What does an existing real estate disclosure ordinance in Juneau have in common with Congress passing a bill to increase the IRS budget by $80 billion? Both are an attempt to give government workers the tools they need to be more efficient in the jobs.
However, those who frequently bemoan government inefficiencies don’t seem to mind at all when the taxman can’t efficiently do his job.
In October 2020, the CBJ Assembly passed the ordinance requiring the buyer in most real estate transactions to report the sale price and terms to the city assessor’s office. A year and a half later, a penalty for non-compliance was added. That’s when a group called Protect Juneau Homeowners’ Privacy formed to challenge the ordinance. They got enough petition signatures to put the issue before the voters in October’s municipal election.
According to Marty McGee, the Alaska State Assessor at that time, mandatory disclosure laws provide “a substantial benefit to local assessors in the efficient and economical performance of their duties.” That’s because it gives them access to the same information that real estate agents, appraisers, and mortgage lenders get to properly do their jobs.
Only six states, including Alaska, don’t have a mandatory disclosure requirement. Five others require the buyers report the sale price, but it’s not disclosed to the public.
CBJ Finance Director Jeff Rogers believes the ordinance will lead to “more accurate—hence more equitable—property assessments.” It shouldn’t surprise anyone that “buyers are more likely to report their purchase price when it is lower than the current assessment” than when the purchase price is higher. More notable is his observation that buyers voluntarily “report prices for higher value residential and commercial properties less frequently” than buyers of “lower value residential properties.”
For assessors tasked with collecting property taxes legally owed to the city, non-compliant owners of higher-priced properties put them at a disadvantage. Rogers said it’s “far more likely that lack of information leads to under-valuation.” If it was the other way around, the owner would almost certainly appeal.
Underreporting of income to the IRS poses similar problems. Congress’s Joint Committee on Taxation estimates it results in roughly $350 billion in uncollected federal income taxes each year. Here again, it’s people with high incomes and complicated tax returns who are more likely to underreport how much they’ve really earned.
Audits are the first line of enforcement for the IRS. However, more than half of the audits now being done are on taxpayers earning less than $75,000.
That wasn’t the case back in in 2010. That year, public reaction to the then unpopular Affordable Care Act helped Republicans take control of the House of Representatives. They began using the ACA as a reason to withhold funding from the IRS. According to a report by the Government Accountability office, from 2015 to 2019 “the audit rate dropped 75 percent for individuals with incomes of $1 million or more.”
The increased funding for the IRS, which is included in the Inflation Reduction Act crafted by Senate Democrats, is intended to address that problem. Or simply put, it’ll help the IRS do a better job of collecting taxes that are legally owed to the federal government. The Congressional Budget Office estimates the additional $80 billion the IRS gets in it budget will bring in an additional $200 billion in revenue over 10 years. That’s a smart investment.
Conservative Washington Post columnist Hugh Hewitt isn’t convinced. But what “matters most” to him is “Democrats have handed Republicans a gift of an issue.”
“Voters who care about their personal bottom lines and for whom dread accompanies every arriving envelope with “IRS” in the return-address space” will see the bill as a “vast expansion” of “the most feared agency in government.”
Republicans are already referring to the Inflation Reduction Act as the IRS Expansion Act. If they win the majority by using that as a talking point, we can expect they’ll start a new round of budget reductions that will once again make the IRS less efficient at collecting taxes from the tax cheaters living among us.
City assessors will be in the same boat if we repeal the mandatory disclosure ordinance. Whereas a vote to keep it will better ensure fair, accurate and efficient property tax assessments and collections.