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The fact that we help the poor and homeless with shelter, foodstamps.. etc, but at the same time we take away the (paid off) houses owned by people who live on an equally poor budget (under the poverty line) if they are unable to pay the real estate taxes seems like a contradiction to me.

About the house in question (that went up in "value" this year from $26k to $32k), the assessor said it went up because: "Average prices of the real estate properties in the area have gone up"

In my opinion, the "value" of the house is something of a hypothetical or potential 'one time' "if sold" nature. It does not mean more actual money in the pockets of the owners every year.

There are "tax relief" programs for people over 65, but not for the rest of the poor. Why?

My questions are:

  1. Why do real estate taxes go up when the assessed value goes up for external reasons (beyond the control of the owner and with no immediate benefit to the owner)?
  2. Why is there no real estate tax relief (or partial relief) for the poor (in many US states)?
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    Which real estate taxes are you talking about? The estate tax? – JJJ May 15 at 13:55
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    @JJJ In the US, "estate tax" refers to taxes levied on an estate of a person who died. "Real estate tax" refers a property tax levied yearly on property owners by municipalities. – grovkin May 15 at 14:05
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    @JJJ the Federal government doesn't... at least not land "taxes". It does rent out land for resource extraction. Property taxes are the way most municipal (city/town/etc.) governments are funded. – grovkin May 15 at 14:12
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    As many mentioned, please rephrase your question. Make your point clear than mixing up social security net issue with your question. If you want to ask about property tax question, don't simply use an ambiguous word like tax and assume everyone understand it is all about property tax. – mootmoot May 16 at 8:58
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    The premise if false. Many states do offer property tax relief for low income homeowners, for one example [Michigan]michigan.gov/som/0,4669,7-192-26847-461581--,00.html). – user4556274 May 16 at 9:53
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[NEW ANSWER FOR REPHRASED QUESTION]

1) a) OK. So let's imagine opposite situation. Let's say that there is such nice district of identical houses. Shall we use their historical transaction prices? So one guy haggled more while buying, so should pay lower tax. His neighbour overpaid because he bought in the middle of housing bubble - he should pay much higher tax. Third one inherited from his parents. Shall we use the price that they paid many years ago, it would be much lower...

[Such idea would not only be rather unfair, but also would motivate not to move, as it would cause painful tax reassessment]

b) Inflation. Prices of everything went 3% up, salaries went 3% up. Gov needs 3% more money to keep public services on the same level. Sure, prices of everything would increase, except taxes on housing are supposed to be frozen, right?

c) "beyond the control". Yes. Taxes in general are not supposed to be punishment for misbehaviour, but a way in which society collectively finances some common goals. Moreover, the whole point is to tax possibly things that are beyond control - when countries were taxing real estate based on things being under control (like number of windows) people started enthusiastically bricking up windows.

https://en.wikipedia.org/wiki/Window_tax

2) a) Retirees are highly disciplined voter group Graph showing share of population and voters by age

On the other poor are highly undisciplined voter group

Graph showing voting participation by income group

In consequences, from political perspective it makes much more sense to cater the old and ignore the poor. That's what the nation want, as shown in perfectly democratic voting. Sort of...

b) If we provide old people with some tax cut, then more people would become old... Luckily not. ;) On the other hand there is an issue with poor. Such system, often lead to perverse incentives, as person who starts working hard some crappy job is losing all benefits and preferences for the poor. When multiple handouts and preferences are being granted in not well thought and coordinated way, then there is a risk that a hard working poor person would face an effective tax rate of over 100%. (and later we would call it as outraging moral problem when such person is trying to avoid a work that would actually cost him extra money... ;))

c) Technical issues. As we all know tax system is overly simplistic, and should be done in more sophisticated way, right? :D Who is a retiree is quite straight forward. Who is poor is not. How exactly to calculate it? Shall it be checked every year? Month? Shall the person lose such status if does not try to find a new job?

[/NEW ANSWER FOR REPHRASED QUESTION]

Possible explanations:

1) Maybe they are not so poor?

Well, the thing is that we already figured out that they have a nice real estate which value went up. If we skip emotional language "having a real estate of high value" does not sounds so much as typical feature of poor people, at least not in my country. Sure, exceptions happen, however aiming at taxing property (like real estate) would tend generally to target richer segment of society, so if one want want to target those pesky rich, he should rejoice tax on real estate.

2) Real estate taxes are hard to avoid or evade.

In contrast to something as esoteric and hard to pinpoint like income, existence of a structure made of brick and mortar is a bit less controversial and easier to prove. Buildings also have this nice property that they do not escape to low tax jurisdictions.

3) Capturing land rent by gov

Usually there is an issue that taxation discourages some activity. (think in line of any carbon tax, where its exactly the point) In case of real estate, their value and implicit land rent is often result of artificial scarcity caused by gov intervention called zoning law. In consequence real estate value goes up, its not being capture by some investor but by gov.

