American Homeownership Fueled by the Government?
by Tran, Harry ~ March 30th, 2009. Filed under: My Writings, Rants n Raves.The government wants all of us to own homes because of… Property taxes.
That’s right property taxes have no correlation to your shrinking income during retirement. It is based on appraised land value. By turning everyone into an owner increases the amount of revenue that the government can collect on property. Essentially no land is free and you will either avoid property taxes by being a renter or be one who will succumb to the inevitable property tax for perpetuity. And don’t think that just because you don’t earn an income anymore the government will understand, unlike income tax property tax is here to stay.
Take a hypothetical example a property valued at $400,000, there may be an annual property tax due of $4,000. A mere 1% at the moment and 10% of the income of someone who takes home $40,000 after taxes. What happens 10 years down the road or 20 or even 30 when you are ready to retire. If the myth of constantly growthing home values holds true the home may be worth $700,000 in that time. If the government continued to levy a 1% property tax than $7,000 each year may wipe out a huge chunk of retirement benefits, imagine that while income is declining your obligations towards your home are increasing. This was possible in the Bay Area, particularly in San Francisco when a home bought in 1990 for $200,000 is now valued at $550,000 even after the economy tanked.
So while we are able to get through the mortgage and the associated interest payments with due time, we are never able to avoid the perpetual property tax and worst of all the government can, at will, always decide to raise the rate of property tax to help cover their ever mounting debt.
What say ye?
