If we want to boost government revenue, then renters should pay more taxes. With more renters paying more taxes, we can better fight for equality and help all people. The more people who can pitch into pay taxes, the stronger our economy.
Every winter and spring, millions of homeowners across America pay their property taxes. In California, homeowners have to fork over roughly 1.24% of the assessed value every year to the local government. Put it another way, in 83 years, a homeowner will have paid 100% the value of his or her home in taxes! How sick is that?
It is the American way for all citizens to pay their taxes, except for the many who don't. We know by now that the often cited “47%” are the elderly or those who make under $20,000 so that's fine. If you are one of them, just don't vote to raise taxes on the 53% who already pay 100% of all federal income taxes please! Let's all pitch in or starve the beast instead.
So why is it that homeowners, many of whom initially struggle to pay their mortgages and come up with the down payment, have to pay extra taxes while renters don't? Let's explore and discuss, shall we?
Why Renters Should Pay More Taxes: We Are All Equal
So why is it that renters don't have to pay a renters tax while homeowners have to pay property tax?
The clearest reason is because the government perceives homeowners as Lords! The word “landlord” makes it very clear that homeowners are considered the superior class.
Back in the old days, peasants had to toil in the fields to pay for shelter. They couldn't even afford regular food, let alone pay extra in taxes to help build schools and maintain roads. Then there's the term “master bedroom.” You get the idea.
Hundreds of years later, it's odd that this archaic term and concept still holds true, even though America has grown to become the wealthiest nation in the world.
For anybody to equate renter to poverty is just ludicrous. Sure, there are some studies that show that the average net worth for a homeowner is 40X greater than that of a renter ($160,000 vs. $4,000). But overall, many more Americans nowadays rent out of choice, not out of insufficient funds.
Related: Why The Housing Market Won't Crash Any Time Soon
Everybody Needs To Pay More Tax
With a typical $700,000 home in San Francisco, the homeowner is paying around $8,000 a year to the city to fund schools and maintain public infrastructure projects. That's $8,000 more than a renter pays, yet both the homeowner and the renter enjoy the same benefits. Clearly, this is unfair.
Just looking at my bill, I see $50 going to the SFUSD (I have no idea what the hell this is), and another $205 going to “teacher's support”, even though I don't have kids in public school. Supposedly, a couple thousand of my property tax is going to be used to build a bullet train from San Francisco to LA too. Sweet! I'm really going to be riding that in 2020 when it's done? No, because it's now 2021, 11 years after I initially wrote this post and the project has been scrapped! But of course, not before wasting at last a billion dollars of tax-payer's money.
Some renters argue that homeowners got it good already with the mortgage interest deduction of $750,000 (was $1,000,000). In other words, if my interest rate is 5%, I can reduce my taxable income by $37,500. Well I say $750,000 is not enough!
The figure is totally arbitrary, and should be raised by at least double to $1,500,000. It takes a lot of work to be able to save up 20% for a downpayment on a house and have 10% left over as a buffer in my 30/30/3 rule. Homeowners therefore deserve a reward for their fiscal discipline, rather than be punished with more taxation.
Equality Between Renters And Homeowners
I'm a big believer in equality, and therefore I believe renters should pay a “Renter Tax.” To calculate an equitable way to tax renters, what we do is capitalize the annual rent by a normal risk free rate of say 4%.
Say for example you pay $24,000 a year in rent. Divide $24,000 by 4% and you get $600,000. The $600,000 is the basis where you as a renter will pay 1.2% ($7,200) every year to the city, to also pitch in and support the schools and roads.
The Renter Tax proposition is a brilliant way to shore up any budget deficit the city or state may have, while creating a fair scenario for all people. Let's create an environment where everybody proudly pitches in to ensure a harmoniously great nation for all our children!
And most of all, let's change the perception that renters are lower class citizens and tax renters just as much as homeowners. Renters should pay more taxes for better equality for all!
If you are a renter, are you sufficiently frustrated yet? The goal of this post is to recreate the frustration homeowners and certain income groups feel for having to pay more taxes.
It's understandable to vote on legislation to spend more of other people's money for your own benefit. We know President Biden wants to raise the top marginal income tax rate, increase the top capital gains tax rate, and remove the stepped-up basis. This stinks for higher income earners working exhausting hours.
The mindset of always raising other people's taxes is embedded in America. However, in the long run, raising rents ends up hurting renters. Rents will simply increase to reflect increased expenditure by way of property taxes.
If you want more spending, please also agree to pay more taxes as well. It is wrong to raise taxes on one group of people without having to pay more yourself.
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Related: Property Taxes By State: We Must Learn To Embrace Ever Higher Property Taxes
Note. In the UK, it is the occupant of the building who pays the property tax, regardless if they are a renter or a homeowner. It's called the Council Tax, and it's working just fine over there.
