It's time to use common-sense property tax valuation.
In 1978, California voters approved Proposition 13, which, among other things, regulated the way in which properties were valued for taxation purposes. Rather than have an assessor swing the property valuation wildly as speculation increased or decreased property values, Prop 13 essentially pegged a property’s value at the last sale price with a reasonable inflationary measure.
It’s high time Idahoans do the same. Rather than rely on fuzzy computer programs and subjective “comps,” we need to assess our property valuation on their actual value — what people are willing to pay.
The issue that brought this to my mind was the recent valuation hikes in Bannock County. While these increased valuations were executed poorly and communicated worse, essentially the county assessor was merely doing her job — trying to assess property valuation based on market value. The law requires her to do this. The problem is that there is no perfectly accurate way to assess a property’s market value except by selling it. We can say we’re looking at comparable properties, but by what measures is a property comparable to another? There are scores of variables involved, some of which are very subjective: square footage, the neighborhood, acreage, curb appeal, the number of bedrooms and bathrooms, and schools are just a few.
When my wife and I were in the market to purchase our home in Pocatello, the deciding factor for us was not the number of bedrooms, but their arrangement throughout the home. Different variables will be worth different things to different people. Consequently, unless a property is actually sold, it is nearly impossible to determine what a house is worth. The sale price tells a perfectly accurate story, while any human or computer trying to assess a home’s value will not. This effect is compounded by a constrained real estate market, such as the one existing in Pocatello right now. With limited houses on the market, prices are inflated, and there are few, if any, truly comparable properties from which one could infer a value.
Finally, if we based property valuation on the most recent sales price, families would not be taxed out of their homes should home values increase beyond their means. If a family has the means to buy a $150,000 home, we should not tax them as if they had a $250,000 home, as the increased value of that home is completely unrealized and doesn’t benefit them financially in any way.
In conclusion, any attempt to assess a home’s market value by human or by computer is beset by problems: There are simply too many fuzzy variables and too much speculation. Instead, real estate should be valued based on what people are actually willing to pay for a property.