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Mark's Market Blog

12-24-10: Property Taxes

By Mark Lawrence

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Merry Christmas!

Ok, I'm in a completely foreign culture. On a walk, I was passed by a young woman driving a scooter down a busy city street. She was on-coming traffic, and passed close enough to me that my shirt ruffled as she passed. She was using only her right hand to drive; with her left arm, she was holding a infant. Which infant she was nursing while she was driving.

On 12-22 the S&P set another new high for the last two years. The tea leaves say we're overdue for a pull back - investor optimism is extremely high, volatility is low, put/call ratios indicate the market is all amateurs now. But no pull back. So far. Bernanke's money seems to be holding this thing up. Or pixie dust. Or Egg Nog.

S&P 500 July 12 2010 to December 24 2010

China carried out at least 1,718 executions in 2008, three times as many as the rest of the world, according to Amnesty International. Some analysts put the yearly figure closer to 6,000. Many executions are done on the road using "death vans." Authorities say the vehicles and their lethal injections are a civilized alternative to the firing squad, ending the life of the condemned more quickly, clinically and safely. The switch from gunshots to injections is a sign that China "promotes human rights now," says Kang Zhongwen, who designed the Jinguan Automobile death van in which "Devil" Zhang took his final ride.

Newark has seen a recent crime spike, coinciding with cuts made to its police force, thanks to the ugly state of the city's finances. The police union had the choice to avoid layoffs in exchange for a pay cut, but the senior members who control the union wouldn't bite, much to the anger of all officers hired since 2006 who got laid off. Not only do public sector unions anger taxpayers who see a very difficult bargaining hand, they also screw over younger members.

Even with home prices off by 30% since the housing bubble popped in 2006, property taxes have gone up, rising over 10% since 2008. To counteract sharp declines in property values, municipalities are raising their property tax rates.In southern Washington, the rate jumped from $10.06 to $11.60 per $1,000 of assessed value--a leap of over 15% in one year. Though Washington state has limits on property tax increases, local government's property tax rates do not rise or fall with assessed value--they're set by budget requirements. So falling prices do not translate into lower property taxes.

In Oregon, a voter-mandated statute limits increases in assessed value to 3% a year. As a result, assessed values are still lagging market prices. That means property taxes can increase 3% a year even as home prices slip. So property taxes won't fall until market values fall below assessed value, and that would require further massive declines in home prices. In northern New Jersey, property taxes rose 80% over the past decade, far outstripping the consumer price index (31% rise) and household incomes (up 24%).

In 2000, property taxes totaled $247 billion and sales taxes came in at $223 billion - roughly equal. In 2010 property taxes will total $476 billion compared to total sales tax revenues of $286 billion.

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