It’s really great that you were able to save up for a 20% downpayment. I commend your fiscal discipline. As it happens, most people in expensive real estate markets get their downpayments from inherited wealth – from their parents, their grandparents or similar. Maybe not most people YOU personally know – but most people. The idea that the average earner (not a high income couple living with their parents) in a high cost of living location can save 150K to buy a house during their 20s and 30s is frankly laughable. Real estate costs in those locations have FAR, far outpaced salaries, which explains why every Boomer alive in America believes they are a real estate investing genius. As with most things, the fact that our economy and our history is insanely unfair to those who do not come from wealth does NOT MEAN that YOU didn’t work hard. You did work hard. So did a lot of other people who didn’t get a downpayment from a family member. The real question is – why is any normal person still living in the SF Bay area? California is full of beautiful, less expensive places to live. We should have a national program to help middle income people move into lower cost of living places. That will revitalize a lot of our smaller cities and towns and get housing costs into check in expensive cities. The pandemic started this process – let’s hope it continues.
Regarding the San Francisco Bay area, the main reason is due to income. You can be a 22 or 23-year-old college graduate who makes $120,000 your first year. Pay is that good, and by the time you’re 30 years old, you’re probably making over $300,000 a year. Add two of these type of people, and you can see how affording property is feasible.
See: https://www.financialsamurai.com/migrating-to-california-from-the-midwest-or-the-south-for-a-better-life/
Every landlord worth their salt includes their property taxes within the overall calculation of what to charge renters,,,renters ALREADY pay the property taxes for the place they’re renting from. Your ludicrous argument totally ignores this and is basically asking for them to pay a separate tax on top of the taxes they’re already indirectly paying while the landlord STILL profits off them. Awful.
Overall, not a high quality post compared to some of your other, better ideas.
It’s all local supply and demand for the rental market. Taxes inform rent prices. If taxes change, sometimes the renters pay for it, and sometimes the local rent market is so tight that landlords know they can’t increase the rent without risking an empty unit.
No need for a law, sheesh. You must be trolling.
Renters face an annual rent increase from their landlord. The landlord claims it’s cause their taxes increased, so the place that burden on the tenants instead by raising their rent. Taxes should not be the tenants burden. It’s cost of business for the landlord, and can be used as a tax write off (or a percentage of it anyways). This forces tenants to move every year cause of rent increases, or move in with family. A way to offset this is to due a multi-year lease which could limit rent increases, but a landlord would have to be willing to accept anything longer than a 12 month lease.
so i believe the idea that renters should pay property tax or an extra tax is silly, the more i thought about it the more i thought about how its like any other product a business is trying to sell. when buying property or owning it with the intention of leasing it out then you make a list of cost. I would assume a smart or experienced business person would account for all cost to include property tax and then charge the renter an amount to cover the cost and make a profit whatever that profite margin may be. I am not an expert this was just a train of thought i had recently.
Ah, but the biggest error you make is that you assume that I’m smart.
At least hopefully you and maybe some others will realize that forwarding to increase property taxes to pay for XYZ desires will simply lead to higher rents. There’s no free lunch and we need to be very disciplined as the society when I comes to thinking about spending other People’s Money.
When I rented it went up pretty much yearly. I’m just now getting your point about thinking someone wants free food. In many places if landlords didn’t take into account property taxes when setting rent prices they would lose money.
I am a Texan. The property taxes here are horrible. I pay $6400.00 a year (Harris co, MUD and ISD). On top of that I pay $1100.00 a year for insurance on my house and $660.00 HOA. The average rent where I live is $1200.00 for a 1100 sq feet apartment. We are 3 people (1 is a child) living in our house by the way. However the renters have access to same schools and services as us “Landlords”. Yes the renters pay rent that goes towards taxes and other expenses the landlord has no arguing that but what about families of 5 living in an apartment (3 of them children) sending their children to our schools (ISD is the highest tax which I paid $2700 this week) for the price of one? I agree with the author, they should carry their own weight around if they want to live in a nice part of town. By the way, I did research on a rental property near me, is 1 million plus sq footage apartment complex I wish I knew how many apartments has, it was assessed a $36 million value! by the property appraiser but only pays $1,200,000.00 a year in taxes (ISD, Harris co and MUD) or about 2.8%. So the renter is paying aprox. $330 a month in taxes (do the math). That is fair if is only 3 people in one apartment but more often that not there are 5 people or more living in a 2 bedroom apartment so they are not paying their fair share of taxes by a long shot.
It’s called property tax. Why should people who don’t own the property pay the tax?
You’re one of those people who thinks “fairness” means you get your way. But that’s not at all what the word means.
That’s why the OP is proposing a NEW law.
Yes it’s called Property Tax, and if that’s the Case why are so many other “fees/taxes/cost” Rolled up into it?
