My tale of two rich men, us and taxes on real estate

My uncle Gramps was the husband of my dad’s sister, Marion, who owned the Tot and Teen shop in Mt. Morris.  Nice guy, but I didn’t spend a lot of time with him. My fondest memory of him was winter 1963 or 1964, when he helped me with my taxes. I think I’d brought all the records home (to my parents) for Dad to help. Gramps came over and showed me how, with our duplex rental property, we would owe no taxes on the income. I found it stunning then, and even now, that by listing all our expenses and claiming something new to my vocabulary, depreciation, we owed nothing. The tax laws are made for the rich by the rich, but occasionally the little guy gets a boost.

President Trump, whom the New York Times is trying to smear without the word illegal appearing anywhere in the story,  created jobs, he provided services, and he took advantage of all the “loopholes.” So did Jeff Bezos, the richest man on the planet, who owes no income taxes at all, and who coincidentally owns the Washington Post, also a Trump hater.

I once asked my mother why my uncle was called Gramps, since at that time he may have been 40 something and had no grandchildren, and she said she didn’t know but that was his nickname at Mt. Morris College where my parents and he met (my aunt would have been in high school so I assume they met later).

I hated being a landlord. We met some really nice tenants and with some we have stayed friends. But it only takes one or two bad ones to make you resolve to never do it again. But that duplex, purchased in 1962, for $14,000, put us on a financial footing that blesses us to this day. We took a mortgage for $10,000 and Dad held the second mortgage. The rent, as I recall was $70/month and that covered the mortgage and  the utilities—so we essentially were living rent free. We sold it on land contract in 1967 when we moved to Columbus, and that payment covered our car loan and the mortgage. When the new owner paid off the loan a few years later, someone at the bank discovered an error in our favor, and as I recall we had a nice settlement.

Owning and living in your own home does nothing for your own wealth, but owning real estate and renting it or using it for some other investment does. My father always said the cost of your home always had to include what the down payment and improvements could have earned doing something else.

Marion and Gramps

Shouldn't churches be taxed, she asked?

Emanuel Lutheran Church, founded by Swedish Evangelical Lutherans, Hartford, CT

 It wasn't really a question.  I know what she thinks.  But that's what she said. So that's what I'll answer.

Churches are mostly 501c3 and donations are tax exempt for the donor—there are millions of these and in order to change that you’d have to go after the huge violators that are fronts for political action like the Clinton Foundation or George Soros’ spidery web of groups. Until Lyndon Johnson's run for Senate, churches weren’t muzzled (it's called the Johnson Amendment to the tax code, 1954)--and probably isn't even legal, but its never gone to the Supreme Court. Just the threat of a law suit keeps pastors quiet.  If churches have a business, (selling books, running restaurants, etc.) those profits are taxable, but in the normal sense of the word, they don’t have profits. 

These days, everything is political, even marriage and gender. Do you really want churches not concerned about dirty air or lead in the water in Flint?  Should being tax exempt prevent a pastor from preaching about prison reform, or the condition of the local schools, or the merger of a local hospital or chaos on the school board, corruption on city council or child pornography, or trafficking in persons or marriage or abortion? Some local, state or federal politician or political party has a stake in it for personal gain, I guarantee. 

I vote at a Catholic church; our Lutheran church is also a polling place. In our old neighborhood it was at an Episcopal Church. Can you imagine the scramble for spaces if all churches didn’t donate space for voting, or food pantries? They also sponsor Scouting and Boys and Girls clubs and AA, blood drives, and art and music events (non-religious) as well as literacy classes. Our church has a huge Muslim and Hispanic population for ESL. Want to stop that? (Actually, proselytizing is forbidden due to government rules because some Vista volunteers are employed.) 

The tradition of not taxing churches predates our country's establishment because religion isn’t just what happens in the building or your personal prayer closet, but what believers take into the community. In the Middle Ages, Kings and monarchs didn’t take care of the poor, or educate them, or run the hospitals, the churches did that (still do). However, our country was settled by people fleeing a state controlled church, so our first amendment is written to prevent the state from interfering with churches, although some are confused about that.

When you hear the phrase, “I’m spiritual, but not religious,” think of the misunderstanding it represents (usually heard from lapsed Christians). That was not Jesus’ command. He established communion, baptism, a hierarchy for service, honored his mother, performed his first miracle at a wedding, preached to large gatherings, observed many Jewish laws and traditions and sent missionaries, etc. That’s being religious. 
 

Black churches particularly are very active politically. And as far as I know, no government entity has removed any politician campaigning from their pulpits. Barack Obama created his political career speaking in black churches in the Chicago area—learned his speaking style there (he didn’t become a Christian until after college), because he grew up in Hawaii and Indonesia and wasn't familiar with the cadence or how to sound "black."

