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Townie
| | Posted on Sunday, January 28, 2001 - 11:15 am: |     |
A friend of mine was visiting yesterday and told us his house is assessed, for tax purposes, at about 60 percent of the market rate. Also, when houses are bought they are re-assessed on the spot to reflect the actual selling price (again, still only around 60 percent). People are more comfortable with that. So long as we fund schools out of property taxes it won't matter how we tinker, the taxes will still be onerous. But so long as we have property taxes for any reason, assessing for tax purposes at below market rates probably creates less tension.
Also, we spent some time with our friend discussing home equity loans. This is really something to bear in mind for those with a lot of equity in their homes who are facing huge tax jumps: make the Maplewood windfall work for you! Even though your income hasn't increased, the value of your house has. This may especially work for seniors. It's true their kids may inherit less by not benefiting from the real estate bubble, but that seems a secondary concern. |
Bobk
| | Posted on Sunday, January 28, 2001 - 12:33 pm: | |
Townie, what you are really talking about is a reverse mortgage. The lender pays the borrower a set amount for a set number of years and then has equity in the home at the time of sale or of the owners death. I don't know a lot about this subject. Just that this type of loan exists.
JUst borrowing money on a home equity line probably isn't going to help. A lender is looking at the borrowers ability to pay. If someone is as financially strapped as is being assumed in this series of posts, I doubt if they would qualify. |
Ffof
| | Posted on Sunday, January 28, 2001 - 12:45 pm: | |
Less tension -great!. California public schools - not great! |
Townie
| | Posted on Sunday, January 28, 2001 - 1:39 pm: | |
Thanks Bobk. I don't know much about home equity loans, and nothing about reverse mortgages. I would have thought it possible to get a "second mortgage" and merely refinance your home so that you stretch out the payments, not so that you'd be paying more monthly. Just the same monthly amount for a longer period. But I'll stick to the liberal arts and let other consult with their professional financial advisers.
Ffof: I think the problem in California is not the assessment rate, but the fact that governments don't tax enough to pay public services. They don't raise the mil rate high enough. (Maplewood's was more than 10 last year -- right? -- to pay for everything based on the old below-market-value assessments. Now it will go down to less than 3 to pay for the same things. If we need more money for schools, we'll raise the mil rate, not the assessments.) By the way, I think the notorious California Prop 13 came about through circumstances similar to Maplewood's: people who bought homes to live in them for the long term experienced skyrocketing rises in the value of the land under their feet and they got tired of getting taxed for the rise. |
Curmudgeon
| | Posted on Sunday, January 28, 2001 - 1:51 pm: | |
Townie - below-market assessments would do absolutely nada. All else being equal, it would just make the tax rates higher; actual tax burden would be exactly the same as for at-market assessments. |
Ffof
| | Posted on Sunday, January 28, 2001 - 2:03 pm: | |
So, as i think I asked on another thread about taxes, what is the best way to fund our public schools? Is there anywhere in the U.S. that does not use property taxes AND has good schools? Is the answer in private financing? I just read in the NYT about a company in Buffalo who financed a new highschool in the city of Buffalo. The school has been energized and a sense of pride has been instilled in the students. (Bright new facility, all kids get a laptop, and more) I suppose a perceived problem with this would be that future schools may be called, as an example, "The Coca-Cola High School". I personally think it would create competition among all schools, publically or privately financed, and that would be a good thing for public education. |
Townie
| | Posted on Sunday, January 28, 2001 - 2:23 pm: | |
Curmudgeon: I understand under current law below-market-assessments are "nada." Part of the reason I put the subject line as "California Dreaming." And in reality, it makes no difference. It only seems to be more psychologically or politically acceptable for some reason. Assessment rates tied to current market value have everybody arguing every wiggle in the market.
Ffof: I, too, am ignorant of alternatives that work although I thought that Michigan's governor had recently shifted the burden to the state income tax.
