Tax Structure of the U.S - Coursework Example

Tax Structure Tax Structure The individual cases express the hopes and expectations of the people from the system, and the government represented by the political party through its policies and their implementation takes a decision. It fructifies a political relation on that specific policy or, for that matter, all policy decisions carry the possibility of developing a unique political relationship. The ruling political party plays a detrimental role in policy making, transforming the political relationship into power structure. It is the presence of “issues areas” in the elite power mechanisms that define the scope of political power (Lowi, 2011, p. 688). Tax structures represent one such situation where changes happen recurrently in the rate of tariff, which has been proved historically as well. Peoples’ expectations concerning a policy decision are based on what past governments have done to resolve similar issues over time through policy changes. Government policies impact society in general and certain not-privileged sections in particular. Politics plays a role in each and every policy of the government, whether it is the “politics of agriculture”, the “politics of education”, or, for that matter, the local government’s current policy of increasing taxes on property belonging to the owners of Habitat for Humanity houses, as property tax revenue forms a big chunk of income for the government (Lowi, 2011, p. 689). There is the provision of providing protection to selected communities under the policy, as they may be facing deficiency of funds to meet their needs. Same is the case with the house owners of Habitat for Humanity. If industry groups, business groups, or agriculture business stakeholders can expect softer attitude from the government by “giving up” (Lowi, 2011, p. 693) tariff making, why are economically marginal families not considered on humanitarian grounds by providing them rebates in the property taxes? Take the case of Kesha James, the owner of Habitat for Humanity home, who is finding herself in a difficult situation created indirectly by the increased property tax rates. She is not repaying any huge mortgage payments, but the appreciation in the property rates in Alexandria has almost doubled the house tax of her home from $ 515 to $ 954 in the past 18 months only. Home owners are asking for government help to avoid abandoning their homes by becoming defaulters. Further, Northern Virginia is not the only Habitat for Humanity suffering from soaring property prices, others including Montgomery County Habitat in Silver Spring and Rockville; however, as the government has provided tax caps along with a five year tax abatement program for new houses, the situation has not worsened there as it has in Northern Virginia Habitat houses. The arguments presented to the local administration in favor of tax abatement by the Habitat for Humanity for Northern Virginia, the arguments stating that their homes should not be appraised at the market value as homeowners do not have the right to sell their houses as per the contract for earning profit from increased property rates. Also, they are not eligible to apply for home equity loans until the 20-years mortgages are over. In case such a situation of selling their homes arises, they can sell only to the Habitat at the rates quite reduced as compared to the prevailing market rates ranging between $80,000 and $120,000. This argument sounds very genuine – if home owners can not sell their houses at market rates, they cannot be charged tax based on appreciated values of the homes. Further, they cannot apply for home equity loans too to get a relief till the 20-years mortgage has expired. These two conditions on the Habitat for Humanity home owners give them the moral right to ask for tax relief from the government. As in the case of Kesha James, she has no alternative but to shift to her husband’s house up north, which she is least interested in because of the emotional bonding with her present home. It makes for a case in her favor on humanitarian grounds as well. The situation stated above seems to be a genuine property tax problem that needs government intervention. The state or local government should come forward to conduct fresh appraisals for the owners of Habitat for Humanity, as it has initiated in other regions for the Habitat for Humanity houses. This makes a genuine case, as the home owners have their limitations. They cannot earn the market premium, which is the basis for increasing taxes, nor can they apply for a home equity loan till 20 years of mortgage payments are completed. This seems to be a solid argument. The local government can use the provisions of ‘Special Forbearance’; a formal procedure can be entered into between the house owner and the house tax department, as it happens between the mortgager and the funding authority whereby it permits a cut back or temporary suspension of the installment of home loan to stop any impending action leading to undue foreclosures and help in improving the crunch situation the borrower is facing. Reasons of justifying such an arrangement could be death, sickness, natural catastrophes, or not securing the property through insurance or a reduction in income caused by reasons beyond the mortgager capacity to control. There is a provision stating that if the mortgager can pay back the defaulted payments in future and can bring it back on the track, the servicer can enter into a Special Forbearance Agreement to help the mortgager come out of the vicious circle of non-payment. Other applicable conditions include verification of past payment history, present earning potential, debts, and future earning possibilities. It further stipulates that repayment conditions must be soft, taking into consideration the mortgagors future earning and other debts. A break time should be allowed so that house tax can be adjusted in future (MHC, 2004, p. 18). Let’s consider the legal perspective as well. As per the property tax law for Habitat for Humanity property, the legislation has exempted certain properties from tax, as in the case of Florida Statutes under Section 196.1978, it states: "Property used to provide affordable housing serving eligible persons as defined by s. 159.603(7) and persons meeting income limits specified in s. 420.0004(8), (10), (11), and (15), which property is owned entirely by a nonprofit entity which is qualified as charitable under s. 501(c)(3) of the Internal Revenue Code and which complies with Rev. Proc. 96-32, 1996-1 C.B. 717, shall be considered property owned by an exempt entity and used for a charitable purpose, and those portions of the affordable housing property which provide housing to individuals with incomes as defined in s. 420.0004(10) and (15) shall be exempt from ad valorem taxation to the extent authorized in s. 196.196. All property identified in this section shall comply with the criteria for determination of exempt status to be applied by property appraisers on an annual basis as defined in Sec. 196.195. The Legislature intends that any property owned by a limited liability company which is disregarded as an entity for federal income tax purposes pursuant to Treasury Regulation 301.7701-3(b)(1)(ii) shall be treated as owned by its sole member.” In short, the benefit is applicable only if the owner is a low earning individual and is a resident of the property; therefore, the tax exemption needs to be granted by the government (Tax Law, 24 September 2008). Also, because the concerned property is used by an owner of Habitat for Humanity, which comes in the category of charitable purposes, it should be exempted by general law from taxation; such laws exist in Florida State, as given in Article VII, Section (3) of the constitution. An application for exemption can be filed, therefore, by 1st of March with the county property appraiser. If this tax rebate is not granted, the charitable purpose of housing for the low-earning families would be neglected. As there is no ambiguity over the functions of Habitat for Humanity of providing housing to marginal earners, their house taxes need not to be increased in any way to match with the appreciation in the market value for such houses (Tax Law, 24 September 2008). The above arguments provide a case of granting exemption in house tax. On the other side is the argument that no break in property tax should be permitted to the owners of Habitat for Humanity. As in the case of Kesha James, she is narrating how she has to forego other important tasks, which are her domestic and married-life responsibilities, to fulfill which she needs to search more gainful employment. Her husband should take increased burden of fulfilling their children’s hobbies and needs rather than asking for a tax break. Government policies cannot be changed for an individuals’ or family needs. Another argument is that people will indulge in such an approach more often if tax breaks are granted randomly. Considering the pros and cons on the issue, the problem needs to be resolved by the local government for providing tax exemption to the owners of Habitat for Humanity till their mortgage installments are totally paid by them. This is a humanistic approach towards resolving the issue faced by many home owners of the Habitat for Humanity. References Lowi, T. J. (2011). American Business, Public Policy, Case Studies, and Political Theory. Retrieved from http://www.nomorepolitics.info/nida/sombat/014.pdf Mississippi Home Corporation (MHC) (2004). Habitat for humanity loan purchase program. Retrieved from http://www.mshomecorp.com/lender%20info/pdf/manuals/Habitat%20Manual.pdf Florida Attorney General. (2008). Tax status of Habitat for Humanity property. Retrieved from https://taxlaw.state.fl.us/wordfiles/PTO%20AGO%202008-52.pdf Read More