Building the Hogan

I’m taking another departure from the process of housebuilding to throw out an idea that came to me the other night.  While lying in bed pondering various things on my “To Do” list my thoughts wandered into the area of property taxes.

Property taxes in Taos are reasonable compared to other places I’ve lived.  In places like Austin, TX and Seattle, WA, where there are no state income taxes the difference can be quite astonishing.  On a half-million dollar house your tax bill will set you back about ten grand per year.  To some this may seem low and to others it will seem exorbitant. 

In any case, property taxes are a fact of life and for most of us rising property taxes has also become a given.  Despite these increases, the housing slump has put pressure on state and local governments to either cut services or raise taxes further, adding more risk to an already staggered market.  Just in the last few months we’ve seen that cuts are negatively impacting schools and services.

With that in mind I considered the small annual sum that I have to pay for my 20 acres and how there might be something I could do to help out the state and local economy.

Here’s my idea.  I’d be willing to pay 5 years of property taxes right now, upfront, at the same rate I’m currently paying.

This may sound like a dumb idea at first, I mean who pays their taxes before they have to, right?

My reasoning is this: I’m willing to give my taxing authority a five year, interest free loan - now when they need the income.  In return for that loan, I get a guaranteed tax bill for the next five years.

I get: protection from tax increases. 

The government gets: protection from declining property values. 

It’s a win/win situation.

With my taxes, and hopefully the taxes of thousands of like-minded property owners the state and local governments get a pile of money in the form of interest free loans which they would otherwise have to borrow on the open market.

The city, county and state could do whatever they needed with the money from simply avoiding economic catastrophe to minimizing layoffs and reduction in services to banking the money for the future or bankrolling infrastructure projects.

In addition, this new, immediate money would alleviate the need for federal intervention into the state and local budgets across the country.  Instead, the US Government could allow the property tax payers the option of writing off the entire 5 year tax bill on their current years Federal taxes or deducting it in various combinations for the next five years.

This reduction of federal taxes for the sake of bolstering state and local economies would amount to a bailout without the stigma or strings of direct federal intervention.

Additionally, this may stimulate housing sales.  If home-builders with lots paid-forward their property tax bills at the assessment value of the lots, they could sell houses to prospective buyers as being property-tax-free for the first five years and enable home buyers to afford otherwise unaffordable houses.

Local governments don’t really lose in this case because some of these lots may sit unsold for years and stemming the downward trend in house prices will help overall revenue collection anyway.

Of course not everyone can afford to pay 5 years of property taxes and it won’t be practical for a lot of homeowners, but a significant enough number might be enough to have an impact.  Even if homeowners could only pay forward an extra year, it would still act as a significant stimulus.

Am I crazy or is this something that just might work?

I’m posting this and at the same time sending off a letter to my Representatives to seek their reaction.  Maybe it will be dismissed as impractical or unworkable, but who knows?