Bacon's Rebellion

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Virginia Property Taxes — Not as Bad as Jersey but Worse than D.C.

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by

James A. Bacon
in

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No one much pretends that Virginia is a “low tax” state anymore. Indeed, the Old Dominion has ensconced itself solidly in the ranks of the middle-tax states. If there is anything good to be said about the state’s tax structure, it’s that revenue sources are diversified across a broad array of taxes — income, sales, property and many smaller sources — so that state revenues aren’t excessively vulnerable to, say, a real estate crash, a consumer recession, or a decline in capital gains-generated income tax revenue.

One downside is that Virginia taxes personal property — primarily real estate and automobiles — more heavily than the typical state. I have combined data from the latest WalletHub offering to show that, using WalletHub’s methodology, Virginia has the 14th highest property tax burden among the 50 states (and Washington, D.C.) The real estate tax rate is modest (16th lowest) but it combines with relatively high median housing prices (11th highest) to create the 23rd highest average tax on the median-value house.

The car tax (2nd highest in the country) is a killer. Throw that into the mix, and Virginia has the 14th highest overall property tax burden in the country. If you adjust the taxes as a percentage of average household income, the numbers look a little better. Still, there’s no escaping the conclusion that Virginia’s “low tax” days are long gone — even at the local level.

The main limit to this analysis is that it obscures the tremendous divide between NoVa and RoVa. NoVa is in a league of its own when it comes to housing values and property tax rates. If you split the state into two, I’d guess, NoVa probably would look more like New York and RoVa more like North Carolina.

— JAB

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25 responses to “Virginia Property Taxes — Not as Bad as Jersey but Worse than D.C.”

  1. JohnHop Avatar
    JohnHop

    Let’s look at the whole picture, shall we? At least acknowledge that when you include all the state taxes, our burden is pretty close to the middle. https://wallethub.com/edu/best-worst-states-to-be-a-taxpayer/2416/
    That surely offsets to some degree the property tax you so abhor. As for the “killer” motor vehicle tax, come on, get serious. It’s not that bad.

    1. James A. Bacon Avatar
      James A. Bacon

      The data you cite makes my point for me. Virginia ranks 28th in the country by average tax burden — 2% higher than the national average. We do better, only 25th, if you adjust for cost of living. Like I said… a middle-tax state.

  2. LarrytheG Avatar
    LarrytheG

    I tend to agree with JohnHop – in that one of the major drivers of taxes in most states is education but how it gets funded in terms of what taxes varies greatly.

    In Va, most counties – about 1/2 their local budget goes to pay for education and to be honest – a lot of it – in some countries 1/2 of that is discretionary and not mandated.

    In my own county – about 1/3 of the tax rate goes to pay for local discretionary education funding – not mandated core academic.

    Some states don’t have an income tax. Other states -no sales tax. a few states have neither so how to they fund education?

    I personally find the Tax Foundation folks a little more informative on all the taxes in a given state … property, sales, income, and other like fuel than Wallet Hub which tends to be more sound-bitey..

  3. TBill Avatar
    TBill

    Especially in NoVA, the “Va. is a low tax state” is a wild and crazy thing to say, but Gov. McAuliffe says it all the time. All of those taxes are much higher in NoVa and trending up. Interesting about Rhode Island car taxes, sounds like a problem they are trying to fix too (I am not ready to admit Va. is 2nd highest car tax without closer study – certainly NoVA could be a match). Yes NoVa is becoming closer to NJ, and my relatives from NJ who moved here keep saying–hey the taxes in NoVA are getting closer to NJ! Our course, it’s hard to talk taxes as some feel higher taxes are a sign of good government providing quality of life services and education.

    http://wpri.com/2014/12/23/7-things-to-know-about-providence-car-taxes-how-they-could-change/

    1. James A. Bacon Avatar
      James A. Bacon

      Let’s see now… Thousands of New Jersyites move to Northern Virginia every year. Taxes go up every yet, getting closer and closer to New Jersey levels. Could there be a connection?

      1. TBill Avatar
        TBill

        But Jersey has some “structural” excuses for higher taxes. It is a home rule state, and every tiny hamlet has its own school system, mayor, police force , etc. (and Fourth of July fireworks). Here we have to do our own fireworks in the streets, which ought to save millions : )

  4. TooManyTaxes Avatar
    TooManyTaxes

    According to the Fairfax County Taxpayers Alliance, real estate taxes are up 154% since 2001 (through FY16), with inflation of 49% and average household income up by 35%. http://www.fcta.org/FxCo/Taxes/

    The trend was up, up, up when Kate Hanley and Gerry Connolly were chairmen of the BoS. Taxes were flat to down when Connolly went to Congress and the Great Recession hit. The last three years or so, taxes have increased substantially with residential assessments recovering slowly.

    Office vacancies except in Reston and near rail stations at Tysons are up significantly. Overall vacant commercial space is equal to the early 1990s. Job growth is all at the low-end, mainly service jobs.

