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Property Tax: Housing Bubble’s Lamprey

After the post on Financial Psychology of Money, there was a good comment on how Property Taxes can add an interesting twist in my statement: ” …  the only time the price of your house matters is when you sell it … “. Property tax is really a Wealth Tax.

Property Taxes (or millage tax), is the only tax where you have to pay a percentage of the “perceived” value of something. If you bought your house for $100,000, that year, your taxes will be based on a valuation of $100,000 (or at least it should, sometimes they try to “zap” you with a higher rate, however you can dispute that valuation, because the value of the house that year was $100,000). After that you are at the mercy of the firm doing the “valuations” of your property (and the jurisdiction inflicting the tax on you).

Say my neighbour sells his house for 100% more than what I bought mine for, many times, your “valuation” will increase because of this sale.  If you feel your valuation is too high, you can try to appeal it, fight it, or whatever and sometimes it works, but a lot of times it does not (but fight it anyhow!).

Property Tax is the lamprey that can grow fat on a housing  bubble, there are countless stories of fixed income retirees in Vancouver having to sell their houses because they could not afford their property taxes (due to astronomical valuations). Many times these are people who paid their house off, however, they cannot afford the property taxes.

What is a lamprey?

While lampreys are well-known for those species which bore into the flesh of other fish to suck their blood, most species of lamprey are not parasitic and never feed on other fish.

A Lamprey’s Mouth The Ultimate Life Sucking Interface

Yes, the lamprey gets fat on its host, much like a property tax sucks the life out of you because your house is appreciating in valuation. Yes, I am being a bit facetious, and ranting, however I do stand corrected the price of your house does matter in terms of how much property tax you must pay (unfortunately).

Feel Free to Comment

  1. My property tax in Montreal has gone up nearly 25% in the past 5 years due to increased valuation and increased tax rates. It is definitely sucking me dry! I fear at some point I will be forced to sell due to the increases, which are far higher than inflation rate.

  2. “property tax sucks the life out of you because your house is appreciating in valuation”

    This isn’t quite right, or at least a little misleading. Property taxes usually only go up because municipal governments decide to raise taxes. Your property taxes will only go up due to appreciation if your house appreciates more than average.

    I actually prefer property taxes (and sales taxes) to income taxes. I can choose to limit my property and sales taxes by living in a smaller house and consuming less, and saving more. I can only limit my income taxes by producing less and saving or consuming less as a result. And by wasting my time doing a million convoluted things like RRSPs, TFSAs, other tax credits, income splitting strategies etc. It’s income tax that sucks the life out of me.

    1. In Ottawa my taxes have gone up due to increases, but also due to valuation appreciation (which is not overly significant, but still annoying). Gotta love a tax that has more than 1 dimensional way to increase…

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