I personally believe (and it’s not a popular belief) churches should “donate” the real estate tax value of their land because in many small communities that have mega churches, it removes huge swaths from the tax rolls. Also, some churches have bought up old, decaying sections of malls, which cleans up the area and reduces crime, but also removes property from tax rolls. And from the obvious wealth of some TV preachers’ lifestyle (Creflo Dollar and Joyce Meyer for instance), I believe someone needs to keep a closer eye on the books, not for tax purposes, but for their own souls and credibility.

Home ownership is not a path to wealth

It might be the American dream (soured a bit recently), but it's not a path to wealth, unless you buy it with the intention of selling at a profit, or build it for others to buy, or finance the mortgage for others to pay you back, or own stock in Fannie or Fred, or rent it with someone else paying the mortgage, real estate taxes, insurance and repairs plus a percentage for your risk. Poor people aren't poor because they don't own homes, and they won't become wealthy by signing up for a government deal with no money down (you can still do that with many government programs despite what we learned in 2007-2008). In fact, you can be rich and lose it all, and will have nothing to do with your house, but everything to do with your values (lazy, rude, promiscuous), your bad habits (alcohol, drugs), your health (something you may or may not control) or your marriage (many women become instantly poor after a divorce--it's much more common than "she took me to the cleaners" story--and if she's smart, she won't accept the house in the settlement of assets).

What is a path to wealth is the life style you choose, or should choose, when you become a home owner. You're choosing neighbors, schools, playmates for the kids, distance from employment, public transportation, access to highways, parks and leisure opportunities. Don't renters do that? Not so much--their values are different. Will they be voting in the school or library bond issues, will they complain to the city or the landlord if the trash isn't picked up or the streets not cleared of snow? Like the new employee, the renter isn't "vested." He can move on--he's got his eye on a different ball.

Drive through any high-end suburban neighborhood of any city (I live in Columbus). Look at the people north of Dublin or east of Easton. Do you really think the 30 year old out there trimming the rose bushes got to a $750,000-$1,000,000 house by buying a "starter" in the city and then moving up? Really? With college loans? Car payments? If he's 30, he probably had family help, either for the house down payment or for the college tuition that got him that $150,000 job managing a business. If he's 50, he's probably moved around taking advantage of more responsibility at higher pay with each move. The house is just a symbol of values--hard work, discipline, and genes--it's not wealth building like investing, starting a business, inheritance, or honing your athletic skills and being first pick in the draft (become a millionaire at 19).

We have owned four homes as primary residences (2 in Champaign, IL and 2 in Columbus), and one as a "second home." We haven't had a mortgage in many years. But we are here, not wealthy but comfortable, because the first home we bought was a duplex, and we rented half, invested sweat equity in remodeling, were willing to live in a less than desirable neighborhood, didn't go into marriage with debts, saved when we could, lived on one income even when we had two, didn't take vacations other than visiting relatives until we'd been married 14 years, and got help from our parents.

However much your primary home appreciates, your next place will probably eat that up. You have to live somewhere. Just don't use your equity by thinking your home is a bank that won't come after you.

The weather is cooperating

We're at the Lake. My husband is painting the house this year. The weather has cooperated--in fact, a bit too hot yesterday--84. Milder today with a slight cloud cover. I keep reminding him about sunscreen, but you all know how husbands love to be nagged about their health and safety.

I did make an important reservation yesterday. I reserved the pavilion for our 50th anniversary party (for lake friends) on August 15, 2010. We've got a rain room too, because the weather here is very iffy. We have not a single computer model that can tell you what Lake Erie will be doing this afternoon, let alone a 15 months from now. We'll have our Columbus event on the real date in September.

I'm cleaning. Decided to tackle the throw pillows. Two will be tossed. There is no way to wash them. I'm washing two that my mother made for me about 20 years ago. From the looks of the stitches to close, I've washed them before. She was neat and careful; I just get the job done and hope for the best. I remember when my parents visited for the first time in 1989 and she and I went shopping over in Marblehead to pick out the fabric. She took the pieces home and made pillows. They are very special. It would be nice to be able to pick up the phone and wish her a Happy Birthday (next week).


I'm going to plant a few more flowers--white impatiens. We already put in 2 flats, but they always seem too thin. When our daughter-in-law planted our flowers one year for Mother's Day they were fabulous--only year they looked really good. A good cook, too. I have the proverbial brown thumb and don't like dirt under my fingernails.

We actually had an offer to buy the cottage yesterday. Although it was a bit of a joke. The neighbor said, "I'll pay you twice what you paid for it." That got a good laugh. I'm not sure how real estate is holding up here, but the county, the people who want to kill the golden goose that is supporting their school system, says it is worth about 6 times what we paid. It's interesting how home values come down, but the taxing entity doesn't reevaluate. They just want more. But we will be selling (he promised) in about 5 years. We'll need the money to pay the higher energy costs as the President destroys Ohio's coal industry and auto plants and everyone has to put a windmill in their back yard. And the higher food costs. And the higher cost of everything made with petroleum products from highway paving to shoes to carpet to windshield wipers. And health care (if you think it's high now just wait 'til Obama Amtracs it).

