There have been very few points of financial solace in the past few years apart from rising financial markets. Part of that has been an incredible increase in home valuations. This comes from inflation, yes, but also from shifts in supply and demand for home purchases. Demand is as it always was but realizing it is another matter.
The problem is on the supply side. In most places around the country, homes are not going on the market at the same, predictable pace they once were. This is because of the soaring cost of new mortgages. Many homeowners purchased their homes when interest rates were absurdly low and negative in real terms, perhaps 2 percent or 3 percent.
Selling now means paying huge capital gains taxes and then applying for a new mortgage at 7.5 percent. The implications of that seemingly small change are actually gigantic, and making it work without paying drastically more in monthly bills means moving to a cheaper area of the country or downsizing the quality and size of the home.
Rather than make that choice, many homeowners are stuck living right where they are, even if they would prefer some other job or home elsewhere. They are frozen in place, but, hey, at least these people have homes that they own, right?
Not only that but the valuation that you see on Zillow is going up and up. Yay!
Not so fast. In the United States, you pay property taxes on your home. This reality gives rise to the perennial question: Do you really own your home if maintaining that title requires paying huge property taxes on the place annually? If you don’t pay, the house is taken over by the state, period. It feels a bit like renting, doesn’t it? Indeed, the difference between renting and owning can get a bit blurry.
Property taxes are the way schools are funded in the United States generally speaking and with some exceptions. Taxes are organized according to school districts, the lines of which are extremely strict. An identical home one street from the next can have a big price difference based entirely on market perceptions of the quality of the schools in the relevant district.
This is a major reason why “school choice,” whereby anyone from any district can attend any other, has never made much progress politically in the United States. It means a tremendous scrambling of ownership valuations. No one wants that.
You pay these taxes whether you use the schools or not and whether or not you even have children at all. That’s what makes them public schools. The public shares in the expense, but the reality is that it is not the public but just property owners from one district to another, with subsidies added by state governments and the federal government, plus “booster” organizations formed by parents.
If you are living in a district and stuck in a home because of the costs if you were to move, you are still stuck paying taxes regardless. These are assessed annually based not on the price at which you purchased the home but on the value of the home at present market value. That doesn’t seem fair either. Why should you continue to have to pay more and more in taxes based on a valuation that you are not actually seeing in any kind of profit?
You are a sitting duck, forced to cough up whatever the assessors and tax collectors decide you have to pay.
This year alone, we are seeing huge increases in market valuations that are reflected in taxes that you have to pay whether you use public schools or not. The taxes on many mid-sized homes in Texas, for example, are going up by thousands of dollars right now. The fear in Georgia is so large that some activists have put on the ballot an initiative to cap property taxes to insulate them from market pressures.
Adding to the frustration here is the terrible reality of school closures during 2020–22. Even if you wanted to use the schools, you could not because authorities said there were viruses in the schools that the children would spread and bring home. There was never any evidence at all that schools were uniquely guilty of viral spread, but the perception was used as the excuse to force everyone into Zoom school, which taught the kids nothing.
We are now faced with years of learning loss that keeps getting worse, not to mention soaring absenteeism. The routines of an entire generation were disrupted and not returned to normal.
In this period, parents were forced to learn to homeschool their kids or pay for private schools. There was never any effort to refund the taxes that people were paying for services they did not use. The taxes had to be paid for schools that were closed and refused to teach the kids in person. That doesn’t seem fair either, does it?
After the schools opened back up, millions of parents decided to stick with homeschooling and private schooling, especially after the nationwide revelations about what the kids were actually being taught in the classrooms.
As lockdowns and the chaos of school closures drove a generation of kids to TikTok and Instagram, they learned all about the ability to magically change one’s gender identity on command by dressing up in a different way. Government authorities and cultural elites all said this was great and wonderful. Parents have been heartbroken and alarmed as their own children suddenly announce the desire to hack off body parts while school authorities call this “gender-affirming care.”
The gains of this movement further prompted the exodus from public schooling. Still, nothing changed about the financing of these institutions. Property taxes still had to be paid. Now, they are going sky high thanks to limited supply in times of high mortgage rates. The tax machinery just keeps operating regardless of the circumstances, and now, families with declining standards of living thanks to inflation are being presented with intolerable bills.
If you are getting the sense of a candle burning at both ends, you are right. We have bad schools that are funded by property taxes that are going to the moon even as inflation is raging and eating away at household finances as millions of parents have sought out other means by which their kids can be educated.
This whole situation is completely unsustainable. We need dramatic reforms of financing systems, tax systems, and school structures in order to not drive the public into absolute fits of revolt. That is not likely, because political systems no longer work to reflect the public interest, so we just keep trucking on while pretending that all this will work out in the end.