The Property Tax has been around in Texas since 1845. Years later, “somehow” the School Tax got rolled up into it. Frankly I don’t have a problem with the Property Tax I pay in Tx it’s about 1.02%, but when I add the ISD tax that’s 1.60%, so every yr I’m paying 2.62% of the value of my home, $15K, Which has been paid off for over 10 yrs now. Just to add to my frustration however, the PTs on my home, had it been in Va, would be $4000, In La it would be $4500. No my friend EVERYBODY needs to part take in the payment of ISD taxes in Equal measure, Everyone that has a SSN and Tax ID and/or a Green card. EVERYBODY.
I’m glad I’m not the ONLY one in TX that thinks this system of Taxing citizens here is faulty an stinks to high heaven. In FACT, just so y’all don’t think I’m just another disgruntled citizen talking outta his A** I’ll leave you with some Info that should give you some Food for thought:”In August 2014, the Travis County District Court ruled (as others before it) that the current school finance system is unconstitutional. The case has moved to the Texas Supreme Court. While the case primarily concerns the formulas that drive the distribution of state educational dollars, an unconstitutional finding from the court may prompt additional property tax reforms.” I pray to God it does.
“Another complaint concerns the property tax appraisal system and the methods by which appraisals may be challenged. A recently filed lawsuit by the city of Austin takes aim at these methods, arguing that they disproportionally benefit commercial property owners and, as a result, shift the tax burden to homeowners.
Don’t whine about property taxes while paying NO state income taxes. Its rude, its insulting. What this should teach you is that Texas’s tax base is regressive and poor people are paying far too high a share and that rich people use addresses there to avoid state taxes and don’t cover their share.
Real estate taxes are based on value of the property. If you choose to live in an expensive community, with low density in your unit then you have to pay – the fact that a 5 person family also chooses the same but has a higher density per unit just shows their frugality. My time in Tarrant county showed me that purchase prices were low, compared to the other states I’ve lived in. Look at your overall costs compared to other places and you will find they align.
“What this should teach you is that Texas’s tax base is regressive and poor people are paying far too high a share and that rich people use addresses there to avoid state taxes and don’t cover their share”
Great point! I had not thought of this. Thank you.
It is pretty distasteful to see mega-millionaires and billionaires leave cities and states that helped make them rich during difficult times. Feels disloyal and I’m very pro-loyalty.
Homeowners build up equity on the properties they own. Renters help build up equity for the property owners they rent from! Why should renters be charged an additional tax on top of that?
FS, you just sound like you’re thinly veiling animosity towards renters because of 1. a perceived (but non-existent) advantage that you can never get as a property owner, and 2. a mental over-generalization of who renters are and what they do.
To address the former, let’s dive into a really brief example. Landlord Alice has a property with 5 units, the mortgage is $3000/month, property tax of $500 a month, all other associated costs total $1500/month, and she’s aiming for 5% profit per unit per month. To break even on the $3000/month mortgage divided out over 5 tenants, each tenant needs to be charged $600/month. To break even on the “all other associated costs”, each tenant needs to be charged $300/month. At this point, we’ve got a total break-even rate of $900/month before we include property taxes. Alice does not simply add 5% to $900/month and then set the rent at that price, she would be losing money if she did that due to the cost of the property taxes. So she factors in the cost of the property taxes ($500/month) divided out over 5 tenants ($100/month). She adds this cost of property taxes into the monthly rental rate, totaling $1,000/month to break even. After including the price of the property taxes for the entire building (which is divided up among tenants – every renter pays a part of the property tax for their building/property), she then adds the 5%, for a total rent of $1050/month per renter, which totals to $5250/month, covering all of her expenses, her mortgage, her property taxes, and netting $250 profit each month.
In this aspect, property taxes are being INDIRECTLY paid for by the renters. If the renters did not pay their fair share of property taxes ($100/month) [assuming Alice still factors the taxes into the 5% for simplicity’s sake], each tenant would now be paying $950/month, and Alice starts losing money every month. No landlord in their right mind would price rentals so low that they lose money, so by the nature of the business, the property taxes are included in the costs that are passed on to the renters.
To address the second point, you have repeatedly made broad generalizations about the traits, actions, habits, mindsets, and class of renters that, put simply, aren’t accurate for the group as a whole, and are probably more byproducts of the state you chose to live in than the way those people choose to pay for their home.
California is a terrible liberal shithole with awful taxation and endless masses of morons. These morons literally believe that endless expansion of the government will eventually lead to some sort of utopia where the poor have no worries and there are no wealthy people – it’s a small slice of the pie of socialism.
