Property Taxes and the Poor

[Boojatta]

Suppose that an apartment unit is such that:

1. It is the minimum legal size for a residential dwelling in that jurisdication or was when it was constructed.
Note: if I'm not mistaken about the legal meaning of the word "apartment", it could be in a building that contains just two apartment units.

2. All adults living there have no biological children and no adopted children.
Note that the above item (#2) didn't mention foster children, which means that we are not excluding the possibility that at least one adult living in the unit has a foster child.

3. All adults living there are earning approximately minimum wage.
Note that approximation may be appropriate given the possibility that someone may be self-employed and earning approximately minimum wage. In such a case, it could be ridiculous to expect the person's earned income to be exactly minimum wage.

For the duration of the above circumstances for the given apartment unit, should the property taxing authority in that jurisdiction refund those taxes directly to the resident who is renting such a unit?

[msongs]

1. no nt

[Boojatta]

5. Why?

[seriousstan]

7. Why should they? Do they not get the same advantage of the property tax

that every other citizen does?

[Boojatta]

12. My first impression...

1. If they are renting a unit that is the minimum legal size, then there's a good chance that they would be willing to rent a smaller sized unit. Other things being equal, larger units are more expensive. Thus, there's a good chance that part of the rental costs are imposed by the local government authority.

2. They don't have children in the schools.

3. You could ask of low-income people: don't they get government services that every other citizen does? Would you say that there should be one income tax rate for all taxpayers, regardless of income bracket?

[papau]

26. Renters -indirectly though rent pricing - pay tax and get tax breaks - there is no

there there in this idea. Pricing the level of rents is based on rate of return on invested capital - and that considers all cash flows - taxes paid and tax breaks received. And God forbid you run into an over supply or a recession because then you lose everything as you can't make the payments with an empty apartment.

The only substance to this question is should there be a property tax to begin with that towns are so heavily dependent on, and should those without children pay for schools,

On the first, I'd be happy if the town had a wealth tax, or an income tax, but unless all towns have such the town would be deserted by the richer folks in a decade.

As to paying for schools, everyone benefits from kids getting educated - even those without kids - even those with low income. It is called having a society - a common goal of a better world.

[Boojatta]

28. Regarding schools and property taxes

As to paying for schools, everyone benefits from kids getting educated - even those without kids - even those with low income. It is called having a society - a common goal of a better world.

Does anyone benefit from kids having an opportunity to demonstrate that they have already achieved a particular level of education?

Eligibility for GED testing is established by the Texas Education Code, Section 7.111, which states that a resident of the state who has not graduated from high school is eligible to take the high school equivalency test in accordance with rules promulgated by the state Board of Education.

In order to take the GED tests, an applicant must:

be 18 years of age;
be a resident of the state; and
not be enrolled in school; and
not be a high school graduate.

Source:
http://www.tea.state.tx.us/ged/info.html

[Boojatta]

31. I apologize for the delay in responding. Will you accept my apology?

Pricing the level of rents is based on rate of return on invested capital - and that considers all cash flows - taxes paid and tax breaks received.

If we are assuming that all tax breaks associated with rental housing must be received by the owner(s) of the housing, then I agree with what you wrote about tax breaks being included in the cash flow issues that affect pricing of rents. However, the purpose of this thread is to consider that some political jurisdiction (municipal, state, or federal) may wish to support a policy of providing some property tax relief directly to some tenants. Could you please explain your point?

And God forbid you run into an over supply or a recession because then you lose everything as you can't make the payments with an empty apartment.

Are you suggesting that any policy of providing some degree of property tax relief directly to some restricted category of tenants would be hazardous to investors?

What do you mean by "lose everything"? Are you suggesting that there are a large number of investors who have chosen to refrain from diversifying their investments regardless of the possible consequences? Are you suggesting that these investors are in significant net debt and that some events that are definitely not extremely improbable might prevent those investors from being able to service the debt? Also, what's the connection between such considerations and the Original Post of this thread?

On the first, I'd be happy if the town had a wealth tax, or an income tax, but unless all towns have such the town would be deserted by the richer folks in a decade.

