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Real Estate - 120
Local Government Finance
| Question | Answer |
|---|---|
| there are variations among the states in the matter of local government finance | Wisconsin is representative in many ways |
| 87,525 local governments in the US in 2002 per the Census Bureau. | 1.counties, cities, villages, towns, school districts, vocational school districts and many special purposedistricts 2.many, but not all, have law-making power 3.many, but not all, have the power to levy and collect taxes |
| general property taxation | “General” – to distinguish it from special assessments |
| this class focus is on the taxation of real property, but the principles remain the same | for taxation of personal property |
| Not all local governments rely so much on the property tax | On average – excluding transfers from state and federal governments – a little less than half of all Wisconsin’s county, town, village and city revenues come from the general property tax. |
| “gap filling” revenues | make up the difference between budgetary demands and all other local revenues |
| In WI real property tax bills are sent out by only one jurisdiction – the city, village or town where the real estate is located | the taxing jurisdiction |
| effective tax rate for a single government (city, school district, county, etc.) | that government’s Tax Levy divided by the Equalized Assessed Value of all the property being taxed |
| “nominal” tax rate | For good or ill, assessing Jurisdictions usually describe their own tax rate, and the final, combined property tax rate, in relation to local assessed values, rather than equalized assessed values |
| nominal tax rates produce the total tax due when | multiplied by the local assessed value |
| to compute the Tax on each property | multiply the sum of the Effective Tax Rates for the tax-receiving governments times the Equalized Assessed Value of the property in question. |
| considerations when collecting the tax | 1.when must the taxes be paid 2.which jurisdiction collects deferred and delinquent taxes 3.interest and penalties 4.collection by lien enforcement |
| collection by lien enforcement – 2 ways | 1.passive – an owner’s obligation to “clear title” by contract when borrowing or selling 2.active – foreclosure by the government (or by private parties, as purchasers of the government’s rights, where this is allowed) |
| lien foreclosure | 1.in many places, the power to foreclose is held only by government & liens are not transferable2.in others, tax liens are sold to investors who own the right to collect unpaid taxes and may even be able to force the property into a foreclosure sale |
| tax deeds | tax collecting governments in Wisconsin (counties and City of Milwaukee) have the right to take property by tax deeds that wipe out all other interests in the property |
| special assessments or special taxes or charges | 1.charges to property owners in a limited area to pay for municipal improvements in that neighborhood. |
| Don’t be confused by the term “special assessment” | this is entirely different from the assessments (or valuations) for general property taxation described above. |
| collection of special assessments (including unpaid municipal utility charges) | is the same as for general property taxes – liens and interest on delinquencies |
| No matter which municipality your property is in, it will also be hit by property taxes for: | 1.local school district 2.Vocational/Technical Education District 3.county government and 4.the State of Wisconsin charges a tiny property tax that supports forestry activities |
| ad valorem tax | general property tax on the value of a person’s property holdings |
| assessment assessment | the government’s determination of property values - an important part of the tax process |
| property tax by steps Steps 1-8 1.determine whether property is taxable or exempt 2.assess taxable properties within Assessing Jurisdiction 3.Budgeting-how much money needed for government operations? | 4. subtract money that will come from other sources 5.determine the tax rate 6.compute tax on each property 7.impose the tax & create lien 8.collect the tax |
| Step 1: What should be exempt? | 1.YMCA exempt, not private health clubs 2.Wisconsin owned airline hub facilities 3.doctors offices–yes,UW Med Found. 4.private country club-yes if rented from Village that owns land 5.church–if it files tax-exempt status 6.entities must follow all rules |
| local assessor’s figures means local assessed value | local assessed values |
| taxing Jurisdictions | assessing jurisdictions |
| the government that assesses a property also | sends a bill out on behalf of the “Tax-Receiving” governments for that property |
| property tax hits in proportion to assessed value, | so you care about your assessment, AND you also care about your neighbors’ assessments |
| uniformity | 1.properties within an assessing jurisdiction are assessed correctly in relation to each other’s values 2.whether the assessments are all at 100% of fair market value, or some other figure, in relationship to fair market value. |
| blank on purpose | blank |
| straying from uniformity: 2 examples (1)property tax incentive programs sometimes create favorable assessments for certain classes of property | (2)some states give benefits to those who hold property for a long time-identical properties can have wildly different assessments depending on when they were purchased |
| examples of classes of property that get favorable assessments | 1. homestead property, agricultural land or forest land |
| to prevent straying from uniformity California’s Proposition 13 when a property changes ownership, and otherwise limits assessment growth to a fixed inflation factor adjustment of 2%. | “fair market value” only when a property changes ownership, and otherwise limits assessment growth to a fixed inflation factor adjustment of 2%. |
| beyond uniformity | a tax-receiving government may get property tax revenues from more than one municipality - this means that property owners care about how their assessor is doing in comparison with the assessors of other tax-contributing governments |
| beyond uniformity – examples (1)Madison school district receives tax revenues from the City of Madison, the Village Shorewood Hills ,Village Maple Bluff, and portions of Fitchburg, Monona, Blooming Grove, Burke, Madison and Westport | (2) Dane County gets property taxes from properties in 8 Cities, 19 Villages and 34 Towns. |
| the issue of equalization testing local assessors’ work and trying to correct for variations in order to assure some fairness from one assessing jurisdiction to another | the issue of equalization testing local assessors’ work and trying to correct for variations in order to assure some fairness from one assessing jurisdiction to another |
| If Shorewood Hills’ assessor tried to assess all of the Village’s properties at one-tenth of fair market value equalization | if done properly, would divide each local assessed value by one-tenth to determine an Equalized Assessed Value shows that equalization does not cure any underlying lack of uniformity |
| tax levy | tax levy |
Created by:
rainesv