I’m a Texan. I’m 22 years old. I make $160,000 a year as a cybersecurity architect, but I might switch into quant finance, which I successfully do in my free time with paper accounts as a hobby. I contribute no money to my 401(k) and choose to rent a moderately upscale apartment that, all expenses included (rent, parking, utilities, etc) costs me a mere $1,400 per month. I have a used Corvette and a used Nissan GT-R. I will probably trade the GT-R for a used Ferrari or an used Audi R8 in the next year. I live very comfortably, have a large safety net to deal with unexpected expenses, no student loans (did not go to college because I already knew more than what college could teach me by the time I was 18, and now my company is paying 100% of the tuition for me to go get my master’s degree).
I don’t rent because I’m poor, I don’t rent because I can’t afford a house, I don’t rent because I’m “bad with money”, I don’t rent because I’m part of the bottom of the barrel in society, I rent because I move for work regularly and want to spend more of my money on things that are significantly more important to my overall happiness – like high-power sports cars and investing in my future. I’m in the top 1% by personal income adjusted for my age, and as I simultaneously get several of my own businesses off the ground and move into mid-management before my mid-20’s, senior management during my mid/late-20’s, (or switch career fields into quant finance) that will likely continue for a long time. By 30, I have an active, thus-far-achieved plan to have a net worth in excess of a million dollars – mostly focusing on income growth and limiting expenses to 1. what’s important to me, 2. what’s necessary, and 3. things that will help my income growth. I’d like to (and plan to) retire by 45 to 50 on a portfolio in excess of $10m, and that’s on the conservative side.
I have never once voted for a liberal candidate, or any candidate who’s not explicitly pledged to lower taxes for that matter. But I rent. I rent because being able to use my current income on materialistic endeavors that make me happy, investments, and business development are all worth much, much more than some $600k shack in Dallas, a city I won’t be living in for more than a few years. The opportunity cost of throwing away my currently-limited income on a house that I don’t want, don’t need, won’t keep, don’t want the hassle of buying/selling/maintaining is massive, especially compared to the larger ROI I’ll see on 2 of the 3 things I put the rest of my otherwise-would-be-spent income towards.
People who vote for candidates who pledge to steal from those who succeed and destroy the country in other ways are NOT primarily designated by whether they rent or own. There are wildly intelligent, successful, fiscally conservative people who rent, and there are plenty of directionless, unhappy, liberal socialists who own homes (just go track down your state, county, and city government representatives, lol).
Please consider expanding your world-view of others outside of California. It’s a really shitty place filled with a lot of shitty people and you’re only deluding yourself if you’re using it as a baseline for what you think the rest of the country is like.
Great comment. No animosity at all towards renters. The 11X greater net worth of homeowners versus renters is a fact from the Federal Reserve. You can view it as you wish.
As an investor, I appreciate the dynamic between homebuyers and renters. Landlords need renters and vice versa. It would be foolish to think otherwise.
Currently 4 out of my 17 real estate crowdfunding deals are in Texas (San Antonio, Dallas, Houston). I’m betting on demographic shifts to Texas and other heartland states so that rents continue to increase so that investment returns continue to increase.
Add on Trump’s support of the heartland, I’m trying to allocate as much possible to heartland real estate and one day to heartland Opportunity Zones.
Once I adopted an investor mindset, it became much easier to see both sides of the equation. Let’s do this!
Related: Buy Utility, Rent Luxury: The Real Estate Investment Rule To Follow
I’m a renter in a market oversaturated with investors. No, we don’t need you. I’d rather own a home. But when 40% of properties are purchased but out of state rental companies it artificially inflates housing costs.
And you hardly sound like someone who understands both sides. Your argument is clearly that of someone who is not a renter. And thinks of renters as ATMs and little else. You have multiple posts arguing that renters should take on many of the costs and risks related to property while you take only profit.
Unfortunately, the return on rent is always negative 100% and you will continue to have a hard time buying a home with your thinking.
You want to at least get NEUTRAL property by owning your primary residence. Inflation is too hard of a beast to battle.
Your suggestion that others expand their world view will be interesting in a decade when you don’t have half of what you think you will have professionally. You’re 22 and already dissatisfied by a career you skipped college for. If you express the hubris you do here in the work place you are likely tolerated for the moment, but you’ll be dumped to the trash when the next wunderkind comes around. You won’t make middle management with that attitude towards the college educated group. – well you might but it will be at some little company that will fold up as soon as the boss has an affair with her personal trainer and her trophy husband takes her for half the business then runs it into the ground. Why would you want management anyway? Sitting around setting goals for others instead of being the tech expert who makes more? Do you really want that? Seems to me that you have yet to actually examine what a manager does all day, all week, all year – it is NOT desirable to a technically competent person.
1%ers are not an age adjusted group, you are one or you aren’t. You aren’t. You’re top 10, maybe top 5 but its temporary. Industries chew kids like you up and spit them out far more humble. One of the thinks you clearly missed from not going to college is how to form an argument and defend it without bringing your own garbage into the discussion.
