More on German Property Tax Talk

N-TV did a great update on the property tax episode that came out of the German Constitutional Court yesterday.

As much as migration/immigration has been pushed back away from the public top problem list, and most were thinking that the welfare/Hartz IV deal would be problem number one for a while....this property tax situation will likely be a major Pandoras Box to be opened and affect public frustrations....likely affecting the 2021 election as well.

Virtually every single house and apartment in Germany will be affected.  German cities collect 14 billion Euro on property taxes.  What the court said in effect is that there is an unfairness situation which exists, and the nation must develop one single clear policy.

As N-TV tells the story.....all of this will lead onto new 'distortions'.

If you live in a major city (like Frankfurt)....even as a renter, you are paying part of the property tax for your building.  So if this were a fantastic high-value apartment building.....a portion of monthly rent covers the owner's tax bill.  If the new change pushes the bill up.....renters will have to pay a higher rate.

But this also covers home-builders.  If you were looking at a major development for a housing area (say 200 homes), and you think that the property tax in this town will make selling the homes difficult....why build there?  You'd go down the road a few miles to find a smaller town and less tax implications.  This will lead to some map which will identify high tax cities and low tax cities.

The other issue pointed out is the potential to increase taxes.  Everyone fears this angle to the story.  The suggestion by the court, and by journalists as they reported everything last night.....no one should expect more taxation to occur.  But then you ask the question.....if this was an unfair taxation system....how exactly will you correct this without people paying more?

An affect on house values?  I would suggest when this finalizes....a major analysis will occur....state-by-state in Germany, and various maps will produce cities with significant taxation, and cities with average taxation.  All of this will lead to a five-to-ten year public anger that some housing prices were affected, and hurt the consumer. 

Will this become the number one political topic for 2018?  No....the welfare episode or dumping of Hartz IV, I think.....will remain topic number one for this year.  Somewhere around spring or summer of 2019, the model options will come out, and a bitter fight will erupt.  With state elections in 2019 and 2020....it'll have some effect on the outcome.