Are you saying that, in your ideal town, only people who have neither much net wealth nor more than median income would voluntarily live there? I'm wondering what makes you think that retired people who have a fair amount of net wealth would all abandon such a town within a decade. What makes you think that every member of the town's political elite, bureaucratic elite, academic elite, judicial elite, and media elite would abandon the town within a decade?

[papau]

33. no problem with concept of renters getting some cash but it is a zero sum game, so rent increases &

net-net there is no change.

The owner rents for some rate of return based on where he has set his required rate relative to the risks he knows about. Take away a positive cash flow - the tax break - and the owner will increase the other positive flows by increasing the rent so as to get the same return, or will decrease maintenance payments so as to increase net income back to the level originally anticipated.

That is why to help improve housing for the poor targeted tax breaks for the poor are more useful, as are vouchers to subsidize the rent, and as is public housing if jobs are provided and safety assured. Since public housing rarely meets those conditions, condo apartment subsidized home ownership - which tends to be better kept because of pride of ownership - is my preferred way to go. Renters as a class include the $10,000 a month rich folks in Manhattan - and I do not see a need for renters as a class to get a new break. If we want new housing to be built, and old housing to be maintained, the investor must get his rate of return.

As to your specific questions:

Re: "the purpose of this thread is to consider that some political jurisdiction (municipal, state, or federal) may wish to support a policy of providing some property tax relief directly to some tenants." I think is answered above - it is a net-net zero change in the economics for everyone because it is not targeted - just a slight change in where the specific parts of the money flows come from and go to. I see no problem if the new policy is applied to new construction.

AS to: "you run into an over supply or a recession you might lose everything as you can't make the payments with an empty apartment." - here I am just saying the reason for the level of the required rate of return an owner will demand in setting the rent is the level of risk involved. You can't force an investor to take a lower rate of return or ignore the level of risk - the investor will just not make the investment if the rate of return is not available. Making such a change after the investment is built lowers the value of the investment and may well be a "taking" under the constitution for which gov must reimburse the owner.

So yes - any policy of providing some degree of property tax relief directly to some restricted category of tenants would be hazardous to investors if such a law was passed after the investment was made.

Is somehow diversifying one's investments a requirement under the law, and if you don't the gov should not feel guilty about making your investment worth a bit less by changing the rules after the investment is made - and we're not even talking about the Constitution prohibition against any taking without fair compensation?

If you want the rich investor to pay to help house the renter pass a tax on assets. To be blunt, the government has no right to even know about any investors net debt position in their various corporations, partnerships, sole ownership holdings, and trusts. What justifies violating the constitution with a taking via the owner that is losing value of property just because the owner has assets and can make debt payments after the new law is passed?

People act based on incentives or lack of incentives, and a wealth tax is a dis-incentive to stay where that tax exists if you have wealth. I therefore want such a tax to be worldwide - but until it is, many of the wealthy are likely to move to the state or country down the road rather than pay the tax.

As to how fast the wealthy will move out - who knows - I am just saying it is just a likely response.

[Boojatta]

34. Your reply is difficult to understand perhaps because the Original Post was confusing.

First, I should not have focused attention on the extreme case of a 100% refund of property taxes to a renter.

Second, I don't believe that I anywhere suggested that the refund to the renter would be done at the cost of eliminating the tax deduction for the property owner.

Does that clarify things enough for you to fully understand what I'm talking about, or should I myself use the above points to produce a revised version of the Original Post?

[IsisDawn]

2. Renters don't pay property taxes....

the owner of the building or apartment owes property taxes. I have never heard of a lease which required a renter to pay the property taxes and don't think that is legal. If this really happened they should contact a lawyer.

[deadmessengers]

3. Of course they do

It's just that renters pay their property taxes indirectly, factored by their landlord into their monthly rent. But make no mistake about it - renters do pay property taxes.

[IsisDawn]

8. Of course

you are correct but that has nothing to do with the tenants paying or receiving payment from the government based on those property taxes. That is a business decision a landlord considers when he decides the amount of rent to charge.

If I own a house, plus have a job and decide to take out another mortgage on a 2 unit apartment building, make renovations, find tenants I decide based on all of those factors what to charge for rent. When I go to pay taxes the tenants are irrelevant to the property taxes.