I support your choice to rent as it better fits your chosen lifestyle – the sillysamurai has he head up his arse when it comes to this topic, as you rightfully point out, but you have your head up your arse if you think we care in the slightest what you drive. Your attempt at bragging just shows how ignorant you are – unless you very poorly were attempting a simple sentence of ‘different people have different priorities, personally I like cars that show how small my member is and the flexibility of moving with little effort and less notice’.
BTW, I’ve lived in both CA and TX – TX has more shitty people with lower education/knowledge. The ‘natives’ are generally morons. You sound like an ignorant child. Seriously, you sound like a kid who has yet to experience anything and has no clue of that fact at all.
50% of your income goes to taxes? Boo hoo. Keep in mind it was as high as 93% in the 1950’s and guess what- there wasn’t the insane income inequality we have now. Sure, life wasn’t fair for everyone but can you say it is now?
Do I think we should raise taxes? Probably. Like California, morons destroyed Colorado’s taxing capability in order to “decrease taxes” and it sure didn’t help most of us. You imply you shouldn’t have to pay for schools unless you have children so I guess you believe there’s no need to educate anyone but your own. Good luck finding health care, clean restaurants, interesting entertainment, advanced research or anything worth talking about. I almost never drove anywhere for years so why was I paying for roads? I dislike fighting and but I have to pay for military spending-how can that be justified?
Federally we have misguided spending priorities and the GOP tax scams make them worse. I’d be fine paying more, if it were humanely spent.
It’s too late to be awake but I need to say one thing- reality shows it’s really the Republicans that tax and spend.
The writer is a moron. SF is the most in-equitable place to live because the indigenous natives to SF keep passing laws to make immigrants to SF pay more. These laws get politicians elected but hurt the economy and create all-or-nothing situations, even for the entitled indigenous ($400 rent or Ellis Acted and $4000 rent). If you tax renters, you just add yet another idiotic law that hurts new immigrants or Ellis acted natives. You also create a bigger demand for buying that would drive housing values up another 100% within a year.
Before you tax renters to make up the shortfall, try repealing Prop 13, rent control, owner-move-in restrictions, protected tenancy, minimum low income build requirements and everything else that destroys the free market in SF.
I rent in SF at market rates despite having millions in the bank and the #1 reason I do is because the repeal of any of these could crush market value. I also prefer to invest in growing assets not propped up by “only-in-Cally” whacked out policies. I see every politician hopeful trying to add even more and more policies to this balloon too. In 20 years 50% of SF will be the protected non-working-by-choice poor paying 1/10th of “market” and the other 50% will be the quarter million a year or penta-millionaires who pay the majority of taxes, with no middle class whatsoever. If you buy in CA, you’re married to your property because of Prop 13, for the rest of your life. If you leave after 10 years you’ve given up your future benefit and lost 10 years of investing in that benefit. It messes with home values, tax base, supply and demand, mobility, etc. It’s why smarter states passed anti-Prop 13 legislation right after Prop 13 passed in CA.
Sorry you missed out on one of the biggest real estate booms in history. But I won’t call you a moron. As I just sold in 2017 to lead a simpler life and stop paying 23,000 a year in property taxes. https://www.financialsamurai.com/why-i-sold-my-rental-home/
The point of this post is to make people who vote realize there is no free lunch. If you continue to raise property taxes, rents will continue to rise. Building more housing is a no-brainer. But since the majority owner homes, a law against homeownership will never pass.
“For anybody to equate renter to poverty is just ludicrous. Sure, there are some studies that show that the average net worth for a homeowner is 40X greater than that of a renter ($160,000 vs. $4,000)”. That’s why they still don’t pay taxes. The gap is still too large.
Renter tax is absolutely reduculas. The owner should be calculating the property tax as included in the rent charge. If they are not doing that, that’s not the renter’s problem.
Your resentment should not be towards renters in San Francisco – it should be towards Prop 13. The reason you pay so much in taxes is that your neighbor who bought 10, 20, 30 years ago is paying a fraction of what you are. I currently rent in SF with my wife. The current landlords inherited the home from their parents about 20 years ago and they only pay about $1100 in property tax per year. My neighbor who bought his house last year and paid $1.1 million pays around $11,000 in taxes per year. How is that fair? This law also applies to commercial properties. Read about it here: https://www.evolve-ca.org/prop-13-facts/. I don’t quite agree with their platform because they are only trying to change prop 13 for commercial properties, but I think it should change for residential too.
And my wife and I would love to buy, but we don’t have enough for a down payment. Our rent of $4200 per month simply consumes too much of our income and it will be at least another 5 years before we can afford a down payment. (Well, not just rent – we also have student loans and ridiculous income tax). Even if we somehow managed to find a rental for $1K cheaper per month, that doesn’t help much in a city where homes cost over $1M and we need $200K for a down payment. And we have a combined income of over $250K per year! We don’t spend our money frivolously either. We are squeezed out in the middle. But we love living in San Francisco so we put up with it.