Can't comment on the Buffalo idea, except to point out that it's hard to imagine a business large enough in Maplewood able to afford to adopt any or all of our schools. |
Ffof
| | Posted on Sunday, January 28, 2001 - 2:44 pm: | |
Perhaps we look beyond Maplewood and think in terms of Essex County? Any Columbia grads out there running large corporations looking to make a name in education? Can the BOE apply for grants? (Do they already?) All I know is that there are the seeds of private money getting into public education. The wave of the future? Beats me. It just seems that wiht so many corporations donating obscene amounts of money to both parties of our government, that once we have major campaign finance reform (we won't hold our breath!) and in the name of EDUCATION(!), maybe this money could reach public schools in a more direct way as opposed to begging for handouts from our state governments because our property taxes just don't cut it! (I think that was officially a run-on sentence!) |
Janet
| | Posted on Sunday, January 28, 2001 - 5:07 pm: | |
I'm a fairly recent transplant from Michigan, so here's what I remember happened there 3 or 4 years ago. Up until that point operating expenses for schools were indeed paid from property taxes, putting the poorer, rural districts at a great disadvantage. What I recall prompted the reform was the early closing one year of at least one very poor rural district that ran out of cash to operate by spring of the school year.
The reform (Proposal A) called for the increase of the sales tax from 4% to 6%, with the revenue generated by that 2% going to the schools for operating expenses. The income tax rate actually went down from 4.6% to 4.4% (I don't recall if this was related to Proposal A, but I'm pretty sure it came in the same year). Everyone's property taxes went waaaaay down, which of course was a delight.
The downside of this is that schools are having a terrible time getting millages passed for capital improvements and technology upgrades. The buildings are aging and cramped, as they are all over the country. But some people, being paranoid as they are about the government and taxes, refuse to see the difference between operating and capital needs, and claim that "they" are trying to take their tax break from them. It took our small town 3 tries before we finally passed a bare-bones millage by the slimmest of margins for much needed elementary school expansions and technology upgrades.
Of course, these millages might still have been difficult to obtain without the Proposal A reform, but anti-tax groups just love throwing out propaganda about the Proposal A tax break being taken away. |
Townie
| | Posted on Sunday, January 28, 2001 - 5:22 pm: | |
Thanks Janet for the update. That's really interesting to a public policy geek like myself.
I guess in New Jersey we'd face a special political problem (in addition to the anti-tax maniacs): The sales tax is kept low to attract shoppers from New York City (and to keep us shopping here).
Ffof: You overlook the reason those corporations donate those obscene amounts of money to the political parties. It's not to improve society. And all this talk about education from politicians is just that -- talk. Talk they think we like to hear and will make us not notice what they are really doing (the dirty work of the corporations!) |
Sac
| | Posted on Sunday, January 28, 2001 - 9:23 pm: | |
Although I wasn't living in New Jersey at the time, I am of the impression that the original justification for the state income tax (or at least a fair portion of it) was to fund education. So what happened there? Did the education portion get lost in the tax cuts of the last several years? I haven't checked the figures to be sure, but it seems like our property taxes went up more than our income taxes came down in that period. |
Curmudgeon
| | Posted on Monday, January 29, 2001 - 8:58 am: | |
Well, yes, it makes some sense that property taxes went up more than income tax went down. First off, economies of scale apply; administrative overhead at the state level is lower than the equivalent in each municipality. Secondly, income tax spreads the burden evenly over the entire state, while the property tax burden weighs more heavily on residents of areas with few commercial ratables (like M-SO).
While the Michigan plan as described by Janet solves some problems, it does not (as she points out) solve others, such as funding for capital improvements. Another problem, quite a major one in my opinion, is that it uses a sales tax to raise funds. Sales taxes are about the most regressive taxes there are. They are much more onerous for people with lower incomes, since the percentage of income used to purchase goods and services is far higher than for people with larger incomes. The income tax is the most appropriate place to generate revenue for education; it's too bad that the order of the political day is Bread and Circuses instead of bread and butter. |
Melidere
| | Posted on Monday, January 29, 2001 - 11:27 am: | |
a reverse mortgage would not be based on the borrower's ability to pay..it would be based on the equity in the home and the borrower's age.
