April 19, 2024

Illuzzi Letter

Envisioning And Creating Your Dream Home

Cut the Size of Government and Return Inflated Property Taxes to Help Homeowners Stop Foreclosure

As the housing bubble inflated beyond all reasonable estimates of property values, one of the largest beneficiaries was the local governments that depend on property tax revenues. Some areas saw tax increases of 300-500{bc1e42e53d8565163e9cec719c82f5e0892e054fb5d628f08363879e07731a2f} while homeowners were moving into areas and paying more and more for properties.

But now with the housing bubble collapsing and many homes either being abandoned or the occupants simply refusing to pay anymore, these governments are seeing their own existence threatened. After all, how can government keep increasing when property values are falling and tax revenues are decreasing?

So, in an effort to fight this threat, many governments have resorted to instituting new programs to assist homeowners in danger of foreclosure. Such hotlines or bank-government partnerships are designed to keep promoting the theft of homeowners’ money, now in a misguided effort to help them stop foreclosure. The real problem with these programs is that government at all levels often has a very, very difficult time rolling itself back, which is the only way to reduce the burden on homeowners.

Look at all the new foreclosure help programs being created by local and state governments right now. They are not going away any time soon, even if the foreclosure problem becomes less severe. And they will just continue to create a tax revenue drag on the average homeowner long after the current housing decline has ended.

Once government programs are created, they often stick around to become entrenched interest groups. And one such as a government foreclosure help hotline which “helps the children” and “keeps the American Dream alive” in the community will not be easy for any politician to do away with once its purpose has ended. Many people are not familiar with the term “mission creep,” but government has made an art of continuing to grab power and redefine its original aims to serve new perpetuations of itself.

After creating these new initiatives, the programs need to be financed, with ever increasing budgets to pay for new equipment, new invasions of privacy, new employees, and cut-backs in actual services provided to homeowners in foreclosure. Many of them may end up with the ever-increasing prices and scaling back of hours and services that are endemic to government programs, such as the Post Office, for example.

Cutting property taxes without cutting government spending will not help the people who have been funding this huge increase in government through their participation in the real estate bubble. If government did spend less, then more homeowners could keep their property taxes and use them to pay their adjustable rate mortgages or spend on increasingly expensive food and energy. After all, government provides no productivity to the economy.

Ironically enough, though, government will keep spending on new unproductive programs to help homeowners save their houses from foreclosure, which will just hurt homeowners and cause more declines in property taxes. This may continue to the point of so many foreclosures in an area that the local government finds itself in financial danger, facing insolvency. Without property tax revenue, the governments will not be able to pay back their municipal bonds and fund the militarized police departments and other so-called government services.

But instead of cutting expenses and doing away with the wasteful programs that homeowners can no longer afford to fund, government will more likely use the blunt instrument of police power. If the police departments and judges may face the possibility of not getting their taxpayer-funded payroll checks through property tax theft, they may decide to turn to direct extraction of revenues at a much higher level.

This means a new reliance on increasing government revenues through other means than property taxes. Cops could pull over more people for coasting through stop lights or speeding, and issue more tickets with higher fees. Fines for smoking in public or a county income or sales tax on everyone living and creating productivity in the area may stabilize or increase revenue in the short term, but will just engender even more disillusionment with government.

To be effective for the long term and actually help homeowners facing foreclosure on their inflated homes, government needs to cut spending and return some or all of the money based on unrealistic property values to the homeowners and other taxpayers. This means cutting the additional waste that was added to government services during the housing boom of the last seven years.

Otherwise, all these temporary programs will just continue to hurt the people they have been set up to help and create more empty houses, crime will increase through actual violations of property values or through absurd government declarations of new crimes designed to produce new revenue, and governments, after giving the people a push into bankruptcy and foreclosure, will face their own solvency crises.