Thread by @stokesbary

<THREAD> I'm now hearing this meme that says property taxes are increasing because home value are increasing.

Guys. It's time for some game theory.

Imagine, as economists are wont to do, a near-deserted island a la Robinson Crusoe.

Let's say three people live on the island: A, B, and C. A owns property worth $1000, B's property is worth $2000, and C's property is worth $3000.

And let's also say that in Year 1, the island's government can raise $50 in property levies.

Since the total assessed value (AV) on the island is $6000, and the island can collect $5, the levy rate will 0.00833 (which can be expressed as $8.33 per $1000 of AV)

(Forgot to mention this at the outset, but in this example, the island's property tax rules are just like Washington's. Importantly, this means the government can only increase its total levy collection by 1% per year, at least without voter approval.)

So since the island raised a $50 levy in Year 1, and they can increase that by 1% per year, then the island can raise a maximum of $50.50 in Year 2 (assuming they don't seek voter approval to raise more).

Let's assume that the island chooses to increase the levy by the full 1% (it could approve a smaller increase, but this rarely happens).

Simultaneously, the island's assessor goes out and reassesses the properties of A, B and C. Let's assume that this year, the AVs don't change.

With $6000 of AV and a $50.5 levy, the levy rate for Year 2 will now be $8.42. This means A pays $8.42, B pays $16.83, and C pays $25.25.

Compared to their Year 1 property taxes, each of A, B and C are paying 1% more in Year 2 than they paid in Year 1. This makes sense.

Now let's assume the island increases its levy by another 1% in Year 3, raising it to $51.01.

And let's say this time, property values increase uniformly across the island, by 10%. Now A's property is worth $1100, B's is worth $2200, and C's is worth $3300.

That's a total of $6600 of AV. Given the $51.01 levy, the island's Year 3 levy rate is $7.73.

This means that in Year 3, A now pays $8.50, B pays $17.00, and C pays $25.51.

Even though A, B and C's property values rose by 10%, guess what? Their tax payments only increased by 1%!

This is the fundamental truth about property taxes that many people, both inside and outside #waleg, find counterintuitive.

Now let's get crazy and say that in Year 4, the island raises its levy by another 1%, and A and B's properties increase by another 10%, but C's property increases by 20%.

This means the total Year 4 levy is $51.52, A's property is worth $1210, B's is $2,662, and C's is $3960.

**Oops, hit = one too many times. AV of B's property would be $2420

Anyway, with a total levy of $51.52 and total AV of $7590, the Year 4 levy rate is $6.79.

Thus in Year 4, A will pay $8.21, B will pay $16.43, and C will pay $26.88.

This time, A and B's tax actually *decreased* by 3.5% (despite a 10% *increase* in AV), while C's tax increased by 5.4% (far above the 1% the island's total levy increased by).

This is how assessed value factors into your total tax bill—it doesn't matter how much your own AV changes year-to-year, what matters is how much your AV changes **relative to the AV of everyone else in your jurisdiction**.

This gets complicated in a hurry though.

For starters, jurisdictions don't have 3 residents like our mythical Crusoe island. Most have thousands are tens of thousands, if not millions. And frankly, computers can crunch these numbers in a few seconds.

What really complicates figuring out how much your own property taxes will change by is the fact that there are hundreds of districts with partially over-lapping boundaries.

We've got the state, county, city, school districts, park districts, fire districts, to name a few.

Your home value may increase relative to other homes in the county, but decrease relative to other homes in the city, for example.

Sometimes, voters approve new property taxes (obviously going from $0 to something is more than a 1% increase).

Occasionally, a district seek voter approval for a "levy lid lift," which is a fancy way of saying "raise the levy by more than the 1% limit."

What REALLY complicates things is the statutory & constitutional limits on total levy rates.

Most jurisdictions' levy rates are capped—the state can levy a max. of $3.60 (per $1000 of AV), counties can do $4.05, cities $3.375, and most junior districts between $0.25 and $1.00.

The fun doesn't stop there though. Many jurisdictions face sub-limits based on use.

E.g., counties may only levy $1.80 for their general fund, plus $2.25 for for roads, but only in unincorporated areas. Cities can raise an extra $0.225, but only if they run a fireman's pension.

In addition to district-specific limits, there are global limits (buckets):

Senior districts (cities & counties) can collectively levy a max of $5.90. Junior districts (parks, fire, &c.) are limited to $0.50 total. Oh but some junior districts can dip back into the $5.90 bucket.

Also, under the Washington constitution, all districts (including the state) are collectively limited to $10.00. Except for most voter-approved levies (euphemistically called "special levies") and (I think) port districts.

All the various jurisdictions with property taxing authority are ranked hierarchically (generally in chronological order of when they received property taxing authority, rather than order of "importance" or "necessity").

If one of these global limits ("buckets") is ever exceeded for a taxpayer, levies must be "prorated" (fancy word for reduced), starting at the bottom of this hierarchy, until the limit is no longer exceeded.

And because the state constitution also requires all property taxes be "uniform" within a jurisdiction, if a levy needs to be prorated so that a limit isn't exceeded for one taxpayer, the levy is reduced for ALL taxpayers in that jurisdiction.

This feels like a weird place to end this, but I think I've covered pretty much all the topics.

In sum:
1. Rising property value doesn't imply higher prop. taxes
2. Prop. value rising faster than other prop. values does imply higher prop. taxes
3. IRL, prop. taxes are hard.