By Anthony Ogorek
Buffalo, NY – I was reminded of Duke Ellington's song, "I Got It Bad (And That Ain't Good)" while scanning a Wall Street Journal article entitled, "Across U.S., Rising Property Taxes Spark Revolts." Since we have just about the highest property taxes in the U.S., it may be interesting to see what the rest of America thinks high taxes look like. Based on my research, if they took up residence in Erie County, there would surely be a second American Revolution.
There are several historical reasons for the sky-high property taxes that we pay in Erie County. First, there is a belief that if government is good, then more government is better. Therefore, we have a proliferation of little fiefdoms, from school districts to towns and villages, fire districts and highway departments that have established their own constituencies who believe that, as long as they are able to influence policies or hiring practices, then life is good.
The problem with this thinking is that when you put a lot of these fiefdoms together, the result is a crushing tax burden that stifles economic growth as well as drives out the affluent, who can afford to relocate to lower tax locales. The resulting brain drain also touches the young, who have to move to more economically vibrant-low tax communities for decent employment opportunities.
The citizens of Western New York just don't seem to understand how bad off things really are here. They don't understand that the rest of America has somehow found a way to educate their young, as well as deliver basic services at a fraction of the cost that we are paying. It never ceases to amaze me that people will cue up at gas stations on a Sunday to save five cents a gallon on gasoline, or visit the malls and grocery stores armed with a fist full of coupons which will save them pennies, yet continue to reelect the same incompetent politicians who perpetuate a cost of government that is way out of line with what the rest of the country is paying.
According to the U.S. Census Bureau, the median household income for Erie County is $38,500. The same figure for Lexington County, SC, which was cited in the Wall Street Journal article, is $44,500. So the citizens of Lexington County, SC have a median household income of $6,000 or 16% more than an Erie County resident. Therefore, you would expect that higher income people would be better able to pay higher property taxes. What we see is something quite different.
The easiest way to compare property taxes between different areas, is to view taxes on a cost per thousand dollars of assessed value basis. For example, a home with an assessed value of $100,000 with property taxes of $1,000 would have a tax rate of $10 per thousand of assessed value. The cost per thousand dollars of assessed value is analogous to an annual sales tax on the value of your home. So a cost per thousand dollars of assessed value of $30 is equivalent to paying an annual sales tax of 3% on the value of your home each and every year.
I was curious to see how bad off I was relative to people in Lexington County, SC - so I plugged in my town of Amherst, County of Erie and Amherst Central school district taxes into a spreadsheet, and came up with the following figures: My neighbors and I are paying $33.27 per thousand dollars of assessed value in property taxes. Looked at another way, we are paying 3.3% of our home's assessed value in property taxes each and every year. Assuming that property taxes increase at an annual rate of 5%, my neighbors and I will have paid 42% of the assessed value of our homes in property taxes over the course of a decade.
The people of Lexington County, SC are 62% smarter than we are. That is the percentage difference between their $12.70 cost per thousand of assessed value, and our $33.27 rate. One of the reasons that our housing stock is so inexpensive is that taxes take up a disproportionate share of a homeowner's monthly payment here. On a home assessed at $500,000, we pay $16,600 in annual property taxes, while the denizens of South Carolina pay just $6,300. By the way, their sales tax is 6% compared with our 8.75% and their income tax rate is 7% compared with our 7.7%.
And so my fellow citizens, forget the gas discounts and coupons. If you really want to save some money, demand that our politicians cut the cost of government - at all levels - and be willing to throw them out if they don't deliver.
The "Ogorek Letter" with commentator Anthony Ogorek is a monthly feature of WBFO News. He's principal of Ogorek Wealth Management in Amherst.
Click the "listen" icon above to hear the commentary now or use your podcasting software to download it to your computer or iPod.