John Otto on Proposition #2
Representative Otto posted the following comment on the blog, in response to my argument that the proposed amendment to allow homesteads to be valued only as a residence violates the principle that taxation should be equal and uniform, and I wanted readers to be aware of it. Mr. Otto writes:
This does not destroy fair and equal. It requires “residence homesteads” to be valued fairly and equally as a residence. Everyone seems to make the assumption that if “highest and best use” is used to value a homeowner’s lot value then that homeowner has numerous offers for his residence at commercial real estate values, or could easily put it on the market for that. That just isn’t so. What is happening is someone unlucky enough to be close to a commercial area can have their lot value affected by commercial land values in the area. What is being done under the “highest and best use” is creating unequal appraisals amongst homeowners and is resulting in condemnation by valuation. Prop 2 only benefits “residential homesteads”, where someone actually lives and claims his homestead. So your answer to the gentleman who tesitified before my select committee about his residential lot going from $30,000 in 2007 to $300,000 in 2008 (oh, and his home was dropped from $120,000 to $60,000 that sounds fair doesn’t it?) is sell your property for the windfall because if the appraisal district says it’s worth that under highest and best use, it MUST be so. How would you like to make his argument before the appraisal review board regarding highest and best use?
My comments:
I understand the problem here. It does seem unfair. No one wants to see a person driven out of his homestead due to higher taxes. Still, if an appraisal board makes its decision based upon current market conditions (and I am fully aware that appraisal boards are not necessarily fair and rational entities), then the owner of the property has a substantial asset that is presumably in an area of high real estate activity. That property can be sold for a considerable sum, and if the appraisal board has done its work properly — a big IF — then no injustice has been done. A lot of rural property has sold for just such reasons, to the benefit of a lot of landowners over the years. What is needed is the ability to review appraisal board decisions. Fortunately, Mr. Otto passed a bill last session providing for appeals to be heard by state hearing examiners. In general, I think it is a mistake to carve out exceptions to the principle of equal and uniform taxation, as well intentioned as this one is.
Tagged: john otto, proposition 2.
Anonymous says:
Paul….you still don’t get it. Your argument is based on your belief the appraisal system is a fair system. This is the flaw in your logic.
The legislature (and the voters of Texas approved) amendments to the constitution allowing for special valuations on real property. Does the ag valuation model come to mind? Under your logic, ag land should also be appraised at the “highest and best use” model. But we allow for a special ag valuation because the people of Texas agreed it was not responsible to tax farmers and ranchers on the “potential profit” they could make if they sold their land.
Paul…go do your homework….I would take John Otto’s advice over yours anyday of the week!
Reply »
MonkeyMan says:
So if I’m a real estate developer in Houston and I’m going through bankruptcy and claim a suite atop my high-rise commercial office tower as my homestead (this is not a made-up hypothetical), the value of the land and improvements on that tax parcel may only be appraised as to it’s value as the homestead?
That just ain’t right . . .
Reply »
John Otto Reply:
November 3rd, 2009 at 11:35 am
Nice try MonkeyMan. The commercial building would be valued as a commercial building sitting on commercial land,(excluding the square footage of the residence suite) and the residence would be valued as a residence sitting on high priced commercial land, but you could still claim your homestead exemption.
Reply »
MonkeyMan Reply:
November 3rd, 2009 at 1:50 pm
Well that’s good to hear, thanks for the reply. I still think it’s unnecessary, and voted against it, but I do appreciate your response.
Reply »
Anonymous says:
I believe in the case of the Ag exemption, if the land is eventually sold at the highest and best use, a rollback is applied to the earnings for the difference in what the property taxes would have been for the difference in value over time. I would prefer something similar to that in this case.
Reply »
ReaderX says:
Unfortunately, the person responsible for Texas Monthly’s public-face Twitter account is “nodding off already” because they clearly think this is boring issue. Most likely due to youthful inexperience.
Certainly the Twitter characterization of this important article (if it weren’t important, would Texas Monthly have published an editorial? And a response? And broadcast the link via Twitter?) is but one of many many public statements made on the Texas Monthly Twitter account which show a lack of maturity and discretion.
Look through the log http://twitter.com/TexasMonthly and you’ll see it reads like a spoilt college student. What a joke. I hope the Texas Monthly editors review their Twitter policy to find a personable voice which is considerate of the importance TM assigns its own journalism.
Having said that, I agree with Rep. Otto’s efforts to protect homeowners against unfair valuation due to commercial interest.
Mr. Burka seems to think of equal and fair taxation as some abstract universal principle.
Encroaching commercial interests currently have too much of an impact on home valuations, period. Some local governments want to use high commercial prices as justification for reaching into the pockets of homeowners, whereas I stand on the side of the people. Some commercial interests would love to see regular folks be priced out of their homes so they’re compelled to put them on the market, whereas I’m against undue pressures on the homeowner.
People matter more.
And these high commercial valuations are often ultimately derived from the artificial mechanism of zoning.
Since zoning is deemed important in American city planning, some effort must be made to protect homeowners who –through no fault of their own– find themselves under pressure to move out of a given area. In extreme cases, this very tactic has been employed to force migration of undesirable ethnicities. Even in tepid affairs, one ought side with protecting a person’s home over the interests of well-heeled corporations or the hungry belly of government tax collectors.
There is no fair and equal tax. Period.
It’s a weapon of war and the golden chalice of politicians. I’m for defending bonafide homeowners against the seemingly insurmountable pressure of non-persons.
Reply »
West U Voter says:
John Otto is an idiot. For the system to work, you must set uniform values based on highest and best use without consideration to politics. It is a zero sum game: Otto wants to politically manipulate the valuations of some downward, what he does get is that to do that you must politically manipulate the values of others upward. The intent was to take politics out of the mix. Otto wants to make the process more political than ever.
Reply »
West U Voter says:
I meant to say, “Otto wants to politically manipulate the valuations of some downward, what he does NOT get is that to do that you must politically manipulate the values of others upward.”
Reply »