Tax Structure: Habitat For Humanity Essay

1693 words - 7 pages

Tax Structure: Habitat For Humanity
Habitat for Humanity is a nonprofit organization dedicate to building homes for low-income individuals. This organization requires that potential homeowners assist in the building of their home or others to reduce the financing cost of homeownership. This paper focuses on the percentage of property tax revenue, two arguments in favor, and two arguments property tax breaks for Habitat of Humanity homeowner, and case resolution.
Quantification
"In 2004, property tax collections in the U.S. exceeded $300 billion. Property taxes are responsible for approximately 72% of all local tax revenues, representing the most important tax revenue source for local governments" (as cited in Shan, 2010, p.195). National statics does not separate Habitat for Humanity homeowners from other property owners. Consequently, this is also true for Wake County. Currently, Wake County uses a formulaic approach to property taxes to ensure equity in tax payments. This formulaic approach takes the home's market value divided by $100 multiplied by adding the county rate of .534 with the city rate for Raleigh is .3735, and a recycle fee of $20.00. For example, a home valued at $150,000/100 (.9075) + $20 would pay $1381.25 in property taxes. Neighboring counties of Johnston, Franklin, Chatham, and Durham also use this formula for assessing property taxes, which is in accordance with the North Carolina General Statues. Therefore, Habitat for Humanity homeowners pays the same property tax rates as their neighbors ensuring payment equity of property tax revenue.
Arguments in Favor of a Property Tax Break
Habitat for Humanity homeownership is income based; therefore, any future property tax assessments should consider this during the evaluation process. Allowing these homeowners to receive a tax break is beneficial to the homeowner and the community. These homeowners help to build their homes in order to reduce the cost of homeownership. However, increasing home values may cause them to lose their home. Property tax calculation in Wake County is formulaic based on the market value of home, if resold. While this provides equity by using a standardized assessment formula, it lacks fairness. It does not consider the homeowners ability to pay or if the property owner can resell the home at market value. Consequently, Habitat for Humanity owner whose mortgages are income based and cannot resell their homes for twenty years this assessment process presents undue financial hardship. By allowing property tax breaks for Habitat for Humanity homeowners, the county assures fairness to citizens by acknowledging resell restrictions and income criteria placed on their homeownership.
Furthermore, these homeowners end up paying more for property taxes than their mortgage and homeowner insurance combined. While equity in property taxes ensures everyone shares the burden, fairness in distribution assures the tax burden is equal...

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