If you own a home or are considering buying one, I have bad news.
Even after paying back the mortgage, you still do not own the property. At least not completely.
From a philosophical point of view, you are renting the house from the government. This payment is due in the form of property taxes.
Property taxes are the worst type of tax. However …
I like to pay a different type of tax
There are no income taxes. When you tax people’s work and efforts, they want to work less.
It’s like taxing your property. They keep people from wanting to own some.
But when you tax sales you discourage consumption … and That is exactly what we want to do.
When you tax something, you get less of it. Less income, less property and less sales.
I would be happy if income taxes were halved and sales taxes were twice as high.
Give me an 18% income tax rate and a 20% sales tax rate – and let go of property and estate taxes – and I’d be grateful for a clam.
Unfortunately we cannot rewrite the tax code. But we are up to something can to do…
How to get a better tax deal
When buying a home, look at property taxes.
If it is taller than other houses then you need to take this into account when making your decision.
I once owned a row house in New Jersey. When I bought it, the tax was $ 6,000 a year. Five years later it was up to $ 14,000. Because of this, I found it difficult to sell the house.
High property taxes reduce the value of your home. In this case it was sizeable – I lost $ 60,000 on this house.
Property taxes are also high in New York, Connecticut, and New Hampshire. They’re high in Texas too, but there’s no state tax.
Source: Tax foundation
South Carolina has some of the lowest property taxes in the country. That’s why people move here even though our income taxes are quite high.
Whether you’re looking to buy or sell, do your homework now to make sure you don’t get a nasty surprise when you close.
Jared Dillian is an investment strategist at Mauldin Economics, former head of ETF trading at Lehman Brothers, and author of The Awesome Portfolio. Subscribe to his weekly investment newsletter, The 10th Man, and listen to his daily radio program, The Jared Dillian Show. You can follow Jared on Twitter @dailydirtnap.