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| Sep 7 2007, 7:09 PM EDT (current) | unionbulletin | 1039 words added |
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In one way or another, everyone pays them.
By Terry McConn of the Union-BulletinGovernmental activities are funded through various means.
Taxpayers foot the bills by coughing up money for sales, gas, real estate excise and other taxes, in addition to assessments for water and sewer improvements.
Local entities have received less revenue in recent years, however, largely because of reductions in vehicle registration fees and caps on tax levy increases. Therefore, cities and county governments have had to make do with less, occasionally lowering service levels or deferring desired maintenance.
Some general, ongoing expenses and voter-approved levies that augment operational funds also are paid by property owners. The amount an owner pays is a fair share of what each governmental entity is authorized to receive.
The fair share is calculated from the total assessed value of land and buildings in the county, and is broken down into a consistent rate per $1,000 dollars of each owner's assessment in a particular district.
Because there are limits on how much total money a governmental entity is authorized to receive each year from property taxes, generally a higher assessed value in a district equates to a lower tax rate.
Often voters will authorize the issuance of bonds to pay for construction of major projects, such as permanent buildings. Such authorization requires approval by a supermajority of at least 60 percent of voters.
Nearly all residents pay property taxes whether they see a statement or not. Some are billed directly by the county Treasurer's Office, others pay in connection with their mortgages, still others are charged indirectly through rent.
The accompanying chart shows what a typical city of Walla Walla property owner is being assessed this year.
Keep in mind that owners of property outside the city limits or other districts listed aren't assessed each of the costs, but pay amounts needed for schools, fire protection agencies, road, library and hospital funds in their applicable areas.
WHAT IS PROPERTY TAX?
It's a tax imposed on people because of their ownership or possession of property and is measured by the market value of the property. In Washington state, all real and personal property is subject to tax unless specifically exempted by law. Property tax was the first tax levied in the state. Today, property tax accounts for about 30 percent of state and local taxes. It continues to be the most important revenue source for public schools, fire protection, rural libraries, parks and recreation.
WHO VALUES YOUR PROPERTY?
State law requires that county assessors appraise property at 100 percent of its true and fair market value in money, according to the highest and best use of the property. Fair market value or true value is the amount that a willing and unobligated buyer is willing to pay a willing and unobligated seller. The county assessor values real property using one or more of three professional appraisal methods. Real property includes land, improvements to land, structures and certain equipment affixed to structures. Personal property includes furnishings, machinery and equipment, fixtures, supplies, and tools. The primary characteristic of personal property is its mobility. Personal property tax applies to personal property used when conducting business or to other personal property not exempted by law. Most personal property owned by individuals is specifically exempt. However, if these items are used in a business, personal property tax applies.
WHEN WILL MY PROPERTY VALUES CHANGE?
Assessors must revalue real property at least once every four years. In some counties, properties are revalued each year and require physical inspection at least once every six years. If your appraised real property value changes, you will receive a change of value notice from your local county assessor that lists the old and new appraised value of land and improvements. The frequency of changes in value to your property depends on your county's revaluation cycle.
WHO DECIDES HOW MUCH PROPERTY TAX WILL BE?
Various taxing districts, including the state and local jurisdictions, levy property tax. The individual taxing districts determine the amount of money needed and the county assessor calculates the tax rate necessary to raise that money. The amount of property tax due on an individual property is based on the combination of tax rates and the assessed value of the property. Property tax exemptions are available for some property owners, such as senior citizens, disabled persons, and many nonprofit organizations.
Source: Washington State Department of Revenue
WHAT ARE BONDS?
Just as people need money, so do governments. They need money for everything from infrastructure to social programs. The problem they run into is that they typically need far more money than the average bank can provide. The solution is to raise money by issuing bonds to a public market. Thousands of investors then each lend a portion of the capital needed. Really, a bond is nothing more than a loan for which there are many lenders. The organization that sells a bond is known as the issuer. You can think of a bond as an IOU given by a borrower (the issuer) to a lender (the investor). Of course, the issuer of a bond must pay the investor something extra for the privilege of using his or her money. This ``extra'' comes in the form of interest payments, which are made at a predetermined rate and schedule. The date on which the issuer has to repay the amount borrowed (known as face value) is called the maturity date.
Governments usually pay interest and face value through voter-approved property tax collections.
Municipal bonds, or "munis'' for short, are debt securities issued by a state, municipality or county to finance its capital expenditures. Such expenditures might include the construction of highways, bridges or schools.
The major advantage to municipal bonds is that many of them are exempt from federal taxes and most are exempt from state and local taxes, too, especially if the lender lives in the state that issues the municipal bond. For example, Washington residents can get triple tax savings by buying Washington municipal bonds because they pay no federal, state or local income tax on them. For this reason, munis are very popular with wealthy investors because they avoid having to claim the income for tax purposes.
Source: Investopedia ULC
