Do your tenants pay taxes? Certainly, if they have a job, they pay income taxes. And every time they buy something, they pay sales tax, unless they live in one of the states without a sales tax. They know they pay those taxes because the money path is obvious: either a deduction from their pay check, or a line item on just about everything they buy.
How about property taxes?
The benighted amongst tenants believe that only property owners pay property taxes. After all they never write a check to the county for property taxes or see an accounting on a mortgage statement. What that means is no matter how high property taxes are, it needn’t concern tenants a whit, since they don’t pay them anyhow. By logical extension it also means tenants have no objection whatsoever to any new government program funded by property taxes. To them it’s free stuff, paid by homeowners and money-grubbing landlords.
Those whose jobs are paid for with property tax money have figured it out. They count on the support of tenants whenever any property tax issue is to be voted on. Regardless of whether it is a question of raising taxes or of instituting a property tax limitation, they drag out the crying towels about how many “essential” government programs will be lost if the people vote to cut property taxes. They also drag out the “without-this-we’re going-backwards” wish list every time a vote on increasing programs funded by property taxes comes up.
Those who live on our property tax revenues know all the angles to eke out every last vote from tenants. And too often it works. That demonstrates that as landlords we aren’t doing our job.
Obviously tenants pay property taxes as a part of their rent. Property taxes are one of our biggest costs of doing business, probably second only to the mortgage bill. If there were no property taxes, rents would be lower by about the amount of what taxes are now. If property taxes go up, at some point we have to raise the rent to cover the increased expense. But too many tenants don’t know that, mostly because we never tell them.
Some education is in order. It is important that we show each tenant the financial impact of every property tax increase. That means whenever a property tax increase in proposed, sending letters to each of them stating “your rent will increase $X per month if this property tax increase passes,” will bring home to them how property taxes affect the amount of rent they pay.
The cities and states that are most property-rights unfriendly are those with the highest percentage of renters. They are unfriendly to property rights because they believe that somehow their interests and their landlords’ interests are different. In fact they are exactly the same in regard to increases in our costs of doing business.
Let’s just make sure our tenants know that their bread is buttered on the same side as ours when it comes to property taxes.
