Tax Appeals Swamp U.S. Cities, Towns as Property Prices Plunge
December 8th, 2010Via: Reuters:
A fiscal flood that threatens to swamp local government budgets across the U.S. overflows from file cabinets in the office of Patty Halm, chair of the Michigan Tax Tribunal.
The backlog of cases from taxpayers seeking to lower property-tax bills of more than $100,000 shot up to 14,236 this year from an annual average of about 6,000 during the past decade. The backlog of smaller claims was at 28,558 at the end of September, eight times higher than a decade ago, according to records at the tribunal, a Lansing-based administrative court.
From Los Angeles to Atlantic City, the New Jersey gambling resort that had its credit rating lowered three levels by Moody’s Investors Service last month, property owners are filing protests to lower their taxes after real-estate values plunged. The disputes over billions in taxes come as municipalities are already cutting services such as police protection and may depress revenue further as communities try to recover from the longest recession since the 1930s. In Michigan, Governor-elect Rick Snyder has warned that hundreds of towns face financial crises.
“We’re just getting swamped,” said Halm, 54, who was appointed in 2003. “We’re constantly buying new file cabinets to hold all the cases. We even have six surplus file cabinets in the courtroom.”
The people who seem to benefit the most from appealing their property taxes are people who buy properties at a deep discount because the deflated sale price is automatic evidence of the property’s value. Meanwhile, everyone else has to argue with various review boards who will nitpick their “comparables” and appraisals to death. The various governments don’t want to admit that the real estate bubble popped; they keep pretending that prices are still high, even though nobody can sell anything, because they want the bubble-era gravy train budget to continue. Oh, and if too many people appeal successfully, they raise property taxes. A win-win situation for them, and an excellent example of the government’s use of the rope-a-dope strategy to dealing with citizens.