I think you have to be at least 62 to qualify. Instead of you paying the bank...the bank pays you for the life of the mortgage or until you die...whichever comes first.
It is designed for precisely the purpose we are discussing here...allowing seniors to stay in their homes and tap the equity in their later years.
Many seniors resist it because the equity in their home is often seen as both a 'nest egg' not to be touched and as the most significant bequest to their children. |
Townie
| | Posted on Monday, January 29, 2001 - 11:29 am: | |
Curmudgeon,
You're certainly right about the sales tax being even more regressive than the property tax -- and the property tax is already regressive to begin with. And yes, I too think proposals to begin funding equity in schooling throughout the NJ with an increased income tax is nowhere on the political horizon. I think Dems are pushing to get more progessivity in the property tax rebates. |
Townie
| | Posted on Monday, January 29, 2001 - 11:33 am: | |
Melidere,
Thanks for the info on reverse mortgages. I was wondering if the children of some Maplewood seniors might look at paying their parents taxes as one of the better savings investments they could make, presuming they will eventually inherit the home and sell it. |
Lisat
| | Posted on Monday, January 29, 2001 - 4:31 pm: | |
I was under the assumption that seniors also wanted to keep their homes to sell later and pay for better nursing care facilities, if necessary. Doesn't it work that way? |
Nakaille
| | Posted on Monday, January 29, 2001 - 6:00 pm: | |
Unfortunately, nursing home care is often a very sudden need, ie. following a major stroke, etc. And usually homes don't sell that fast, except during bubble periods in Maplewood in certain neighborhoods when the moon is full.  Nursing home costs eat up cash incredibly fast and some folks end up having to go on Medicaid to get a n.h. bed. Or, they run out of their own money and get transferred to a M'caid bed within that facility if they are lucky. (The unlucky ones get transferred to a different n.h. - basically wherever a bed is available.) If that happens, Medicaid takes the house after a couple of months to recoup some of the cost unless the home was transferred to another party (usually an adult child) at least 3YEARS prior to entry into the nursing home. Plan for this with your parents or children if you can, folks. A tough discussion, but useful in the long run, if you can do it. A surviving spouse may live in the home indefinitely, I believe, but once that person is out of that home for whatever reason, the house reverts to Medicaid.
So, a reverse mortgage makes a lot of sense either to be able to continue to pay taxes, etc. or to buy better quality nursing home care. It gives you control over your assets and pays a fixed amount of money (which you determine) to you on a monthly basis. The kids (adult children) really can survive without inheriting their parents' homes. It's a nice gift if you've got it to give but not worth being miserable in your waning years to achieve, I think.
Bacata |
Papa
| | Posted on Monday, January 29, 2001 - 11:34 pm: | |
I do not think we should be changing our lifestyles and the way we live to afford our taxes .This is crazy, an extra 3 or 4 hundred dollors a month is crazy for what we are getting for our money. avg. govt.and avg. schools and an avg. town with top of the list taxes......... |
Townie
| | Posted on Tuesday, January 30, 2001 - 7:48 am: | |
Papa,
The extra 3 or 4 hundred dollars is because of the rise in the value of a home relative to other homes in the area. It isn't an increase in revenues for the town. Some homes in Maplewood became worth a whole lot more than others in the last 19 years. Had they all risen at the same rate, everybody's taxes would have stayed the same. |
Ucnthndlthtruth
| | Posted on Saturday, February 3, 2001 - 4:51 pm: | |
Asking life long or long time elderly Maplewood residents to take out a reverse mortgage to finance their tax increase is just plain wrong . |
Nakaille
| | Posted on Saturday, February 3, 2001 - 11:49 pm: | |
A reverse mortgage is neither immoral nor criminal, U. It is simply a way of getting back out of a house what you have put into it if you need the cash. It's a tool. It is a way to address the concept of "house poor." Why is that so "wrong." It is what I would recommend to my 88 year old mother if the need should arise. I don't need to inherit her home. She does not owe it to me. I would like her to be able to stay in it as long as she is comfortable. What, exactly, do you find so objectionable?
Bacata |
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