Tax Structue

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Assignment 4: Tax Structure

Julian Hoggard

Strayer University

PAD 505 Public Budgeting and Finance

Dr. William H. Kraus

Dec. 2, 2012

Habitat for Humanity is a non profit organization that uses volunteer labor, donated materials from churches and other organizations to build new housing for low-income families. Habitat for Humanity has built over 45,000 homes throughout the nation and over 150,000 homes worldwide. The goal of the organization is to eliminate poverty and homelessness by providing low income families with housing opportunities. In this paper, you will see how you would quantify the amount of percentage of property tax revenue that comes from owners of Habitat for Humanity houses in a particular municipality, arguments in favor and against giving a property tax break to owners of Habitat Humanity homes, and the best way to resolve the problem discussed in this case. Explain how you would quantify the amount or percentage of property tax revenue that comes from owners of Habitat for Humanity houses in a particular municipality.

Many provisions of property tax law affect affordable housing. Property taxes are based on a property’s assessed value. If the property is built and the property value rises drastically, the property tax bill is also going to rise. In order to correctly assess the amount of property tax revenue that comes from owners of Habitat for Humanity homes, the market data or comparable sales approach can be used to estimate the value of a home by comparing it to similar properties. The market approach uses information directly produced by the market about how property owners value properties (Mikesell, 2010). Property tax in dollar terms is calculated by taking the assessed property value and the mill rate, which is the amount of tax payable per dollar of the assessed value of a property, and dividing by 1,000. A property may be subject to tax by a number of different authorities, mill rates are set by each taxing authority so as to meet the revenue projections in their budgets (Investopedia, 2012). Homeowners in Northern Virginia are assessed taxes at a much higher rate, which causes the homeowners to pay a much higher property tax than those in other areas of Virginia regardless of how much money they make or if they are able to make the payments with the rising property tax cost.

It is not the high property tax that is an issue, but the fact the owners of Habitat homes do not have the financial resources to pay their property taxes. In the city of Alexandria, the city does not discriminate based on what type of home you have. The government assesses value based on the value of the house, so if you’re home is in a high taxable area, then your assumed property taxes will be higher. This is why Kesha James, who only makes $28,000, is having a hard time trying to make her house payment because the property taxes have increased up to three times the amount in the past three years.

Provide two (2) arguments in favor of giving a property tax break to owners of Habitat for Humanity houses.
In order for individuals to purchase a home through Habitat for Humanity, they must meet several qualifications. The main qualification is that they earn a monthly income that falls within minimum and maximum limits (Habitat.org, 2012) that does not allow them to qualify for a home otherwise. Being that Habitat for Humanity is a non-profit organization, some may argue that non profit properties do not belong in the tax base. In the past, non profit organizations have typically been exempt because they provided public services together with the government. One benefit to giving tax breaks to owners of Habitat for Humanity homes is that the government can make sure they will receive payment for homes in their area.

In the area of Northern Virginia, the Cost of Living is one of the highest in the nation. Some residents, regardless of the type of resident they have are...
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