And I resent your comments that renters just vote for what they think sounds good. Do you think we are that naive to not understand that programs cost money? I certainly did not vote for any propositions that would increase government spending just because I thought they sounded good.
Furthermore, do you really think that any landlord does not pass the cost of property taxes to their tenants? I actually own rental property in Phoenix and I certainly increase rent to cover increases in property taxes.
And as a renter paying I do envy the tax breaks that you get as home owner. Because I can’t afford to buy, I don’t get the same tax breaks that you do. Because I know that I am ultimately paying the bills for my landlord — for property taxes, for their mortgage (if they have one), etc.
You seem to be arguing for a dwelling tax to replace a property tax, so that whomever resides in a home would pay the tax. I’d be down for that, if it provided me with an equivalent tax break that my landlord currently gets.
Here’s another fun fact. For my rental property in Phoenix, I paid $270K for it in 2010. I pay $2600 in property tax on it per year. Is it fair that I pay more in property tax my landlord in SF? The market rent for my rental is $1800, yet I pay $216 per month in taxes where as my landlord here pays just $91 on a rental property that pulls in $4200 per month? Granted, these are different jurisdictions, and I compare only for example. But suppose my neighbor decided to rent his house out. Is it fair that he would be paying $916 per month in property taxes?
All good points.
Check out my latest post on the subject for 2017: Why We Should All Embrace Higher Property Taxes
A residential owner who rents the property out should have to pay current value property taxes. Protecting grandma from being taxed out of her home, protecting people who have lived in an area for generations helps keep the area stable, both are good policy. Protecting small businesses makes sense to also keep taxes lower for them, small businesses are the backbone of this country. To allow someone to claim value based on original purchase when they themselves do not actually live there nor operate a business is an abuse of the intent of the bill, is it not?
I’ll echo what some others have mentioned and comment that property tax needs to be done away with entirely. There is no such thing as property ownership in the US; you merely rent it from the government for a time. The moment you stop paying your property tax (government rent), they come and take your land. Senior citizens are routinely taxed out of their homes as taxes increase and their post-retirement incomes do not. This fundamently flawed system has got to go.
You seem like you have never thought about what property taxes pay for. Where will money for municipal roads come from? Police and fire services?
Why do so many anti-tax people have only one argument against taxes: “I DON’T WANNA!!! WAAAAAAAAA!”
The flaw could be resolved through laws that don’t allow property taxes to rise more than the general rate of inflation unless the property is sold or used as a rental property. Michigan has several protections for owner occupied properties. I’m sorry of your state doesn’t care about grandma.
Residential property taxes should be done away with entirely. People need a place to live, and to tax someone solely for owning a residence should be unconstitutional. Take the revenue in the form of state income taxes, sales taxes, even gasoline taxes if you have to. Any property zoned for commercial use could still pay property taxes.
I raised rents due to property tax increases. I have to pay more for my home mortgage due to these increases. What if when i’m old, retired, house paid for, no income, social security collapses, and i have to either sell my home or take a reverse mortgage just to pay such a draconian thing as property tax?! One would have to forfeit their home if they could not pay the property taxes.
Achieving home ownership should be celebrated and rewarding in our society, not taxed at an ever increasing rate.
I am both homeowner and a renter. Isn’t there a little flaw in the argument? Each renter pays property tax, in the form of increased rent. My landlord of multi-family unit pays the property tax on the unit I am renting and passes down the cost to me in terms of higher rent.
If all renters would have to pay property tax, wouldn’t that reduce the tax burden on those landlords? Certainly govt. can not expect double taxes on the same property.
It is a major flaw in the argument. Any tax is shared by the landlord and the tenant in the form of higher prices, regardless of who it is levied on. This is part of the Economics 101 curriculum.
My goal is to encourage more renters to THINK before aimless voting to raise property taxes on homeowners who will ultimately turn around and raise taxes on renters.
There is NO FREE LUNCH. It’s much better to hold our politicians ACCOUNTABLE for their excessive spending.
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Guys, just so you all know, Sam isn’t actually advocating that tenants be handed a tax increase. He’s just making the point that one shouldn’t demand that the government institute new programs–and thus new spending–without accepting the need to pay more taxes. He’s even said in another post (the one about how you shouldn’t use a Roth IRA) that one of his arguments against it is that you are giving the government more money to waste, so he doesn’t really seem like he’d suddenly be demanding more taxes.
Personally, I’d like to see less taxes for everybody, but this would have to come with less government spending. This doesn’t necessarily mean getting rid of food stamps tomorrow, but it does mean cutting back on our mindset of “everything is the government’s responsibility”. It also means cutting back on our foreign policy; I’d rather the government spend our tax money here at home than dealing with Iran and ISIS, handing it over to Israel, destroying/rebuilding Iraq, and just generally meddling in the affairs of the Islamic world (what the hell is our fascination with the letter “I”!?).
