Opinion: Let’s keep the real estate mandatory disclosure ordinance

What does an existing real estate disclosure order in Juneau have in common with Congress passing a bill to increase the IRS budget by $80 billion? Both aim to give public servants the tools they need to be more effective in their jobs.

However, those who frequently bemoan government inefficiencies don’t seem to care at all when the tax department can’t do its job effectively.

In October 2020, the CBJ Assembly passed the ordinance requiring the buyer in most real estate transactions to report the price and terms of sale 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 order. They got enough petition signatures to take the issue to voters in the October municipal elections.

According to Marty McGee, Alaska’s state assessor at the time, mandatory disclosure laws provide “a substantial benefit to local assessors in the efficient and economical performance of their duties.” In effect, it gives them access to the same information that real estate agents, appraisers, and mortgage lenders get to do their job properly.

Only six states, including Alaska, do not have a mandatory disclosure requirement. Five others require buyers to declare the sale price, but this is not disclosed to the public.

CBJ Chief Financial Officer Jeff Rogers believes the order will lead to “more accurate, and therefore fairer, property valuations.” It should come as no surprise that “buyers are more likely to declare their purchase price when it is lower than the current valuation” than when the purchase price is higher. More noteworthy is his observation that buyers “voluntarily report prices of 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 more expensive properties put them at a disadvantage. Rogers said it’s “much more likely that the lack of information will lead to an undervaluation.” If it were the other way around, the owner would almost certainly appeal.

Underreporting income to the IRS poses similar problems. The Joint Congressional Committee on Taxation estimates that this results in approximately $350 billion in uncollected federal income taxes each year. Again, it is people with high incomes and complicated tax returns who are more likely to under-report what they actually earned.

Audits are the first line of application for the IRS. However, more than half of the audits currently carried out concern taxpayers earning less than $75,000.

That was not the case in 2010. That year, public reaction to the then unpopular Affordable Care Act helped Republicans take control of the House of Representatives. They started using the ACA as a reason to withhold IRS funding. According to a Government Accountability Office report, from 2015 to 2019, “the audit rate dropped by 75% for people with incomes of $1 million or more.”

The increased funding for the IRS, which is included in the Cut Inflation Act drafted by Senate Democrats, is intended to address this problem. Or quite simply, it will help the IRS better collect taxes that are legally owed to the federal government. The Congressional Budget Office estimates that the additional $80 billion the IRS receives in its budget will bring in $200 billion in additional revenue over 10 years. It’s a smart investment.

Conservative Washington Post columnist Hugh Hewitt is not convinced. But what “matters most” for him is that “the Democrats have given the Republicans a problem”.

“Voters who care about their personal bottom line and for whom fear accompanies every envelope that arrives with ‘IRS’ in the return address space” will see the bill as a ‘vast expansion’ of ‘the agency’. most dreaded by the government”.

Republicans already refer to the Inflation Reduction Act as the IRS Expansion Act. If they win a majority using this as a talking point, we can expect them to initiate another round of budget cuts that will once again make the IRS less effective at collecting taxes from tax cheats living among we.

Municipal assessors will be in the same boat if we repeal the mandatory disclosure ordinance. Whereas a vote to retain it will better ensure fair, accurate and efficient property tax assessments and collections.