Exploring the Importance of Property Tax Compliance
Unfair as the property tax—sometimes also called the ad valorem tax—may seem to many, its importance to state and local government administration far outweighs the complaints against it.
Arguments about property taxes being retrogressive and unfit for the contemporary world’s realities continue to pervade the social space, as this form of tax has been discovered to date back to 6000BC.
There are also concerns that it is a means of making people pay for the privilege of owning a home.
When homeowners sometimes rent these houses to less wealthy folks who have to also bear these tax costs in the form of exorbitant monthly rent payments, the arguments against property taxes become more plausible.
It becomes evident that this tax may well work against the principle of equity that it aims to promote.
However, the high maintenance cost of public schools, fire stations, police stations, and other public offices and amenities necessitate the continuity of property tax collection.
Over 30 percent of state and local government revenue is, according to census data, generated from property tax, which is the tax levied on landowners, homeowners, and in some states, owners of tangible properties like cars, boats, and other recreational vehicles.
While the payment of all forms of taxes may always meet with some reluctance on the part of the taxpayers, it is important to remember that systems and amenities put in place, of which one takes full advantage without any second thoughts, are made possible property tax compliance.
What determines the property tax rate?
This is after the government must have exhausted all other forms of tax revenues. And although tax figures levied may seem arbitrary, the actual determinant of tax rates is the number of public projects being undertaken and maintained by the government.
For instance, a new public health center and public school under construction by a local government will have to be funded by mostly internally generated revenue.
A second and equally important determining factor of the amount paid in taxes for properties is the said property’s market value.
This value is usually assessed by an appraiser who draws their evaluation from a combination of parameters, including the size of the property, the quality of materials used to construct the property, the year it was constructed, as well as the current price that similar properties are being sold for within the community.
Unsurprisingly, the tax rates levied on property owners in certain neighborhoods are directly proportional to the existence and quality of amenities present in those neighborhoods.
This explains the wide gaps in mortgage and rent costs between properties in cities, towns, and villages, with the differences often going as high as one thousand to two thousand dollars per annum.
Are there any risks associated with non-compliance with property tax regulations?
Non-compliance to tax regulations incurs a lien by the government, which means that the government takes part or complete ownership of the property, depending on the amount of tax owed.
Embarrassing situations like this can be avoided by making monthly savings in an escrow account towards the next tax payment.