My point is, well, that he’s just making a point. I don’t think Sam wants to see anyone’s taxes raised. But at the same time, if you are the type to demand more programs that require more government spending (whether you are a hardcore leftist that thinks that the government should hand you a living wage worth of welfare checks or are a raging neocon that is angry because we haven’t bombed any Middle Eastern countries in the last 45 minutes), then you should be willing to accept an increase of YOUR taxes, not on someone else’s. Unfortunately, most people in this country want to see government spending increase (for both good and not-so-good reasons) and have somebody else pay for it all. No bueno.
Sincerely,
ARB–Angry Retail Banker
Why do “lower taxes!” whiners never mention cutting military spending? Hmmmm….
Are you telling me, a 22 year old man who makes $12 an hour working full time, A man who makes just under $25,000 a year working full time, who has never been fired and has worked since 16, Who will have to cut down my working hours to go to school and live off of a lot less, Who forks over a third of every paycheck for a studio to live in should have to pay taxes on something I don’t own???
God you boomers are so spoiled. I am working my ass off in an economy that worse than any you lived through and you tell me I should pay your bills? Quit your bitching, If you can’t afford your taxes then you should have worked harder.
No, I’m saying to be careful voting on more government spending if you aren’t willing to pay for it because it results in higher property taxes and higher rents. That makes sense right?
Check out this post: https://www.financialsamurai.com/rich-spoiled-clueless-work-minimum-wage-job-at-least-twice/
Nah. You’re whining about paying property tax on YOUR property. WHy do so many property owners argue for a high cost of rent, because “we take on risk” and always Always ALWAYS push the cost of ALL the risk onto renters. Always.
Where is the risk to renters for renting a property? There is no down payment or mortgage to take out.
The numbers who ended up homeless after the crash in the aughts because their landlords couldn’t actually afford the property would tell you there is plenty of risk.
“Many properties that renters live in are assessed at yesterday’s or older valuations thus reducing the amount of property tax paid as a portion of rent and thus reducing the tax burden to renters, whereas most homeowners are paying today’s inflated, market rate valuations for their properties and thus are hit hard with large and rising property tax bills.”
When I got my tax bill as a property owner it did not matter if I owned the property as a primary user or as an investment property. My taxes increased because the property rightfully increased in value I then increased the rent to compensate. Homeowners who use their property as a primary residence get the tax assessment at exactly the same time land lords do and thus should change rent accordingly and might I add landlords don’t reduce the rent because taxes went down.
“Taxation with no connection to the properties being taxed is inherently unfair” first an foremost this is inherently wrong.
As I have explained before renters pay more in rent because property taxes are higher. Find me one instance that this is wrong.
When my renter asked me recently why I increased his rent I said it was because my cost of maintaining the residence has increased because of property taxes. You know what? He was more than happy to pay more.
“I note that renters in general seem to have lots of disposable income whereas most homeowners are impoverished with in disposable income.”
Please give some documentation. Last I checked a landlord would be bad a one at best for charging less than what the property cost to maintain including taxes.
By your argument we should be back to mid evil times when we had had lords “who owned land” and peasants. The peasants don’t have a voice because they don’t own land. We all know the lords were wealthy and had all of the “modern” comforts back then. The peasants were poor at best. As in they had nothing and were forever indentured to their lords. We might as well talk about your ideas and slavery. Indentured servants had no say and they lived off the land they “rented.” This is viewed as universally wrong yet this is exactly what you want to impose.
Many properties that renters live in are assessed at yesterday’s or older valuations thus reducing the amount of property tax paid as a portion of rent and thus reducing the tax burden to renters, whereas most homeowners are paying today’s inflated, market rate valuations for their properties and thus are hit hard with large and rising property tax bills.
Property taxes in California and other high cost states are outlandish and bankrupting anyway, with school bonds and special assessments constantly being added to the annual tax bill. I note that renters in general seem to have lots of disposable income whereas most homeowners are impoverished with in disposable income.
And it is true that in various studies it has been shown that renters tend to support new school bonds and other special assessments (because they don’t directly see or pay them) whereas homeowners are much less inclined to support additional taxes. Which is why historically you had to be a property owner to vote on property taxation issues (which seems much fairer); today, not at all, so people other than those will be affected by them get to vote to raise other people’s taxes (very unfair).
Taxation with no connection to the properties being taxed is inherently unfair. Lets go back to the old way of doing things where you had to own a property to be able to vote to increase taxes on it. Most elections for school bonds, special assessments, and add-ons would then fail, just like they used to.
God help us struggling California, New Jersey, New York, Florida, and Texas property taxpayers as we sit in our kitchens eating rice and beans, driving 20 year old cars, and buying nothing, ever!
