What other economic factors are affected when taxes are raised or lowered and how are they affected

Karoly and Perez-Arce In a single-year static analysis, public education for the school age population will appear as an accounting cost; likewise, for the older working-age taxpaying population, the cost of education incurred in previous periods will not be captured as part of the net calculation. Beyond public education, a large number of other goods, services, and programs generate public costs at various levels of government:

What other economic factors are affected when taxes are raised or lowered and how are they affected

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Absent any adjustment to this assessed value, the property would be taxed at a greater value than it is worth. In these events, county assessors may automatically reduce the Proposition 13 assessed value of a property to its current market value. If they do not, however, a property owner may petition the assessor to have his or her assessed value reduced.

Figure 5 illustrates the assessment of a hypothetical decline—in—value property over time. The market value of the property purchased in stays above its Proposition 13 assessed value through At this time, the property receives a decline—in—value assessment equal to its market value that is less than its Proposition 13 assessment.

For three years, the property is assessed at market value, which may increase or decrease by any amount.

Two categories of property are assessed at their current market value, rather than their acquisition value: We provide more information about these properties in the nearby box.

Combined, these types of properties accounted for 6 percent of statewide—assessed value in — Most personal property and state—assessed property is taxed at the 1 percent rate plus any additional rates for voter—approved debt.


Some personal property, however, is subject to the property tax. These properties consist mainly of manufacturing equipment, business computers, planes, commercial boats, and office furniture.

When determining the market value of personal property, county assessors take into account the loss in value due to the age and condition of personal property—a concept known as depreciation.

Unlike property taxes on real property, which are due in two separate payments, taxes on personal property are due on July 3. The State Board of Equalization is responsible for assessing certain real properties that cross county boundaries, such as pipelines, railroad tracks and cars, and canals.

State—assessed properties are assessed at market value and, with the exception of railroad cars, taxed at the 1 percent rate plus any additional rates for voter—approved debt.

As part of a federal court settlement decades ago, railroad cars are taxed at a rate that is somewhat lower than 1 percent. The railcar tax rate varies each year and currently is about 0. For example, some levies are based on the cost of a service provided to the property.

Others are based on the size of a parcel, its square footage, number of rooms, or other characteristics. Below, we discuss three of the most common categories of non—ad valorem levies: In addition to these three categories, some local governments collect certain fees for service on property tax bills, such as charges to clear weeds on properties where the weeds present a fire safety hazard.

These fees are diverse and relatively minor, and therefore are not examined in this report. Local governments levy assessments in order to fund improvements that benefit real property. For example, with the approval of affected property owners, a city or county may create a street lighting assessment district to fund the construction, operation, and maintenance of street lighting in an area.

Under Propositionimprovements funded with assessments must provide a direct benefit to the property owner. An assessment typically cannot be levied for facilities or services that provide general public benefits, such as schools, libraries, and public safety, even though these programs may increase the value of property.

Moreover, the amount each property owner pays must reflect the cost incurred by the local government to provide the improvement and the benefit the property receives from it. With the approval of two—thirds of voters, local governments may impose a tax on all parcels in their jurisdiction or a subset of parcels in their jurisdiction.

Local governments typically set parcel taxes at fixed amounts per parcel or fixed amounts per room or per square foot of the parcel. Unlike assessments, parcel tax revenue may be used to fund a variety of local government services, even if the service does not benefit the property directly.

For example, school districts may use parcel tax revenue to pay teacher salaries or administrative costs.

What other economic factors are affected when taxes are raised or lowered and how are they affected

The use of parcel tax revenue, however, is restricted to the public programs, services, or projects that voters approved when enacting the parcel tax.

Mello—Roos taxes are a flexible revenue source for local governments because they 1 may be used to fund infrastructure projects or certain services; 2 may be levied in proportion to the benefit a property receives, equally on all parcels, by square footage, or by other factors; and 3 are collected within a geographical area drawn by local officials.

Local governments often use Mello—Roos taxes to pay for the public services and facilities associated with residential and commercial development.

This occurs because landowners may approve Mello—Roos taxes by a special two—thirds vote—each owner receiving one vote per acre owned—when fewer than 12 registered voters reside in the proposed district. In this way, a developer who owns a large tract of land could vote to designate it as a Mello—Roos district.

After the land is developed and sold to residential and commercial property owners, the new owners pay the Mello—Roos tax that funds schools, libraries, police and fire stations, or other public facilities and services in the new community.

Mello—Roos taxes are subject to two—thirds voter approval when there are 12 or more voters in the proposed district. What Properties Are Taxed? Property taxes and charges are imposed on many types of properties. These properties include common types such as owner—occupied homes and commercial office space, as well as less common types like timeshares and boating docks.

Due to data limitations, we do not summarize the tax bases of other taxes and charges.

What other economic factors are affected when taxes are raised or lowered and how are they affected

We note, however, that the property tax base for other taxes and charges is different from the tax base for the 1 percent rate.There are many economic factors that can be affected when taxes are raised or lowered, depending, for example, on what taxes are ashio-midori.comg some taxes can lower the supply of various goods.

For example, if a gasoline tax is increased, the supply of all goods . consumption taxes for other analysis. pure rate cuts is that they reduce the value of existing which tax changes affect economic growth, revenues, and other factors.

B. Tax Reform Tax. For further discussion of policy solutions, see the companion to this report, Reducing and Averting Achievement Gaps: Key Findings from the Report ‘Education Inequalities at the School Starting Gate’ and Comprehensive Strategies to Mitigate Early Skills Gaps.

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Bush administration was characterized by significant income tax cuts in and , the implementation of Medicare Part D in , increased military spending for two wars, a housing bubble that contributed to the subprime mortgage crisis of –, and the Great Recession that followed.

Economic performance during the period was adversely affected.

Understanding California’s Property Taxes