One of the lessons from high school that I vividly remember is an explanation for why the government sponsors free education in public schools:

- The government needs to teach people to read so they can read a voting ballot and understand who to vote for
- The government needs to teach people math so they can pay taxes

Of course, there are many more benefits to education than just voting and paying taxes, but when I first heard this explanation, it stuck with me. It was sort of entertaining (in a depressing way) and made life seem like a closed system of voting and paying taxes.

With this lesson in mind, you can imagine my excitement when I sat down this weekend to figure out if my property taxes are over assessed. Having not only a high school degree, but also a college degree from a reputable institution, I figured this would be a piece of cake.

Ok – here we go.

So – we live in Tarrytown, NY, which is technically the “town” of Greenburgh and the “village” of Tarrytown. So that means we have to pay taxes to the town separately from the village.

Ok – no big deal, I got this.

So – for each (the town and the village) there is a more or less random value called the “assessed value” of our home. In neither case is this number even in the same order of magnitude as the actual value of our house. The town has assessed our home at around $18k and the village at about $16k.

That’s pretty confusing.

I dug in a little bit further. As it turns out, according to public records, the assessed value of our house has been the same exact number for the past 30 years. The only reason it changed in 1986 was because of an addition put on the house. Needless to say there is no system in place to update the assessed value of a home year over year to track to inflation and true property values.

Ok… I think I’m still on the right track.

The next obvious question is: if the assessed value of our home is essentially a random number that hasn’t been updated in 30 years, how do we figure out if we’re over assessed?

Well – each year the town and village assessors base their taxes off of two numbers.

- The total amount of money that they want to raise in taxes to fund their annual activities (paying firefighters, police officers, running fairs, parades, etc.). (e.g. $10M)
- The total aggregate assessed value of all homes in the region combined. (e.g. $50M)

They divide the first number by the second number, then multiply it by 1000 to get the “mill rate” (e.g. 10/50 * 1000 = 200). The mill rate is then used to calculate how much each homeowner pays in taxes, as follows:

Assessed value of the home * Mill Rate / 1000

If the assessed value for the town is 18k and the mill rate is 200, then I would owe (18k*200/1000 = $3,600 in taxes).

Eek – ok. I think I’m getting somewhere.

But how do I know if I’m over assessed?

Well each year the assessor of each region publishes a Residential Assessment Ratio that serves as an estimate of the ratio between your assessed value and the market value of your home. This rate varies each year.

Ok – so all I have to do is take the assessed value of our home and divide by the residential assessment ratio and get the market value of our home that we’re paying taxes on?

But then there is a formal assessment roll that is published each year (like this one) that lists everyone’s taxes and “fair market value” of their home using a “uniform percent of value” ratio, which is DIFFERENT from the residential assessment ratio.

Ok – Now I’m lost.

How (and why) in the world did we develop such a complicated tax system?

It is a great example of what you get when you’re too afraid of breaking something to make any major changes. A very complicated and nonsensical system. We should all take a lesson here: if you’re iterating on something that’s already complex: break it before it becomes impossible to figure out.