You seem to miss one important thing about property taxes. If a person is renting they then pay the landlord. the landlord then pays property taxes. The renter’s property taxes are then baked into the rent they pay. Renters do in fact pay property taxes through the landlords.
I am both a renter (primary home) and a homeowner (rental property) I do pay my FAIR share of property taxes. I charge my renter more because of property taxes and my landlord asks more rent because of property taxes.
Your “goal” cracks me up. First off, find me a study where renters are demanding property owners to pay more taxes? Second, find me a study saying renters don’t expect rents to rise because of higher property taxes.
I love your site and I’ve gleaned some great advice from it but stick to the facts and don’t look down on those who you think pay “less” taxes.
Estaban–Hoorah! Exactly what I was thinking. The property the renter lives on is taxed. To tax both the owner and the renter is double-dipping. And does the author really think that cost is not factored into the rent? And the owner gets the advantage of having equity from the bottom line costs.
By the way, the management of our apartment complex clearly charges a certain amount to each renter for property tax.
Exactly, my (friendly) landlord recently raised my rent. His told me that property value went up and now he is paying higher property taxes.
The renter doesn’t always pay enough to cover the property taxes; it depends on the market. Landlords will often rent for less than enough to cover their mortgage, let alone their mortgage plus their property taxes, if that’s what the market dictates. Landlords have no guarantee that they’ll be able to cover all of their expenses… and if they can cover all of their expenses and then some, then they’ll still charge a market-related rent, not one that is directly tied to their own expenses. Either way, it doesn’t really make sense to say the renter is “paying the property tax”.
The owner pays the property tax; the rent, which is not set according to the owner’s expenses, but according to market conditions, may or may not be enough to cover the property tax but in either case is unrelated to the property tax.
(Keep in mind that a landlord always has the option to [try to] sell, or to leave the property vacant, but at the end of the day a landlord who isn’t getting rid of a property has to compare the rent he can claim to the $0 that comes from leaving it empty, NOT to how much he needs to cover all his expenses and make a profit).
100% agree. Renters seem to think landlords can just charge whatever they want and make up the tax increase by taking their tenant’s money. It’s an absurd way of thinking. The market clearly dictates how much money a landlord can take in for their property. Landlords could realize a tax increase but if the market doesn’t allow for a rent increase, the landlord foots the bill for the entire tax. There are many rental markets across the nation that are financially desirable for tenants. Where owning at current values would cost hundreds or thousands more a month than renting.
You’re missing the key point here. There is no free lunch. It is the government who is raising rent on renters. People are misguided when they vote to raise property taxes because they want XY and Z and think they will not have to pay for it.
This is not an endorsement of the common property tax scheme, but I turned this fact to my advantage by buying a home under the median value for my area. I pay half the interest and half the property tax relative to my peers who borrowed twice as much. Although I get a slightly lower income tax deduction, I don’t consider it to be a significant factor relative to the amount I save.
Also, I purposefully bought in an area that is known for good local schools. Otherwise, in the city I work, my kids would’ve faced a lottery to get into the good schools. Funny how government structure can have great influence on such important life decisions.
I once rented an apartment where I received an itemized bill . the rent was broken down into taxes paid and rent. Essentially the renter pays and the landlord collects. If you feel the renter is paying less you may raise their rent and let them decide if they want to stay or go.
You can also give your renter an itemized bill so they can see how much you are paying to Uncle Sam. Its not like the renter earns capital gains when you sell your property for a profit.
Its your prerogative to use the rent as you choose. Use the same logic that you use in stealth-wealth. The have’s don’t have to rub it in the have-nots faces. A little empathy for other humans in different life situations goes a long way. Being a landlord is messy business and requires people skills and empathy in liberal measures. if you don’t feel upto it you can keep your properties unoccupied and not have a worry :-)
[…] as possible. Renters certainly aren’t going to volunteer to pitch in if they can simply vote to raise property taxes. Too bad everything just comes around in the form of higher rents. In other words, together we must […]
Hi – Your point that all of the residents of a city should pay for its infrastructure and services is well taken. However, property tax is a tax on the value of the land and construction on it, so it would be unfair to tax anyone who does not own that property. The value of a property in San Francisco is derived not just from the construction of the home, but also from elements like the clarity of air and the quality of the bus system. If someone were to build a steel mill next door or eliminate a bus line on the street, then the property value would decline. Property taxes are meant to pay for the value derived from the surrounding amenities.
In New York city, we have had an additional income tax on city residents since 1966. For reference, the income tax accounts for about 20% of the city revenue while property tax accounts for 40%. This is necessary due to the large proportion of renters that live in the city and the massive infrastructure that must be maintained. I rent an apartment in this city, and I have no qualms about paying this tax to support my subway, schools and whatever else the city needs.