In this case even a simple sanity check, like 'automatically flag homes with 10x the median average value for an extra manual review', would have caught the problem.
The house has been around since 1978 (and presumably annually taxed). Flagging houses that have 3000x in value would have caught this.. but even 1.5x seems reasonable.
Surely the most likely ways for a house price to jump is a corporate relocation (land newly within a city/town), subdivision, or further building on the same land.. all three of those would have associated records to justify a jump
The lack of a property tax allows for property to be used as an asset rather than used productively. The lack of a property tax in China has already wreaked led to this kind of behavior there en masse, with lots of empty apartments even in hot markets being used as basically gold bars hidden under a bed.
Ironically, this is why I support a property tax but not a sales tax.
Sales taxes are regressive and inhibit economic activity. Property taxes target accumulated wealth and incentivize the most efficient use of real property.
If one ignores the orthodox propagandizing from economists. You end up with the unremarkable idea that the value of ordinary property is based mostly on the amount of public goods and services tied to it. Which are paid for and maintained by the state. Stands to reason that state should then impose a property tax to pay for all that.
The connection between sales taxes and public goods and services is a lot more tenuous.
One example of a clear connection between a sales tax and public goods and services is a gas tax. It doesn't work perfectly, especially given advances in vehicle efficiency and electric vehicles, but it used to pretty reliably charge people for road maintenance based on their usage. It was also a regressive tax, because poorer people spend more of their income on purchases like gas.
"Orthodox propagandizing from economics" has come up with some things that you might not immediately think of when reasoning from first principles.
You support property taxes because a miscalculation can cause people to pay more and is hard to detect?
[Replying to dead comment]
Actually, yes. Property taxes are paid for by the people best able to afford the tax.
And with property taxes, its easier to catch errors and errors are individualized, meaning that the error is easier to correct once found. After all, this one was caught, and corrected, quite easily.
Further to note: it was inappropriate for the related jurisdictions to use the erroneous property tax numbers as the basis for their budgets without first vetting the numbers. A jump in the property tax base that large should have triggered an automatic audit.
You have to ask what you really want. Haven't you ever lived in a place where the tax base has rotted away? How do you force people to buy a property that was seized for back taxes? The poorest areas end up with the highest tax rates, and no money.
I like the idea (and it's not new) of taxing the unimproved value of the land (because taxing it can't decrease the amount) and not taxing the improvements (because it's to everyone's benefit to improve property and you don't want to discourage that). If I was made dictator of San Francisco, that's what I'd try.
The art of transferring control of property without a “sale” is already well known and widely practiced, rendering transfer taxes useless in every jurisdiction in America.
This actually doesn't accomplish the thing you're hoping it would!
Here in Texas, there is a sales tax of 6.25% when you sell a car. They found that people were doing stuff like saying they sold their car to their neighbor for $100 so that the neighbor would have to pay 6.25% of $100 instead of 6.25% of $2500. And maybe the neighbor agrees to some untraceable off-the-record compensation like painting your house for you. There's an incentive to create this kind of deal because neither party loses money to taxes, benefiting both.
So realizing they were losing out on revenue, the state changed the law and created something called Standard Presumptive Value. Some method exists to look at comparable cars to estimate the value of a car (based on model, mileage, etc.). Now you pay 6.25% on the actual sale price or the SPV, whichever is higher.
Sometimes the car is in worse than average condition (not running, wrecked, etc.), and the SPV is too high, and yes, there's a procedure for that involving a professional appraisal.
not just a typo, but a mis-valuation. If no money is exchanged, the value of the property is indeterminate.
And i also don't like taxing wealth - after all, that wealth was already taxed when you used your existing money to purchase it. If the land is making an income, then by all means tax such an income. If you sell the land, and make a gain, then tax the gains (commonly refered to as capital gains). But to tax existing wealth just because you have it is ass backwards.
Wealth requires maintenance. Actual property taxes may be based on the idea of property being accessible to tax more than anything else, but in principle, all your property requires the apparatus of the state to preserve, so some percentage fee is appropriate.
That's separate from income taxes, because that can be justified by the principle that being part of civilization provides a multiplier.
"That error — which the Wasatch County assessor explained possibly occurred when a staff member may have dropped their phone on their keyboard — has resulted in a countywide overvaluation of more than $6 million and revenue shortfalls in five different Wasatch County taxing entities"
That is an oddly specific explanation for the error, I guess the phone dropping incident must have been an especially memorable incident that year.
Today I learned that a random clerk can make a typo that is only picked up months later and has significant costs impacts on the area. I wonder what would happen if the clerk made the mistake in the other direction many times over.
