lazere says. "In Ward 7 and Ward 8, the homeownership rate is very low. Wards 2 and 3 combined would get half of the total tax savings."

Evans, not surprisingly, disagrees with Lazere's assessment.

"He’s dead wrong," Evans says. "The taxes in the District are far higher than they are in Virginia as a composite. He can probably find the one example where they’re relatively even, but as a general propposition, the taxes in the District are far higher."

Evans says the city's income, sales, and commercial property taxes are much higher than elsewhere in the region, though he acknowledges that residential property taxes are relatively on par with neighboring jurisdictions. But ultimately, taxes are taxes, regardless of where they come from, and he says residents complain to him all the time of their rising property taxes.

"Where Ed is right, although it doesn't matter, is that if you live in an expensive home, you’re going to realize a bigger dollar savings," he says, adding that "nobody living in wards 2 and 3 is having 10 percent increases in their salary either." He also notes that while residents of wards 2 and 3 might be benefiting now, it's homes in wards 5, 7, and 8 that are likely to see big increases in value—and taxes—in years to come.

If Evans had his way, he'd ban property tax increases altogether. "I’d go down to zero if I could," he says of the cap, "but I can’t get the votes for that."

I asked Evans why, if income and sales taxes are disproportionately high for the region when residential property taxes aren't, he's targeting the latter. His answer: because we can afford it.

"Frankly, the city doesn’t need the money," he says. "We don’t need to be gouging our residential homeowners when we’re spending more moeny than at any time in the history of the city. Every aspect of our government has more money today than they’ve ever had before."

And if his plan benefits wealthier D.C. residents, well, he says, they could use a little relief, too. "$250,000 in Washington, that’s a lot of money, but it doesn’t get you very far here," he says.

Add that to the list of problems I wish I had.

Photo by Darrow Montgomery

Comments

  1. #1

    In most places, property taxes usually fund schools. How does this work in DC? Would this have any adverse effect on school funding?

  2. noodlez2: electric bugaloo
    #2

    "the benefits would go to Evans' Ward 2 constituents"

    TO WHOM HE IS ELECTED TO REPRESENT SUCKAS. JACK-O IS JUST DOING HIS JOB.

  3. #3

    One never met a tax cut he didn't oppose.

    The other never met a tax giveaway he didn't support.

    Looks like a tie.

  4. #4

    Funny how DC property tax assessments barely budged down when propery values were falling, significantly in some overpriced neighborhoods. Now that values are rising again, the one-way tax ratchet clicks higher and higher.

    The endless urge for "revenue" is the 21st century crack addiction for DC politicians.

  5. #5

    For most people, thier mortgage is their biggest monthly bill.
    I know lots of folks for who tax is 20-30% of thier monthly payment.
    The longer they've been there, the higher that number tends to be.

  6. #6

    Ed Lazere never met a tax hike he didn't love, or a counterproductive welfare program he couldn't demand increased funding for. He is the poster boy for 40 years of failed welfare state policies in DC.

  7. #7

    I admire Ed for a lot of things, but don't understand how he can oppose this when- in DC- property tax burdens tend to hit the working poor and middle class the hardest. Folks who bought a long time ago (well, relatively) when things were cheaper are being forced out.
    Why doesn't Ed see this?

  8. #8

    Um, I'm assessed at 465k and paying way more in tax than what they are quoting. Huh?

    F**k this plan. Reduce income and/or sales taxes instead.

  9. #9

    It's tough being a homeowner these days. We only got $7K back in mortgage interest deduction last year, and annual home price appreciation in our zip code is a bare 18%. It's good to see at least one of the council members looking out for us land-owning residents.

  10. #10

    Seriously Murph! I did my taxes without the mortgage deduction and I owed something like 40 bucks. After I plugged in the mortgage interest, BLAM, $5,000 coming my way. That's a straight up subsidy encouraging me to do something I was going to do anyway. It's criminal that my spouse and I with our nearly $400k salary and $1 million house get this subsidy. Don't get me wrong. I'll take it. But it's preposterous, and anyone who says it shouldn't be means tested just like most other significant deductions (student loans, child tax credit, IRA, etc.) is just a greedy bastard.

