Time for The Tax Fights to Begin

There was a time when real estate values where on an endless escalation, household net worth was expanding, government coffers were getting fat, and all had no income restraints… or so it seemed.
Well, that was then and now is now. Consumers and homeowners know the reality of today but government is just now waking to reality.
One of the first skirmishes is about to begin on a local level - city and county sales and property tax bases. Sales and property taxes are the base line of local governments' budgets. Historically, local government has had little difficulty in meeting budgets. If they needed money they could just raise taxes, thus even if they were short this year their bonds were golden in the credit markets. But, oops something happened.
Their budget base lines increased with the property tax valuations of real property during the boom years. Many of these entities increased their sales taxes to cover expansion and debt service at the same time and now their baseline is falling faster than low tide at full moon.

SALES TAX

The first income stream to fall off is sales taxes… consumers who are losing income and net worth through job loss or shrinking home equity are not able or willing to spend as freely now as during boom times, so sales tax income is shrinking.

PROPERTY TAX

Secondly, the housing boom came to a screeching halt and values began to recede. Real Property tax income is tied to property values as the sale is recorded, triggering a reassessment of tax for that property. Thus, government spending increased in line with the increase tax valuation of properties and commitments were made against anticipated higher income streams.
While lower sale tax revenues are felt immediately. Property taxes revenues can lag for several months or even years, but they will also shrink. The tax revenue is tied to either the sale of a property or a reassessment is triggered by property owners who feel the values are lower than the earlier value used.
If the property value has truly fallen then it will benefit the owner to appeal the assessment with the appropriate agency and reduce their property tax bill. Sufficient time, nationally three to four years, has elapsed to establish a lower value for many property owners and the wave of appeals is about to begin.
This will further exacerbate the financial conditions of government and this time they cannot resort to raising property or sales taxes to raise revenue. We will soon be seeing the effects of cut spending, raising "fees" and the skirmishes in the property tax arena.