    Some data from Virginia’s largest local jurisdiction.

  5. Reed Fawell 3rd Avatar
    Reed Fawell 3rd

    Yes, but no one wants publicly to state the truth as to what is happening.

    Fairfax is hurting so bad, and going nowhere literally and figuratively, not because of sequestration but because of gridlock and the sickness gridlock imposes on it communities, its citizens, their families, and their livelihoods.

    Imagine what happens when Sequestration is removed and defense spending goes up dramatically, as it surely will?

    Traffic gridlock then will double and triple down yet again, except this time Fairfax will be strangled not only by traffic on its interstates but by local traffic trying to get around the interstates to work or to retail or to rail stations, and such local gridlock traffic forced by the Suburban grid that is never fixed, it will kill strip retail quickly by the side the local roads. All because Fairfax will not face the truth, but keep playing the short term game, killing the golden goose with ever toll, land speculation, and building, while hiding the truth from its citizens as to what is really going on.

    1. Reed Fawell 3rd Avatar
      Reed Fawell 3rd

      TMT – I ran out of time to edit the end of that last comment, but you get the point, I am sure.

  6. LarrytheG Avatar
    LarrytheG

    Interesting thing about New Jersey – rank high on education, near Massachusetts… way ahead of Virginia

  7. TBill Avatar
    TBill

    Just imagine my average property tax if I went out and bought 2 new cars! It would be an unbelievable tax hike, at the average cost of a car about $34k now. At least we can control it, and at least it is tax deductible.

  8. LarrytheG Avatar
    LarrytheG

    I always thought car taxes were pretty hefty… especially on new ones where you also get socked with taxes when you buy it.

    and.. in most places – the money doesn’t usually go for transportation – either.

    Gilmore totally screwed the whole thing up in my view.

    the state should never have gotten involved in it.

    if you add up how much you pay locally for car taxes and THEN look at how much the state is transferring back to the counties to buy down the car tax – it’s a LOT and that money is competing against education, healthcare, and other state level services.

    if voters were fully cognizant of the actual total tax on cars – election consequences would be brought to bear.

    too much smoke and mirrors.

    1. TooManyTaxes Avatar
      TooManyTaxes

      Gilmore’s car tax plan was the best thing that ever happened to Fairfax County residents. It took back a large chunk of Fairfax County tax dollars and sent them back to us, rather than subsidize low real state taxes in RoVA.

      1. LarrytheG Avatar
        LarrytheG

        actually it removed responsibility for local spending by having the state taxpayers subsidize local spending rather than holding local elected responsible for that spending.

        would you trade more of the same ? would you trade a lower local real estate tax rate in exchange for a higher income tax from which the state would send more money for education – instead – and the state would decide how much you get?

        I bet you won’t like that idea TMT, eh?

        😉

        1. TooManyTaxes Avatar
          TooManyTaxes

          State taxpayers are NoVA taxpayers. And a huge segment of them live in Fairfax County. We get about 20-25 cents on the dollar back from Richmond and pay high real estate taxes, higher sales tax and still highway tolls. I like what Gilmore did and always will.

          I’ll stick with the status quo, rather than pay a higher income tax because the 25% return on my dollar is terrible. What would you do if you lived in Fairfax County today?

          1. LarrytheG Avatar
            LarrytheG

            so you LIKE sending money to Richmond to then dole back out to you?

            I thought you HATED that idea?

            Didn’t Richmond ALSO – RENEGE on the original Gilmore car tax?

          2. LarrytheG Avatar
            LarrytheG

            re: status quo

            TMT – when others control the status quo – like Richmond – is that what you really want?

            If Richmond decides to reduce the car tax subsidy – is that okay?

          3. Reed Fawell 3rd Avatar
            Reed Fawell 3rd

            And now some folks pay $6o bucks a day just to drive back and forth to work through Fairfax County to try to earn a living, and that’s just a starter. So much for the status quo.

          4. TooManyTaxes Avatar
            TooManyTaxes

            Larry, based on your comments, I think my statement needs some clarification. By retaining the status quo, I mean keeping the same basic balance between state and local government with two possible exceptions. 1) localities should have more power on purely ministerial matters – such as changing the color of school bus roofs; and 2) counties should have the same taxing authority as cities – such as the ability to raise the local cigarette tax. I cannot think of any good reason to treat counties and cities differently in this area. But, generally, I like the Dillon Rule. It keeps Fairfax County in check and protects our liberties.

            I would oppose any increase in state taxes because Fairfax County gets screwed. I don’t think we can expect to get dollar for dollar back. We have to help run state government and contribute to basic public school costs in poorer parts of the state. However, the LCI unfairly hurts Fairfax County because if fails to adequately address the huge differences in cost of living and fails to take appropriate account of the huge numbers of poor kids in FCPS. But the LCI is not going to change via legislation. So I oppose giving the state any new money for education. Live with what you have and with growth.

