Taxes

Here is an interesting map of the world’s highest marginal tax rates.

I think that there is an important thing you need to realize has been overlooked about the US tax rate- it only is looking at IRS income tax. It isn’t taking the US Social Security tax rate into account. Adding that into the mix, and the highest US marginal rate is about 49 percent.

Furthermore, property, sales, or other indirect taxes are not included. It also omits state, provincial, and municipal taxes. In total, the US total tax burden averages out to about 31 percent of total income. Still, more than half of the people who live in the US are net receivers of US tax money. It’s a critical number. When more than half of the people who vote receive more money than they pay in taxes, there is no way that you can get the public support and votes to change anything.

Most of the people in the country care more about what people have left over after taxes than they are about the taxes that they themselves are paying. When I point out that a flat ten percent income tax with no deductions or adjustments permitted would get the nation $2.3 trillion a year in income tax revenue, people still complain. Why?

This would mean that a person who makes $10,000 a year would pay $1,000 in taxes, while a person making $10 million would pay $1 million in taxes, ten times as much. This isn’t as fair as a flat rate, but it’s more realistic and practical.

Still that isn’t good enough, because when I do point that out, the counter argument that they make is “Yeah, but that leaves the poor guy with only $9 thousand, while the rich guy still has 9 million.” To these people, taxes are a way of taking money from the rich so that everyone is equally poor. In other words, communism. It’s caused by pure envy and jealousy.

I maintain that if you took all of the wealth of the nation and redistributed it to each person, giving every one a million dollars, within 10 years the people who are now poor would all be broke, and the ones who are rich would mostly be rich again. Why?

The poor would spend it because they see money as something they use to buy things. Give people with this attitude a million bucks, they will have a house full of big screen TVs, gold chains, and fancy cars.

The rich would be rich again because they see money as a vehicle to make more money. While there are people who are rich due to graft and corruption, largely those people are government officials who earn their money by peddling influence. Most of the nation’s rich, the people in the top quintile, are there because of skill, hard work, and attitude. Give them a million bucks, and they will start a business selling those baubles to the people that are soon to be poor.

All taxes are supposed to be so that a society can have the things that it needs for us to exist- fire, police, courts, and common defense. Instead, it has become a way for one group of people to steal wealth from those who have earned it.

I don’t think that we should have ANY Federal level taxes on individuals. Instead, the Federal government should charge a per capita tax to each state. Let the states figure out how they want to come up with the money. Each state can charge it to their citizens, or perhaps they can add it as a tariff to exports. You want Alaskan oil? Salmon? Crab? Alaska is charging a tariff on that good in the amount of $$ to cover Alaska’s per capital tax obligations. Perhaps Florida could charge a tourist tax for beach or theme park access, or a tax on oranges. New York would be free to have an income tax. Each state decides. You get the idea.

The Democrats want to give a $5000 tax credit to couples who spend money on products made by small businesses in the USA. I plan on buying guns, gold, ammo, and other important supplies.

I just have to source them from qualifying vendors.

As you will recall, I was appealing the tax assessor’s valuation of my old house because I felt that the house had been undervalued for tax purposes. Since that would actually increase the taxes in my new house (I explain that here) I decided to appeal the valuation. The hearing was just a few days after my mother had passed away, so I will admit that I wasn’t as prepared as I should have been.

The hearing was in front of a magistrate. One thing that I felt was unfair about this is that the magistrate was an employee of the tax assessor’s office in another county. Since all of the counties in the state use the same methods and computer software, I don’t feel that the magistrate is an unbiased individual.

Still, I thought that I presented my case pretty well. I pointed out that my house was valued at $154/sf, but every house in my neighborhood sold for $195 to $210 per square foot, even using the assessor’s office’s numbers. Even at the low end, my house was undervalued by a significant margin.

That’s when the excuses started. The assessor claimed that they were permitted by law to subtract the customary costs of sale from the fair market value and then they began pointing out that the other houses that had sold had features that my house didn’t- one had a pool, one was a corner lot, two others were on the edge of the neighborhood, etc. This, according to them, made my house less valuable.

By the end of the hearing, the magistrate and the assessor were both explaining to me that I just don’t understand real estate. Keep in mind that they were all government employees whose judgement means nothing, because they don’t invest in real estate. They merely tax those who do. I was able to show, using the assessor’s own data, that the assessor’s office is consistently 15-25% lower than actual market value. That didn’t matter, I got lectured about how TOP MEN used computers to value this property, and the methods are used all over the state.

So I thought I had lost. I resigned myself to getting screwed by the tax man.

Imagine my surprise when I got the magistrate’s decision. I didn’t get a total win, and I didn’t even get as much as I hoped for, but I did get something. The magistrate recommended that my valuation be increased from $154 per square foot to $164 per square foot. Not great, but the increase will lower my property taxes on the new house by about $400 per year. In total, the deductions from Save Our Homes portability decrease my property taxes by about $3000 a year.

Do I like paying $750 a month in property taxes? No. That’s why I fight to keep my taxes as low as I can, and this hearing cost me $25 plus a few hours of my time. Property taxes and the 6 percent sales tax are the only taxes we pay here in Florida, so it’s just something that we have to live with. At least we don’t have personal property taxes or income taxes. Still, I often wonder what it is we get for that tax rate.