    "But I figured that into my budget when we bought the house!" you say. Well, GM line workers figured in a good union wage when they bought there homes, and they got screwed. You don't have a right to a government subsidy. I'll grant that the change can't be immediate, but there's no reason it can't be phased in.

  11. #11

    @DC - Since you have such liberal guilt about the tax code's property tax deduction, feel free to fork over that $5,000 tax refund to the D.C. Treasurer so that it can pay for more of DC's failed social welfare policies.

    Otherwise, STFU.

  12. #12

    Add that to the list of problems I wish I had.

    Amen. And its not exactly stopping people from moving in.

  13. #13

    @Drez

    That is simply not true. The homestead exemption takes out a huge chunk of tax for people living in cheaper places. For someone who bought their house in U St in 2000, and it has increased in value 150%, and they now pay a mortgage of $900 and $350/month in taxes, I don't feel bad for you even 1%. Your house is worth 150% more than you paid for it.

    @Scotch

    He is right. He shouldn't be getting a deduction. Regarding your suggestion to kick in to DC Treasurer. STFU. That is such a ridiculous thing to say, it baely even deserves a response.

    You want to talk about failed policies? Lets talk about the military industrial complex, and tax cuts stimulating growth. Move along now child, the adults are having a discussion here.

  14. #14

    @Kyle-w
    For someone who bought their house in U St in 2000, and it has increased in value 150%, and they now pay a mortgage of $900 and $350/month in taxes, I don't feel bad for you even 1%. Your house is worth 150% more than you paid for it

    Having all that extra equity sounds real nice until you realize it doesn't do shit for you until you either:
    1) do a cash out refi (increase your debt and monthly payment and risk foreclosure), or
    2) sell and move

    People shouldn't be faced with the inevitability of property taxes going up 10% per year. It contributes to displacement.

  15. #15

    @kyle-w

    Clearly another poor with a history degree talking about sh-- you don't understand.

    And this is why you're poor and share a room with strangers and have to eat ramen. Go take a finance class at UDC and come back with some intelligent discourse.

  16. #16

    Jack Evans, Chairman Mendelson and the Council still refuse to go after the downtown property owners who have received (and continue to receive) property tax refunds. Billions of tax collected dollars have been returned to commercial property owners.

    These hefty tax refunds are based upon arbitrarily approved tax policies, behind-the-door meetings and no clear, definitive tax law that has been agreed upon between CFO Ghandi and this insipid City Council.

    How can Jack Evans ignore this loop-hole in the downtown-commercial property tax law? Perhaps, most of the downtown commercial properties are in Ward 2?

  17. #17

    @CalvinG - you obviously know nothing about what you are talking about. The refunds you speak of are because DC's OTR does not have sound valuation skills and policies. Very few in the OTR's assessor's office have any credentials whatsoever. The refunds are not given in back-door meetings. They are fought over in first level hearings with assessors, at the public forum of RPTAC (which is in the public record), and in litigation (where most agreements are come to during mediation, because judges hate real estate cases). It is not a loophole that you speak of, but a delineated process that is regulated and statutorily given.

  18. #18

    Good post about Lower Property Tax Limit.Very good post.

  19. #19

    Nice info about lower property tax. thanks to share it.

  20. #20

    He can probably find the one example where they’re relatively even, but as a general propposition, the taxes in the District are far higher."

  21. #21

    Property taxes are already the lowest in the region, due to lower rates and more release mechanisms.

  22. #22

    it's not fair to ask them to pay 10 percent more property tax if their home value goes up or if there's a gap between their property's assessed value and taxable value, as there often is.

  23. #23

    The second problem is who benefits from Evans legislation. Most of the benefits of capping, going from a 10 percent to a 5 percent cap would go to people who own the most expensive homes.

  24. #24

    He acknowledges that residential property taxes are relatively on par with neighboring jurisdictions.

  25. #25

    But ultimately, taxes are taxes, regardless of where they come from, and he says residents complain to him all the time of their rising property taxes.

  26. #26

    The summary of about lower property tax limit. which is really good thing for all real estate holders. thanks to share it.

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