[Hint: next time try to write a question in less emotionally loaded way]

  • The "value went up" is relative to an earlier assessed value. It does not mean the house is big, or as you put it "nice" – Alex Doe May 15 at 14:35
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    @AlexDoe Unquestionably. Do you expect local gov to be able to pay for provision of social services using contemporary market prices which are inflation adjusted, while simultaneously tax people based on some ancient value estimate? – Shadow1024 May 15 at 15:22
  • It seems OP present the point poorly. I.e. Property values may go south – mootmoot May 16 at 9:13
  • @mootmoot That's another possible interpretation, but I find it unlikely. When I read this question one more time with next clarification I started to wonder "why retirees got some tax cut and poor not". So the issue would deal with elder citizens being much more disciplined in their voting patterns. Maybe. Dunno. He asks question in unclear and emotional way to become disappointed that no-one had a clue. – Shadow1024 May 16 at 15:21
  • Well, this is politics SE ;-) . Some people just carry away by their frustration. By reading the subsequent comments , it seems he needs help to rephrase the question. – mootmoot May 16 at 16:23
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Why is there no real estate tax relief (or partial relief) for the poor (in many US states)?

  1. As a general rule, poor people don't own houses. People who own houses may not be terribly well off, but they aren't usually poor.
  2. If someone somehow manages to own a house and be poor and the house is increasing in value, then there is an obvious solution: sell the house. Then the person won't be poor and won't have to pay high property taxes.
  3. Retired people often have lower incomes than they did when they bought the house. It's not like they can go out and get a better job to support their overly expensive house.
  4. Retired people get assistance for a limited time. Someone can be poor for a lifetime. And then retired. That can last their entire adult lifetime.

Why do real estate taxes go up when the assessed value goes up for external reasons (beyond the control of the owner and with no immediate benefit to the owner)?

  1. Because if they don't go up then you get perverse incentives. For example, the taxes would go up if the house were sold but not if the house is leased for a hundred years with a buyout provision at the end.
  2. Because many people who own houses are well off and able to pay the taxes.
  3. Because it is unfair to have two households with comparable houses paying different levels of property tax purely because one bought cheaper than the other.
  4. Because well-to-do households generally see larger gentrification increases and would thus benefit disproportionately from rules preventing tax increases from external reasons.
  5. Gentrification encourages people to sell houses that are in high value areas, helping keep the prices down and prevent more gentrification.
  6. Because localities don't cut their tax rates when assessments rise. Which means that voters don't insist on their representatives cutting the tax rates. Apparently they prefer the services to lower taxes.
  7. Or localities do cut tax rates. In which case preventing assessment increases would cause the locality to lose money.
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Maybe because Missouri (which motivated the question, even though now it's not included in it anymore) is a red state? So its welfare policies are in line with that?

Just to stick to the letter M, in contrast Maryland has

The Homeowners' Tax Credit Program is a State property tax relief program that allows a property tax credit to households whose total gross income is below a standard set by law. This program provides property tax credits for homeowners of all ages depending on their incomes. In addition to the State's program, local governments can now supplement the amount subsidized by the State.​

And the details are:

Benefit: The program provides a credit equal to the amount property taxes exceed a percentage of income. For the 1st $8,000 of income, tax relief is 100%. For the next $4,000 of income, relief is taxes in excess of 4% of income; 6.5% for the next $4,000 income and 9% for all income above $16,000 up to $60,000.

Description of Eligibility Criteria: An applicant's income cannot exceed $60,000. The maximum property tax considered is on first $300,000 in property value. The maximum net worth is $200,000, which excludes the residence, IRAs, and other retirement accounts. Further, the applicant must have lived in the dwelling for at least 6 months of the year, including 1 July of the year for which the tax credit is applicable.

Such laws are generically called "circuit breakers". Only a few states don't have an age requirement for eligibility though, namely (as of 2018):

DC, Maryland, Maine, Michigan, Minnesota, Montana, New Hampshire, New Jersey, New York, Vermont, Wisconsin, West Virginia, Wyoming.

(Homework: which of these states are red and which blue?)

The number of states that do have that only with an age limit (typically 65+) isn't much longer, it's only longer by two if I haven't made any mistakes.

Arizona, Colorado, Connecticut, Iowa, Idaho, Kansas, Massachusetts, Missouri, North Dakota, New Mexico, Oklahoma, Pennsylvania, Rhode Island, South Dakota, Utah.

(Oregon and Hawaii have some "renter-only" provisions; I'm guessing this protects only against increase in rents due to property taxes increasing. Hawaii has it for all ages, Oregon only for 58+.)

Also note that many more states in the Union (35 of them) have various caps (not income dependent) on property tax increases, which also don't have an age restriction.

  • If you want something even more controversial, try California's property tax system (in case you wonder why it's on neither of those lists): latimes.com/politics/… CA voted in 2018 against even age-based protection en.wikipedia.org/wiki/… – Fizz May 25 at 2:39
  • But because of the unusual CA system, the elderly already receive a lot from the existing system latimes.com/politics/… but only if they don't move to a new house – Fizz May 25 at 2:47

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