[Boojatta]

4. Doesn't the owner recover the property taxes by means of the rental

fees charged to renters?

[havocmom]

6. Of course! And they get to write the taxes off as part of business expense

while not many states allow renters to claim credit for that part of the property taxes they paid indirectly. Too often, it is another tax on the working poor.

I am FOR property taxes, but think renters should be allowed a tax credit. Landlords do not pay the taxes out of pocket out of great civic responsibility. They do figure taxes in when basing rent rates and the do get to take it as a business expense.

[havocmom]

9. Welcome to DU. Hope you learn much here.

Landlords DO give consideration for taxes they have to pay when they determine rental rates.

Renters do pay, they just do in indirectly - and in too many states, they don't get any credit consideration for their share of the landlord's payment when they file their own taxes. It is rather shabby and regressive.

[seriousstan]

10. As a landlord, I don't see anyone stepping in to help when their are no tenants

or when the tenants tear the house up so bad that it takes 6 months to fix it. Being able to claim the property tax on my units is the same as deducting the tile floor.

[IsisDawn]

11. I agree wholeheartedly

Let's not demonize landlords for providing rental property. The renter doesn't own anything. That means they don't pay property taxes, that means they don't pay for any of the local schools or services that the property taxes are being used to fund. Why would they get a check at the end of the year for that?????

[Cleita]

13. The renter does pay property taxes because the landlord tacks

the costs of operating the building on to the rent and that includes property taxes. As a renter myself I can't count the number of times my rent got raised because the landlord actually told me his property taxes went up so he has to raise the rent.

So renters do pay their share of schools and the other things property taxes pay.

[seriousstan]

14. So renters pay their fair share of prop taxes. Why should they get any back?

Why shouldn't home owners get it back also?

P.S. Anyone who thinks a landlord is making a killing is MORE than welcome to go ahead and give it a try. Just remember, you probably have ALL your property, home included, riding on the gamble that you can make it work. Good luck.

[Cleita]

15. In a perfect world the money could be refunded to the landlord,

who would lower the rent accordingly to his tenants since his expenses have gone down with the property tax refund. However, in my years of renting (and I'm sixty seven years old)no one has ever lowered my rent when their expenses went down because of some windfall the property owner received.

So how would you do it to be fair?

[seriousstan]

16. Pay the taxes and use the services they provide. Taxes are there for a reason.

Why should anyone get their prop taxes refunded. It is a bullshit premise to start with.

[Cleita]

19. I agree, so why is it being brought up?

Has it happened? Like I said I never got a refund on my rent even when I paid a full month and moved after two weeks. There is a renters credit on our state taxes which is $60 a year. Yeah, that'll break the bank. However, to state that renters shouldn't receive services like schools because they don't pay the property taxes directly is a bit disingenuous. Actually, in my county there is renters tax and room tax on hotel room rentals, besides normal property taxes, so everyone is pretty much paying taxes up the ying yang.

[Boojatta]

27. I could be wrong, but there seem to be various subtopics.

Pay the taxes and use the services they provide.

Do you think it is preferable for people to use such services as unemployment insurance, food stamps, etc. than for them to use a refund of the property taxes associated with an apartment unit? Doesn't it cost money to employ bureaucrats and provide government offices to administer the various services for low-income people?

Taxes are there for a reason.

Is one reason for taxes to send building inspectors to ensure that all new apartment units are at least a certain size determined by influential political lobbyists?

Why should anyone get their prop taxes refunded.

Why should anyone pay income taxes at a lower rate than the highest income tax rate?

[IsisDawn]

18. Everything you buy has taxes added onto the final cost...

If you buy a computer you are not merely paying the manufacturer for the cost of building the computer you are paying for importing the various parts, taxes, freight, port fees, fuel, the trucker's salary who delivered it. All of these things are factored into the final cost of EVERYTHING. You don't get a refund check at the end of the year for purchasing things.

A landlord is operating a business and a tenant is a consumer. You don't get anything back...it doesn't even make sense.

