The Mpls Assessor says the Market Value is $169,500. The Mpls Assessor says the Taxable Value is $115,800. The taxes are $1,551.18.
The above terms are imprecise.
These are not terms used in either Mpls Property Records or Hennepin County property records. If you look online at Mpls Property Records or Hennepin County property records, the three categories are:
Estimated Market Value Limited Market Value Taxable Market Value
The only way to answer the questions below is if the example above is expressed using the actual assessment terms.
But let's assume the $169,500 figure is really Estimated Market Value and the $115,800 figure is really Taxable Market Value. Let's proceed to Vicki's questions.
Does the property owner have a moral obligation to tell the assessor that
the home is significantly undervalued?
No - or rather "undervalued compared to what?"
The two figures Vicki cites ARE assessment figures - not the selling price of a home. So unless the homeowner is hiding improvements from the assessor, there's no moral wrong.
If Vicky is implying the home is assessed for less than it would SELL for...well, there's no way to know from the figures she cited. None represents "selling price."
The difference between the two figures stems is almost certainly due to limited market value. Limited market value caps the rise in taxable market value (if you check your own house, the two figures are often the same).
Limited market value is part of state law. It is capped while estimated market value isn't. Thus the gap in the figures above. The state is phasing it out, but it still existed in 2004. The phase-out is a big reason residential property taxes are jumping. In a few years, though, the two figures will be the same.
Again, Vicky has presented no figure to indicate what the home's true value is, so there's no way to know if the home is "undervalued" on any other basis — but it isn't on the one she's presented.
If the property owner remains silent, is he or she guilty of tax fraud; tantamount to understating income for Federal and State tax purposes?
Unless the homeowner is hiding improvements, no. The figures above aren't represented by the property owner; they are produced by cities and counties. And again, the "understatement" is a misunderstanding of what is represented.
Is the wink wink method of determining market values acceptable?
Not even wink-wink. The state limited market values to insulate property owners from big tax jumps. It was a conscious public policy decision. You can agree or disagree with the concept, but it was decided in public (especially undoing limited market value) and is not nefarious.
Is it hypocritical for thousands of under taxed residents to whine about
reduced City services and beg the State for money?
Hardly, when the assessment rules are set by the state.
Here are some suggestions for addressing the issue:
1. Get rid of the Minneapolis Assessor's office and let Hennepin County
determine market values.
What evidence is there that Hennepin County is any more "accurate" than Mpls? (Or that they could do the job less expensively?)
2. Lobby the Legislature for simplification of the elaborate and convoluted
property tax rate and tax capacity systems. For example: A straight 2%
property tax on all property, accurately valued.
Believe me, they've simplified things a lot in recent years - that's another reason residential rates are jumping! Of course, this has nothing to do with assessments...
But philosophically, many (most?) Minnesotans are against a flat tax of any kind, because it would shift the tax burden to the poor and doesn't reflect ability to pay.
Not only would the City solve its budget crisis, but voters (typically
property owners) would pay more attention to the spending side of the
equation down at City Hall. The example house used above would pay $6,000
per year. I can hear the screams over the internet!
Of course this won't happen. Assessments are only one part of what constitutes your tax bill; the other is the mill rate. If everyone's taxable market value went up, then localities would cut the mill rate to bring everyone's taxes into balance, heading off the revolt.
Again, assessments do not equal taxes. They are one component of property taxes. Assessments really are about , they determining your share of the local tax base. If everyone is underassessed - as Vicky seems to imply with her many examples — increasing assessments won't change anyone's share.
It was Milton Friedman who summed up the whole issue by saying that "there
is no free lunch."
And it was H.L. Mencken who said "For every complex problem there is an answer that is clear, simple, and wrong."
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