  9. FreeDem Avatar
    FreeDem

    Coming out of my long, long hibernation of lurking and trying to give up Virginia politics.

    Is there anything particularly wrong with high property taxes?

    James while I recognize your point about wanting a broad tax base, it seems to me that property taxes, particularly real estate, is a less economically inefficient method of taxation than say high sales taxes or high income taxes.

    Certainly it would be better if we could adopt a property tax split, as advocated by Chap Petersen a few years ago, so we could focus on taxing the value of the land and not the improvements on it.

    But you noted “The real estate tax rate is modest (16th lowest) but it combines with relatively high median housing prices (11th highest) to create the 23rd highest average tax on the median-value house.”

    If Virginia has high median housing prices because people want to live here, that’s a good thing. If we have high median housing prices because people want to live here and localities are too restrictive to allow for more building, that’s a public policy problem that we can and should tackle as a Commonwealth, not just just as localities.

    Who’s going to run for Governor in 2017 and focus on reducing the roadblocks to new housing developments?

    1. James A. Bacon Avatar
      James A. Bacon

      All good questions.

      Actually, I have suggested (in the spirit of inspiring discussion) that local governments should rely more heavily upon real estate taxes (not car taxes) as a revenue source because it would put their focus where it rightfully belongs and they have the power to influence: pursuing policies that enhance property values (creating a balance between lower tax rates and superior amenities, including more functional land use patterns) rather than detract from them.

      The obvious drawback to that idea is that localities would become more vulnerable to the whipsawing of real estate booms and busts.

    2. TooManyTaxes Avatar
      TooManyTaxes

      I agree with Jim that FreeDem has raised some very good points. The key problem with large population areas growing even more is transportation. NoVA’s is beyond capacity for both roads and transit (at least some transit).

      Several years ago, the Greater Washington TPB did a study that concluded that, even with massive new investments in transportation, traffic congestion will be as bad in the future as it is today – and in some locations, worse.

      Earlier this week, a friend sent me a link to a WaPo story discussing how big tenants are moving from one location in Tysons to another to be closer to rail. But the story also noted the low ridership on the Silver Line with Tysons as the destination. No surprise there. Every traffic study showed SOV will continue to be the main mode of transportation for the foreseeable future in and out of Tysons. Plus, 37% of the traffic on Route 7 at Tysons is through traffic. Traffic on 123 is similar.

      While there are benefit for heavy rail and mixed used development, they are limited. Growth in NoVA means worse traffic and an ever declining standard of living. But it seems to be the price many of us will pay to be near the seat of the federal government.

      1. Reed Fawell 3rd Avatar
        Reed Fawell 3rd

        A thoughtful and informed look at the map shows quite clearly why the traffic problem in Northern Virginia is insoluble. And why it will only grow impossible worse, absent a massive readjustment of land use in the region starting now in Northern Virginia, instead of wasting everyone’s money on short time fixes that are bound to fail, and impose huge pain on innocent victims in the meantime.

        In light of this, what amazes me is the total failure of anyone in a position of responsibility and leadership to take such a thoughtful and informed look at the map, and reach some very fundamental, and obviously conclusions, and begin an open, serious, and intelligent dialogue on what the problem is and how to fix it. Instead of being frozen in the headlights of an oncoming train.

        Talk about a failure of leadership!! Talk about a failure of civic responsibility!! Talk about leaders who run and hide!! It is simply beyond belief that our local government and society has come to this. And all we can do is talk about how world class we are while Rome burns. It’s pathetic.

    3. TBill Avatar
      TBill

      There is nothing wrong with higher property taxes. However, I feel our ultra-high car tax hurts car sales and thus hurts our economy, and penalizes more expensive and green cars. Furthermore, there is nothing wrong with a reasonable local car tax.

      What we seem to have (in NoVA anyways) is a government that tries to promise low house taxes, at the expense of high car taxes. Also when Gov. McAuliffe talks about why FBI should come to NoVA, it’s the low taxes he says. What low taxes? Let’s just be honest and say we are a medium to high tax place. Liberals seem to feel an urgent need to mislead and sugar-coat about about high taxes. In contrast, I like to just come right out and say it.

  10. DonR Avatar
    DonR

    The comments here are somewhere between ill informed and disingenuous. Plenty of fast growing metropolitan areas are solving their transportation problems with a mix of bigger roads and more mass transit. Atlanta comes to mind. Dallas too. Virginia is a Republican run welfare state where money is sucked out of urban areas and spent stupidly in small town and rural areas by pseudo-conservatives. If NoVa kept all their taxes in region (or even 75% of their taxes I region) the transportation problems would be solved in 10 years. However, the Imperial Clown Show in Richmond just can’t resist shoving its hands into NoVa’s pockets to fund the really unsustainable human settlement patterns in Virginia – you know, the places where the jobs have gone but the people have stayed.

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