There are lots of obscure events that can do this. A few years ago a New York school district lost a few million dollars of aid because of a lottery winner tipping some state aid threshold.
And apparently tons of entities throughout the county just went on with budget increases to the tune of 4.4 million from one year to the next and no one anywhere asked any questions... it seems almost unbelievable that everyone just didn’t notice or noticed without questioning any of the numbers. It might have been caused by a single error but the effects and shortfalls where widespread and significant.
Years ago I sold a property I owned for about $150,000. Then one day, probably about two years later, I got a letter from the IRS. It was a notice that I owed hundreds of thousands of dollars in back taxes, and that I had 30 days before they would begin to take money out of my bank accounts (a bank levy).
The problem was that when the title company recorded the sale, the person entering the data added an extra zero to the sale price, and the IRS thought I had sold it for $1.5 million! Luckily the IRS was very easy to deal with and gave me a few months to resolve the issue, and the title company was able to fix the records.
A friend of mine once received a letter from the IRS demanding several thousand dollars in unpaid taxes on interest earned from a bank account of some type.
He told them that if they provided him with the account info that earned that much interest that it owed thousands of dollars in taxes, he would happily pay including penalties.
Gosh. Imagine if SSN included a checksum, and were not just issued sequentially. Instead we get a reminder that all this is really random, and if your soul had been born 50 milliseconds earlier you too could have been rich enough to owe thousands in taxes on a single account.
36 comments
[ 3.4 ms ] story [ 90.3 ms ] threadSurely the most likely ways for a house price to jump is a corporate relocation (land newly within a city/town), subdivision, or further building on the same land.. all three of those would have associated records to justify a jump
Sales taxes are regressive and inhibit economic activity. Property taxes target accumulated wealth and incentivize the most efficient use of real property.
The connection between sales taxes and public goods and services is a lot more tenuous.
"Orthodox propagandizing from economics" has come up with some things that you might not immediately think of when reasoning from first principles.
[Replying to dead comment]
Actually, yes. Property taxes are paid for by the people best able to afford the tax.
And with property taxes, its easier to catch errors and errors are individualized, meaning that the error is easier to correct once found. After all, this one was caught, and corrected, quite easily.
Further to note: it was inappropriate for the related jurisdictions to use the erroneous property tax numbers as the basis for their budgets without first vetting the numbers. A jump in the property tax base that large should have triggered an automatic audit.
I like the idea (and it's not new) of taxing the unimproved value of the land (because taxing it can't decrease the amount) and not taxing the improvements (because it's to everyone's benefit to improve property and you don't want to discourage that). If I was made dictator of San Francisco, that's what I'd try.
Here in Texas, there is a sales tax of 6.25% when you sell a car. They found that people were doing stuff like saying they sold their car to their neighbor for $100 so that the neighbor would have to pay 6.25% of $100 instead of 6.25% of $2500. And maybe the neighbor agrees to some untraceable off-the-record compensation like painting your house for you. There's an incentive to create this kind of deal because neither party loses money to taxes, benefiting both.
So realizing they were losing out on revenue, the state changed the law and created something called Standard Presumptive Value. Some method exists to look at comparable cars to estimate the value of a car (based on model, mileage, etc.). Now you pay 6.25% on the actual sale price or the SPV, whichever is higher.
Sometimes the car is in worse than average condition (not running, wrecked, etc.), and the SPV is too high, and yes, there's a procedure for that involving a professional appraisal.
You're against property taxes because a clerk might make a typo somewhere? That's an oddly specific phobia.
not just a typo, but a mis-valuation. If no money is exchanged, the value of the property is indeterminate.
And i also don't like taxing wealth - after all, that wealth was already taxed when you used your existing money to purchase it. If the land is making an income, then by all means tax such an income. If you sell the land, and make a gain, then tax the gains (commonly refered to as capital gains). But to tax existing wealth just because you have it is ass backwards.
That's separate from income taxes, because that can be justified by the principle that being part of civilization provides a multiplier.
That is an oddly specific explanation for the error, I guess the phone dropping incident must have been an especially memorable incident that year.
My cat loves to sit on my nice warm laptop keyboard and type things in. I am always having to revert her code changes.
In case anyone ever wonders, this is why I use rebase!
https://www.syracuse.com/news/2017/07/one_mans_huge_lottery_...
The problem was that when the title company recorded the sale, the person entering the data added an extra zero to the sale price, and the IRS thought I had sold it for $1.5 million! Luckily the IRS was very easy to deal with and gave me a few months to resolve the issue, and the title company was able to fix the records.
He told them that if they provided him with the account info that earned that much interest that it owed thousands of dollars in taxes, he would happily pay including penalties.
Turns out it was an off by one error in a SSN