Our new €100 household is modest measured against property taxes elsewhere, writes FRANK CONWAY
FOR FAMILIES everywhere, preparing personal finances for the years ahead is now more important than ever. How we relate to money and manage it has grown in importance as the primary means of maintaining our personal financial well being. Property tax is one of those new costs. Including it as part of a balanced personal budgeting exercise is important, and so too is anticipation of what a property tax could be in the years ahead. At €100 per household, the first property tax in over 30-years is considered by some to be very modest.
As the introduction of the tax was mooted as part of the EU/ECB/IMF bailout, I thought it would be interesting to understand how people in some of the major powers that make up the troika think about property taxes. I picked the US, UK, France and Germany for comparison. Within those countries, I selected fivemunicipalities/cities. A conversation with homeowners in those areas also confirmed charges/taxes.
EALING, LONDON:the local borough of Ealing publishes its band of charges using an alphabetic scale. A fairly typical property in this area carries an annual tax of £1,670. The local borough also charges for water, which will cost a family of 4 in the region of £444 per year. All in, the charge for property and water will cost £2,114 per annum.
BORDEAUX, FRANCE: there are three sets of charges. First, property owners pay an annual charge of approximately €800. If one owns multiple properties, they pay a multiple of this charge. There is also a residency charge, which costs approximately €500 per year. This charge is based on a mix of factors, it can be higher or lower. There is also a water charge, which can cost an average family €500 per year. So all in, costs could run at about €1,800 per year.
HAMBURG, GERMANY:The local council tax in Hamburg seems pretty reasonable when compared to other jurisdictions. In Hamburg, the tax (Grundsteuer) can cost €50 – €200 per year (this is based on a range of pre-set factors, including the assessment value of the property and a rate of tax). €130 refuse collection (Müllabfuhr), Water/sewer (Wasser/Abwasser) charges cost in the region of €500 per annum.
LINCOLN, RHODE ISLAND:US towns can have a whole raft of charges for services. In Lincoln, Rhode Island, this municipality imposes a "taxable rate" on a property. City officials also set the assessment value of the property, which is usually a big source of contention for homeowners. The assessed value on a property may have little resemblance to the actual market value. In recent years, while market values of properties fell, assessment values remained the same. In this New England municipality, the taxable rate for residential property is $21.65 per $1,000. So, if your property is assessed for €300,000 (even if the market value is €150,000), then the annual tax on that property will cost $6,495. However, there is normally a discount given for a homestead, which can reduce the tax bill by 25 per cent or so. There are various other charges, such as water / sewer and other state charges which cost €500 – €1,000 per year.
WESTBOROUGH, MASSACHUSETTS:This independent town lies to the west of Boston, on the edge of what is known as technology highway (Route 128). According to the town treasurer, property taxes in this well-heeled area of Massachusetts can typically cost $6,000–$7,000 per annum. These charges cover the cost of a variety of services, including schools, police, fire department as well as refuse collection and snow removal (all of which are managed at local level). Water / sewer charges can cost an additional €500–€1,000 per year.
Some US towns and cities also charge a property tax on cars. This is especially the case in some cities that have high concentrations of rental units. In some cases, a property tax on a new car can cost €1,000–€1,500 or more in the first year of ownership.
Now that the authorities here have broken a long-held taboo on property tax, homeowners must begin to plan accordingly. Property tax is a primary means of how authorities in many countries acquire funds to pay for vital services locally. Whatever our final property tax charge will be, planning for one greater than €100 would make sound personal financial planning!
Frank Conway is director of moneycoach.ie. info@moneycoach.ie
