Appraisal Artifice: The Legalized-theft Property-tax Racket

“A man’s home is his castle.” Or, that’s how it’s supposed to be, anyway. Is it really the case, though, when government can breach the castle walls with property-appraisal increases anytime it pleases?

Whose castle is it when you’re essentially paying rent to the government?

Whose is it when, if you can’t cough up that rent, your property will be stolen by the state?

Commentator Olivia Murray has her answer. She’s currently being fleeced by her local government, she says, with an arbitrary and capricious property-appraisal increase. It’s an experience millions of Americans have every year, too. It’s sometimes, even, what inspired the American Revolution: taxation without representation.

That is, if the local property assessor is appointed, this unelected official can institute a de facto tax increase. (This isn’t the norm nationwide, but is more common in the Northeast. In New York, for example, approximately 95 percent of property assessors are appointed. Any guesses as to why?)

Legalized Theft?

Murray explains her woes, and it’s a true “Go fight city hall” situation. She received a card via mail informing her of a property tax increase. The reason: Her home’s appraised value is now $346,000. Murray called the municipality and was told they could easily lower her appraisal. She determined, however, that this would save her only $15 yearly.

Now, Murray points out that hers is a modest, 2,100 square foot home with an unfinished section. She also states that there are about 12 homes on her block. One is larger and more impressive than hers, but the owners had to drop the selling price to $240,000 months ago. It still isn’t moving, though. Another house remains unoccupied while the owners wait for improved market conditions. A third is a foreclosure — auction price $180,000.

So Murray requested an appeal with the relevant town board. She was then notified of her appointment for the appeal — in the mail, a day before she was to appear. (So any postal delay would’ve meant missing her opportunity. Bug or feature?)

So Murray appeared and asked for a $250,000 appraisal, knowing that was probably too much to hope for. The board told her she made a good case, however, and that she’d get an official update in the mail. She did, too. The new appraisal?

It was $346,000 — the original, inflated figure.

Commenting on this, Murray wrote Monday:

That’s total fraud because they are fully aware of the specifics. (They cannot claim plausible deniability on this one.)

If a bank sought to inflate a home’s value artificially for profit, that would be fraud.

If I were applying for a loan and my appraiser drastically inflated the value beyond all reason and evidence to obtain a higher loan amount on my behalf, that would be fraud.

But it’s okay when the government does it?

In fact, artificially inflating property value is precisely what New York Attorney General Letitia James charged President Donald Trump with in 2022. He should’ve just said he identified as a county property assessor.

(Late economist Walter E. Williams once made such a quip when complaining about government money-supply inflation. If he were a counterfeiter in court, he said, he’d tell the judge he was just engaging in “monetary policy.”)

Un-American?

Many complain that this government “Do as I say, not as I do” property standard is wholly un-American. Just consider the common experience writer John L. Smith related on Tuesday:

How many people who worked hard to buy a home wanted to live in it always, but after retirement could not keep up with rising tax assessments despite senior discounts?

So they have to sell to downsize, but they get socked with paying taxes on the capital gains, which were not really a real rise in value, but just the relentless drop in their dollars’ purchasing power.

Here’s another issue, too. Normally you pay capital-gains taxes on the increased value of an asset, once, as determined by the market. And even this only happens when you sell. Property tax increases based on higher appraisals, however, are akin to taxing unrealized capital gains — over and over, every year.

And the government arbitrarily decrees when your asset has gained value!

(The kicker is that you pay the taxes even when your home doesn’t gain value.)

So property tax is a bit like owning Macy’s stock, currently $24.85, and the government saying, “Actually, it’s worth $40 now. We’re going to tax you on its total value, too, including our increase — every year for as long as you own it.

Returning to Smith, he adds (perhaps stating the obvious):

The John Locke Foundation and The Frontier Institute allege that local governments use mass reassessments as a “strategic financial tool” to claim more revenue than is justified by economic reality. Americans for Tax Reform argues that rising home values (due to inflation) provide local governments a bounty of new tax revenue to expand budgets without having to get votes on politically unpopular tax rate hikes.

The 1970s California Tax Revolt, led by Howard Jarvis, highlighted the position that “inflation should not be a reward for government,” and California’s Proposition 13 was passed by the voters in 1978.

Speaking of revolts, “tenants” launched one in upstate New York between 1839 and 1845; it was called the Anti-Rent War. Sparking it was outrage against the lingering patroon landowner system established by the Dutch. The point in mentioning this?

Our property-tax system smacks of this Old World Manorialism — only, Big Brother is now Lord of the Manor. Another similarity:

Woe betide the peasant who can’t pay his rent.