Inflation Disruption Watch: Property Tax Assessments
by James A. Bacon
Inflation can be a national or even global phenomenon, but many of its ramifications play out locally. When house prices rise, property tax assessments and tax burdens also rise. Inflation creates tensions in the labor market as workers demand wage increases to compensate for the loss of purchasing power. Higher wages push employees into higher tax brackets. The term “misery index” – calculated by adding the unemployment rate and the inflation rate – may well make a comeback. Economic productivity suffers and, if we follow the path of the 1970s, stagflation could well ensue.
Here has Bacon’s rebellion We’ll start sharing data points on the local impact of inflation, starting with two stories: one from King George County and one from the City of Richmond.
In King George County, Carl Crump, 77, is retired and lives on a fixed income. With the prices of gasoline, groceries and other commodities on the rise, Crump was not too happy to receive a real estate appraisal that would push his tax bill up by $ 800, reports Fredericksburg’s The freelance star.
The median home value in the county has increased 25% since the last appraisal in 2018 – and 9% in the last year alone. That’s the median: some homeowners get off more easily while others are hit harder. The supervisory board has yet to set the tax rate, so the final impact on landowners might not be as severe as reassessments suggest. On the other hand, the Commission will have to face the reality of its own growing costs of doing business, from salaries and healthcare to pencils and gasoline.
Meanwhile, in Richmond, the average assessed value of a home has increased 13.7% this year. With the Property tax base increases by $ 4.2 billion, city officials estimate property tax revenues will increase by $ 45 million, reports the Richmond Times-Dispatch. It’s a big bite for city taxpayers, but the article focuses on the implications for the city’s finances through the feedback loop of what’s known as the Local Composite Index (LCI).
LCI is a formula that calculates a local government’s “ability to pay” and the state government uses it to adjust its public support to public schools. Localities with a higher capacity to pay receive less from the state. For example, the city of Richmond expects to lose $ 30 million in state aid for its schools.
Local officials are angry. They say the growing real estate wealth fails to capture the fact that one in four residents live in poverty. “It’s a misrepresentation of the city’s ability to pay; nor does it effectively capture the high levels of concentrated poverty in the city, ”said Richmond Superintendent Jason Kamras. “We know from research that it is exponentially more difficult and expensive in terms of raising children [in poverty]. “
City taxpayers must shell out an additional $ 45 million, and not a word of sympathy for them. After the adjustment of the LCI, the city of Richmond keeps a net of only 15 million dollars. Waaah. That’s what you get when you have an education funding formula that transfers the wealth from the rich communities to the poor communities.
Whether or not you share my reaction to the woes plaguing the city of Richmond, this is an example of how inflation is eating into the system, causing disruption, upheaval and conflict. There is much more to come.