Fairfax CountyGÇÖs failure to assess luxury homes at full value means lower taxes for wealthy homeowners GÇö and a greater tax burden for everybody else.
One of the notables called out is Richard Cheney, whose property is assessed at less than its 2000 purchase price ... reducing his tax burden by perhaps $50,000 year in, year out ... and leaving the community with that much less money to pay teachers and policemen and to build parks.
In one corner of the nation, McLean, Virginia, it seems that those in the most expensive properties have a hidden tax subsidy -- with homes assessed at significantly lower rates than those of their fellow citizens not residing in multi-million dollar residences.
The inequities in real estate values in became apparent through comparing mansion listed sales prices with assessed values ... on the top six properties for sale earlier in 2006, just one was assessed at over 50 percent of the price that the seller was asking (and it ended up selling at just above that assessed price). On the other five properties, Fairfax County's assessed values totaled $29 million while the asking prices totaled more than $79 million.
In other words, looking at just five homes, there was potentially over $4 million dollars in lost tax revenue, year-in, year-out ... tax revenue that has to be compensated for through revenues collected on those not living multi-million dollar residencies.
My outrage over this situation led me to start looking high end streets in McLean -- which is one of the richest parts of Fairfax County, Virginia, which is one of the richest counties in the nation.
When examining these homes, not only does one find numerous examples of homes that are quite probably significantly underassessed, relative to their "fair market value", but interesting information as to just who is profiting from this (now not-so) hidden tax subsidy for the homes of the rich and (in)famous.
To take a rather stark and prominent example: the Vice President's situation .. e.g., Richard and Lynne Cheney's property
on Jan. 12, 2000, Vice President Richard B. Cheney bought a property for $1.35 million on Chain Bridge Road, one of the top-end streets in McLean GÇö one of the richest parts of Fairfax County, which is one of the richest counties in the United States. The 2006 assessment is $1.045 million GÇö or less than 80 percent of what the Cheneys paid for the home.For the past six years, a time period in which the average Fairfax homeownersGÇÖ assessments increased more than 10 percent annually, CheneyGÇÖs tax assessments were lower than what he paid for the property in 2000. His land assessment did go up 25 percent this year, but the assessment on the land portion of my property went up 50 percent.
When the Cheneys bought the property, the tax assessment was $841,600 GÇö of which $413,200 was for a structure they immediately had torn down. The 2001 assessment for just the land then fell to $450,000 GÇö a $21,600 increase (less than 5 percent) over the 2000 land value.
To believe that the CheneysGÇÖ tax assessment has been reasonable over the past six years requires an assumption that the land was worth less without the structure than with it GÇö when their first action after purchase was to tear it down. Any Realtor knows a GÇ£tear-downGÇ¥ is valuable for the land it sits on; the existing structure actually has negative value because it costs money to have it torn down.
Realtor acquaintances estimated the land value of the CheneyGÇÖs property between $2.5 and $6 million. If that estimate is accurate, Cheney has been underpaying his fair share of real estate taxes by anywhere from $15,000 to $50,000 each year for the past six years GÇö while the McLean inside-the-Beltway real estate market was easily averaging 15 percent annual increases.
If one were to take the CheneysGÇÖ $1.35 million purchase price as their own GÇ£fair market valueGÇ¥ assessment of the landGÇÖs value, its fair market value as of Jan. 1, 2006, is $3 to $4.5 million GÇö right in the sweet spot of realtorsGÇÖ estimates.
The Cheney property is just the tip of the iceberg.
KEY NOTE: This discussion (and the other diaries/OPEDs) is 100% based on public records that are available to any and all via the worldwide web. For example, the
Fairfax County Department of Tax Administration's Real Estate Assessment Information Site
Now, there are many reasons for discrepancies between prices for homes put on sale and assessed values. And, in many areas, land has traditionally been undervalued compared to structures -- thus, destroying a structure lowering property assessed value is not shocking. And, assessing high-end properties can be difficult, trying to determine just what it would sell for on the open market.
But, with a law that calls for assessments at 100% of fair market value, one has to question whether these long held practices are still appropriate. And, whether it is appropriate for the property assessors to so systematically undervalue the most valuable homes and thus shift, even inadvertently, the tax burden to those living in less luxurious or desirable properties.