Self Assessment

Here is another tax idea. Real estate taxes are based on a “fair market value” assigned by a person who is an alleged expert in assessment. As a result, the fair market values are completely unrelated to the actual market value and completely unrelated to the “recently sold in your neighborhood” value. As a result, I (and you) pay much more (or much less) real estate tax than is proper. I have little faith in the government determining what is “fair”.

The new idea is that the owner of the property sets the value, not some government functionary or contractor. The basis of the idea is that the owner is the one best qualified to estimate the “real market price” of a particular property. The owner of the property would set a “public offering price”, file a report with the taxing authority (city or county) and that would be the basis for all real estate taxes.

Wait! I hear you cry. Joe down the street would say his house was only worth $10,000 and his taxes would be a pittance. Ah I say, that is why you need to understand that it is a Public Offering Price. When the value is declared, you are saying “If you pay me this price, I will sell it to you”. There is a TV show that sort of does this. With the self-assessment idea, everybody does it. Beg or borrow $10,000 and buy Joe’s quarter-million dollar mansion. He can’t refuse if you’ve met his price. Re-sell it and pocket the $240,000 (minus the transfer tax), move up, or rent it out to Joe who still needs a place to live.

“But I don’t want to move” – Build in enough “profit”, “excess”, “value added”, whatever to discourage people who do not want your house but see it as a good investment. Sorry but you will have to pay taxes on this additional value. But should you not? To you it is real value. Besides, everyone else will be doing the same thing (recognizing the real value) so the rates will be lower. The county will still collect the same amount of taxes, it is just that the distribution will be owner determined, not arbitrary.

“Businesses will not pay their fair share” – Most businesses are expensive to move. They are also good at determining costs. They will use a sharp pencil to make sure that that “location, location, location” is not bought out from under them.

Did I mention that part. Public Offering Price means just that. If you get a valid offer to buy, you must sell at that price. Well maybe not. If you decide that you have previously made a mistake in valuation, you can declare a higher value now. When you file the higher value, just pay the taxes on the difference for this year and the last 3 years. Simple.

Eminent Domain? No problem. The price is set. The you and the government agreed on the correct price when the government accepted the taxes. They cannot pay you less.

“The market won’t pay my price and I need to sell.” No problem, sell at any price you like. The selling price becomes the default value until another POP is declared. Sorry, no refunds on taxes. Buyer, make sure you do not get caught with a market clearing price. Declare the margin that made you see it as a good deal, file, and pay that tax promptly.

Real Estate Agents and Assessors out of work? Hardly. The Agents still can advise on proper pricing, facilitate sales and all the things they do. Assessors can still work but they will have to be a bit more accurate that they are today. No more “drive by” assessments. And banks are not going to be wanting to write a mortgage on an incorrectly valued property.

So talk up self assessment when your County Council Election comes up. You may have to wake up your state legislature as well. They will all tell you dozens of reasons why it can’t be done. Now they have control. With self assessment, you begin to take it back.

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