- Joined
- Apr 14, 2006
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Based on some of the comments I have read, some apparently believe property taxes are just some random amount your local government charges you. Maybe it is that way in some places, but not where I live. The bottom line is that my property taxes are my pro-rata share of paying for the town's schools and other government services. The cost of those services rises overall every year, near the rate of inflation. That's just the reality of life everywhere - things cost a little more every year.
In my town, your taxes are the product of the assessed value (in CT, this is 70% of the likely market value) of your house times the mill rate. By state law, there is a reassessment of all the property in town every 5 years. And the sum total of the assessed value of all the property in town is known as the Grand List. The mill rate is how many $1 tax per $1000 assessed value (in the financial world, we call them basis points).
Every year, the Mayor, Board of Finance and Board of Alderman approve a town budget. At the end of that process, they take the total amount of the budget and divide it by the amount of the Grand List to get the mill rate. So, for example, if the town budgets to spend $100 million this year and the value of the Grand List is $2.5 billion, then the mill rate will be 100/2500 = 4/100 = 40/1000 = 40 mills. If my house is assessed at $400,000, then my property tax will be (400000/1000)x40 = $16,000. So, my share of the Grand List is 0.016% (400k/2.5 billion) and I am paying 0.016% of the cost of running the town.
Absent any reassessment, and given normal inflation, next year's town budget will probably be $103 million. So the mill rate goes up to 41.2 and my taxes increase to $16,480. Still the same pro-rata share of the cost of the town. Unless I make an addition/change to my property, my assessed value remains the same for 5 years and the mill rate gradually rises with inflation, until a reassessment year.
In a re-assessment year, they look at all the property in town. Going back to year one above, if every property in town doubled in value in the past 5 years, so that the Grand List is now $5 billion, and the budget is $100 million, then the mill rate is now 20 = 2% = ($100 million/$5000 million). My house is now assessed at $800,000 and my taxes are .... still $16,000 (800 x 20). And assuming normal inflation of 3%, they will be $16,480 next year.
However, all property does not appreciate at the same rate. Houses in more desirable areas along the water, like mine, generally increase in value more than the average across the town. So, in the above example, while the Grand List may have gone up by 100% on average, the value of my house may have gone up 110%. So my assessment may now be $880,000 and my taxes would be $17,600 (880 x 20). Assuming inflation of 3%,they'll be $18,128 next year.
In my view, assuming that your property taxes never should change ignores reality. At the very least, the cost of running your town will likely increase every year. If it doesn't, that probably means they're cutting services. And if you have been wise in your choice of property, it will probably increase in value more than some other parts of your town. You should be happy about that, because now you have a more valuable asset.
In my town, your taxes are the product of the assessed value (in CT, this is 70% of the likely market value) of your house times the mill rate. By state law, there is a reassessment of all the property in town every 5 years. And the sum total of the assessed value of all the property in town is known as the Grand List. The mill rate is how many $1 tax per $1000 assessed value (in the financial world, we call them basis points).
Every year, the Mayor, Board of Finance and Board of Alderman approve a town budget. At the end of that process, they take the total amount of the budget and divide it by the amount of the Grand List to get the mill rate. So, for example, if the town budgets to spend $100 million this year and the value of the Grand List is $2.5 billion, then the mill rate will be 100/2500 = 4/100 = 40/1000 = 40 mills. If my house is assessed at $400,000, then my property tax will be (400000/1000)x40 = $16,000. So, my share of the Grand List is 0.016% (400k/2.5 billion) and I am paying 0.016% of the cost of running the town.
Absent any reassessment, and given normal inflation, next year's town budget will probably be $103 million. So the mill rate goes up to 41.2 and my taxes increase to $16,480. Still the same pro-rata share of the cost of the town. Unless I make an addition/change to my property, my assessed value remains the same for 5 years and the mill rate gradually rises with inflation, until a reassessment year.
In a re-assessment year, they look at all the property in town. Going back to year one above, if every property in town doubled in value in the past 5 years, so that the Grand List is now $5 billion, and the budget is $100 million, then the mill rate is now 20 = 2% = ($100 million/$5000 million). My house is now assessed at $800,000 and my taxes are .... still $16,000 (800 x 20). And assuming normal inflation of 3%, they will be $16,480 next year.
However, all property does not appreciate at the same rate. Houses in more desirable areas along the water, like mine, generally increase in value more than the average across the town. So, in the above example, while the Grand List may have gone up by 100% on average, the value of my house may have gone up 110%. So my assessment may now be $880,000 and my taxes would be $17,600 (880 x 20). Assuming inflation of 3%,they'll be $18,128 next year.
In my view, assuming that your property taxes never should change ignores reality. At the very least, the cost of running your town will likely increase every year. If it doesn't, that probably means they're cutting services. And if you have been wise in your choice of property, it will probably increase in value more than some other parts of your town. You should be happy about that, because now you have a more valuable asset.
