Thursday, 18 November 2010 by David H. LeVan
There is a lot of talk these days about limiting property tax increases and thereby limiting local government spending. Of course with less spending, the concern becomes “will services be reduced?” or better “how much will services be reduced?” It could be worse. What if property taxes were collected and no services were provided? Would that be fair?
Well, apparently in India it is……at least from the perspective of the Municipal Commissioner of Delhi (MCD). According to “The Hindu”, the second largest English newspaper in India, a delegation of 360 representatives from villages in rural areas of Delhi met with the MCD to demand that property taxes be abolished in their villages because no services are being provided. (Having visited several rural villages in India, I can see their point).
The delegation leader, BJP national general secretary (BJP is the second largest political party in India), Vijay Goel, says “when MCD is not spending a single rupee, then it has no right to recover tax from there.’’ His basic thinking is that until the government is willing to build roads, provide drinking water, electricity and schools they shouldn’t levy a property tax. That sounds fair. (He also thought it was strange that owners of houses constructed after 2008 were being asked to pay property taxes from 2004… but that’s another issue).
Where does the “fair” line get drawn when it comes to property taxes vs. services? It’s all a matter of perspective. I guess if you’re in a rural village in India, no amount of property tax will get you a glass of water.
Topic: A Tax to Grind, Property Tax Valuation
Thursday, 11 November 2010 by David H. LeVan
I know what you are thinking…… what is a trackmobile and how would you NOT value it for personal property taxes? Good questions! A trackmobile is a railcar mover, used to maneuver railcars around at a manufacturing facility. To answer the second question, let me tell you a story.
Several years ago we were asked to review why personal property taxes had increased so significantly at a milling operation in Missouri. The only event that had happened from one year to the next was that the facility had been purchased by another company. Same location… same process… same production… same equipment. So why the huge increase?
In reviewing the fixed assets we stumbled upon a trackmobile with an original cost of $500,000. This seemed like a lot of money so we decided to dig a little deeper. Upon further investigation we found that the trackmobile had been purchased 5 years earlier for $120,000. So why the change in cost on the books? When the new owners purchased the assets they revalued them and set up new fixed asset records with the revalued costs. And overnight the$120,000 trackmobile became a $500,000 trackmobile (I’d like to see my assets appreciate like that!).
The new owners reported the $500,000 trackmobile for personal property taxes (along with all the other revalued assets). With the significant increase in reported costs came a significant increase in their personal property tax bill. Problem discovered! And you know the real irony? The $120,000 trackmobile which had become a $500,000 trackmobile had been recently scrapped and was in reality only a $7,000 trackmobile.