Florida Democrats are proposing a law that would require HOAs to donate 15% of their dues money to charities in the community where they are located. The bill text is found here. (pdf warning)

This amounts to a 15% tax placed on the backs of all property owners. What this means is that all HOAs in Florida would have to increase their association dues. This will increase the costs of housing for everyone in the state. Even renters.

Democrats: they hate property owners. They hate America. The only groups that they like are sexual deviants, criminals, and illegal immigrants.

So how do you fight this, should it pass? The law doesn’t specifically say what organizations that the donations have to benefit. This is what it requires:

Donate or use at least 15 percent of the association’s total annual income to benefit the community in the county in which the community served by the association is located.

What constitutes a “benefit the community”? Perhaps using it to donate to a progun group, establishing firearms safety courses, or some other pro-liberty cause. I mean, increasing gun ownership benefits the community, at least in my opinion.

In 1992, Florida voters were worried about runaway property values causing drastic increases in property taxes from one year to the next. With so many people wanting to move here, property values were climbing rapidly, and this was causing property taxes to skyrocket. Amendment 10 was proposed, which is a benefit of the homestead exemption that provides homeowners protection by limiting the maximum that the assessed value of their home for tax purposes can be raised to 3%, or the CPI, whichever is lower. The Amendment to the state constitution passed, and it became the law of the land in 1995.

How does it work? Like anything that relates to taxes and the government, there is a lot of confusing math involved. Let’s say that you live in a taxing district that taxes your property at a rate of 10 mils, and you bought a starter house at #1 First Ave. for $75,000 in 1993. At the time, the state of Florida had a $25,0000 homestead exemption. You would then owe 10 mils on the $50,000 taxable value of the home, or $500 in property tax each year. Your house was valued at $80,000 in 1994, and you paid $550 in taxes for 1994.

A housing boom hits, prices go way up, and by 1995 your home is now valued at $100,000. Your tax bill would have been $750 (a 50% increase from just 2 years before), but save our homes had gone into effect, so the increase in your home’s assessed value only went from $80,000 to $82,400. That means your property tax was only increased to $574.

Eight more years go by, and you decide in 2003 that you want to sell. Your home is now worth $145,000. Of course, save our homes only has you paying taxes on the assessed value of $104,000, minus your homestead exemption, making your tax bill $790 for the year. Anyhow, you get $150,000 for the place. The tax assessor still says it’s worth $145k, and the guy who buys it will have to pay $1200 in taxes in 2004, assuming the value stays at $145k. (you already paid 2003’s taxes)

You, however, bought your second house at #2 Second Street. You were able to get this one for $240,000. Your portable SOH credit was (145,000-104,000=41,000) so even though the tax guy says this place has a market value of $220,000, you will only have to pay taxes on (220,000-41,000-25,000), making your tax bill $1,540.

Then in 2008, voters approved an amendment that increased the homestead exemption to $50,000 for the non-school portion of property taxes. This complicated things even more, but that is a different topic.

Why do these Amendments keep getting voted on? Whenever the Democrats want more voter turnout, they make sure that something of interest to Democrat voters that will drive voter turnout is on the ballot. Tax cuts in property taxes, legalizing marijuana, increasing the minimum wage, saving baby pigs from the slaughterhouse, things like that.

There is an old saying: a person who is acting as their own attorney has a fool for a client and an incompetent attorney. In this case, we are talking about real estate taxes. We are in the midst of buying a new home. There are a lot of expenses to consider with a move, and taxes are one of them, especially in Florida. Understanding how Florida computes real estate taxes is important, if you want to pay as little in taxes as possible.

This paragraph is specific to how Florida computes real estate taxes. If you aren’t interested in the mechanics of that, you can skip to the next paragraph. When you own real estate in Florida, the county property appraiser assigns your property a “market value” each year. If you live in your home, you can claim it as your homestead, and every year after the first year that you own it, the value can only increase by 3% for taxing purposes, and this amount is called your “assessed value.” The difference between the market and assessed value is called your “Save Our Homes” credit. You subtract your Save Our Homes credit from your market value to arrive at the assessed value, then your homestead exemption ($50,000) from your assessed value, and that is your “taxable value.” The taxing authority where the real estate is located then taxes you on that value, and the amount of tax you own varies by taxing district. (I know that this sounds complicated and it is, but the end result is that there are only 9 states in the US that have a lower tax burden than Florida (we are tied with Louisiana), so there is that.) The reason that I explain this is because the “Save Our Homes” credit is portable, and this is important when moving.

What’s important here is that, when you are moving, you want your old house to be valued as high as possible, and your new house to be valued as low as possible. This will minimize your property taxes going forward. Since we are preparing to move, I got our current home appraised and sent a copy of that appraisal to the county property appraiser’s office. Each August, the appraiser’s office sends every homeowner a copy of the proposed numbers, and you have until September 15 to appeal these numbers. The appraisal that we got from the county was almost $100k less than what the our private appraiser says it is worth. Since this is how our tax credits are calculated, I need to get this fixed, because allowing this to stand will increase our property taxes on the new house by about $2,200 a year for the entire time we own the place.

To do that, you need to apply to the Value Adjustment Board. It’s a sort of tax court that is run by a county magistrate. It’s a legal process, and I think that it is worth our money to hire a real estate tax attorney to handle the process. My wife wants to just do it ourselves because she says lawyers are expensive. My point to her is that we only get one chance to get this right, and screwing it up will cost us more than $22,000 over the next ten years in taxes that we otherwise wouldn’t have to pay. If it costs a grand or two now, a lawyer is well worth the cost going into the future.