[Cleita]

21. Yes, and those taxes are supposed to pay for certain services

that are supposed to benefit EVERYONE. Of course today, it seems that tax money is definitely siphoned off for special interests and corporate welfare so very few of us actually benefit from it and people like you seem to think that this is the way it should be. The conservatives want you to believe this.

[IsisDawn]

24. People like me????

Well this thread isn't about whether or not I agree with what tax money is used for, but I can assure you I disagree with just about everything our tax money is used to fund and corporate kickbacks. Property taxes are usually used to fund local services so they are pretty necessary...

This thread is about renters and whether or not they deserve a check from the government based on property taxes someone else paid and the answer is no for various reasons. A renter is just a consumer and a landlord can charge whatever he wants and you as a consumer have the right to take your business elsewhere.

[Cleita]

25. I don't know what refund you are referring to but in my state,

there is a renter's credit of $60 a year, which is deducted from taxes owed. There is no check paid. For those, like myself whose income is so low that I don't pay taxes, there is no credit and no refund. So it's not like all these renters are getting a check.

[Boojatta]

30. "A renter is just a consumer"

Does that mean that any suggestion that a renter might be anything in addition to a renter is a mistaken suggestion? What kind of suggestion do you have in mind? What is it that a renter is not, but that someone might imagine a renter to be?

If we don't assume that a given renter is actually living in the rented premises, then can we be certain that the renter is a consumer? Isn't it possible that the renter is a "middleman" who is renting the premises from the owner and renting the premises to a consumer?

If we assume that the renter is actually living in the rented premises, then the renter is not just a consumer, but also a resident. Being a resident can have consequences regarding access to particular schools and libraries, the right to vote in a particular district, etc.

[dropkickpa]

35. I rent and I pay a school tax that is

double to my city income tax. Saying that renters don't pay towards schools is incorrect. My w-2's have a handy dandy little section on them that says PGH SCH right next to the PGH taxes.

[zalinda]

17. The answer is no.

The tenants are not taking on any of the responsibility that the building owner has taken on. They are not responsible for any repairs that need to be done (unless it is in the agreement), they are not responsible for the look of the outside of the building. The only thing the tenant is responsible for is the rent, every month. As any landlord would tell you, owning a building is not the money machine that it's cracked up to be on those late night real estate shows (You too can become a millionaire with real estate). Unless you are really, really lucky, the building owner is going to get a tenant that causes more damage than they've paid in rent. Or tenant who move in, don't pay the rent and won't move out.

Some tenants feel that since it isn't theirs they can do anything they want to or in it. This is one of the reasons that cities push for home ownership. They know that a neighborhood will stay viable if most of the houses are owner occupied.

zalinda

[Cleita]

20. I guess I must have had the wrong landlords all along. I have

always had to pay for my own repairs and paint if I painted. I just had to replace a screen that broke off recently.

[IsisDawn]

22. Learn your tenant rights

Unless you signed a lease that says otherwise the landlord is responsible for maintaining the property. If the renter damages the property then the renter is responsible. i.e. if you broke the screen you must pay to replace it if the screen was old and rotten and fell off then the landlord must replace it. You should speak with an attorney if you feel you are being taken advantage of, there are lots of great tenant/landlord sites online for each state you should check them out and learn your rights and maybe just sit down with your landlord.

[Cleita]

23. My landlord takes care of the outside and things like the plumbing and the tenants take

care of our own spaces. It's always been that way everywhere I have rented.

[shrike]

29. As the daughter of a landlord and the friend of one

I'd say you have been taken advantage of.

Painting is one thing, because sometimes the tenant wants specific colors: in that case, he/she is asked to do it on their own.

However, repairs: I lived in one unit where the toilet broke down, should I have been asked to pay for that? Of course not.

As IsisDawn said, if you yourself are not responsible for said repair, such as a broken screen, you should not be paying for it.

[Boojatta]

32. "Some tenants feel that since it isn't theirs they can do anything they want to or in it."

Which tenants? What is the connection between that comment and the Original Post of this thread? There might be a significant connection, but I quite frankly don't know what the connection is.

[Nikia]

36. In Wisconsin, you can claim rent on your taxes

And get a refund.