Sigh. Life is just political, isn't it?

Update: I just checked a real estate list. Prices here are still crazy. I noticed a tiny "fixer upper" that would get you laughed out of town at $80,000 if it were on Columbus' west side listed at $209,000. The coffee shop building is listed at $689,000 and that's not the business--just the building. There's a wooded lot on our street (waaaay back) for $174,000.

Vote No on Issue 4 (Library) of $25 million

This information comes from the letters in the UA News, April 22

If a school levy fails, people lose jobs, children's education is strained and communities suffer. But the library levy is not one of those. It is an overpriced, ballooned request upon citizens in a challenging economic climate.

This is the third time the library tax has increased since 2001, and should it pass, UA taxpayers will be paying nearly five times what they paid to the library just 8 years ago.

Of the 3 plans presented to the library board, the most expesive was chosen, and added to.

Operating costs are not included in this request. Therefore, we can expect more down the road.

No library employees will lose their jobs if this levy fails.

Over half the UA library patrons live outside the city of UA and do not pay UA property tax.

One letter writer counted 18 chairs in the atrium, 4 in the video area, 3 being used. Saw children using study cubicles for coloring books. [Actually, I applaud the parent for bringing something to keep the children busy, rather than letting them run loose disturbing others.]

A $25 million dollar levy is over the top for unnecessary expansion. Most seats are vacant. There are a dozen DVD copies of the movie Elf. [And 15 copies of anti-Bush books, and every movie Michael Moore ever made.] Proponents arguments are not for literary or educational need, but for more free entertainment.

People are losing their jobs. Why gold plate the library? Does it really need a cafe, a gathering place, fireplaces--after an outcry these perks were removed, but do they think the taxpayers have forgotten? A $25 million levy goes far beyond "improvements" and is empire building.

If issue 4 passes, UA tax payments to the Library will rise from $996,000 in 2001 to almost $4.7 million annually.

Of the proposed 35,000 sq. ft. Tremont (main) expansion more than 1/3, 14,000 sq. ft. is for the library's staff/mechanical storage space, and the entire lower level will be off limits for patrons.

Two of the library's trustees voted against the levy, citing the bad economy.

Critical repairs are needed: the library has $3 million+ on hand for that.

Other details at changeinua.org.

The recent Miller Park (south of Lane Ave.) branch totaled about $1 million--administrators said no public funds would be used, but records show otherwise.

Residents opposed the "cafe" originally proposed; now it's called a vending area.

Advice from a resident: rein in tax increases, budget for necessary maintenance, prioritize services, heed board members Magill and Perera; be accountable to voters.

Why I won't be supporting the Upper Arlington Library levy

The signs are popping up in yards like daffodils. Can you imagine a worse time to ask people to raise their real estate taxes for a non-essential service? This town is getting grayer and grayer; retired people have lost bundles in collapsing retirement accounts. Our city can't figure out what to do with the little taxable property we do have (like Kingsdale) which only leaves our homes. And it approved a terrible housing experiment for Tremont Road which stands empty.

I'm not at all saying that public libraries are non-essential (although they become less so in an internet world). But this increase is definitely not needed. They just came to us. . . when? Three or four years ago so they could build a drive through book drop and then didn't get it the correct height. And although they want us to voluntarily increase our taxes, when we came to them with our concerns (pornographic and gay sex materials in the lobby) they let the gay activists who don't even live here tell us we have no right to decide what the children see because the library gets money from the county. No concerned parent told the library director that there should be no purchased and cataloged gay material in the library collection. No, the parents of UA said don't leave the free circ trashy newspapers and magazines in the lobby. Let the distributors put them in bars and clubs. This was solved by bringing the objectionable material inside, spending money on special height shelving, and leaving the lobby empty. Great use of resources and input, wasn't it?

No, this library board and director don/t listen to the people, don't buy what we want if we're conservatives, but love to pass the collection plate (oops, can't say that--they don't want church groups to meet in library space if they pray). Sorry. I'm saying NO to this one. I'd say YES to the zoo or the MRDD (or whatever the current acceptable term is) or the schools, but this librarian is saying NO to more money for the public library.

Update: I was wrong. I just checked my blog and the last levy was two years ago. All the reasons I listed then, still exist. That blog content went to the local paper but was never published.

New roots in Vermont

The architectural article in today's WSJ is about a 3 generation Korean-American family (via Communist North Korea over 60 years ago) with a retreat reflecting Korean culture and Vermont practicality. They own quite a chunk of land and built the family compound for about $300 sq. ft. With 48' of glass in the 12' wide dining room, the children can play in the middle of winter without shoes as the room can heat up from the sun to 87 degrees. Our little manufactured porch, 6' wide, at Lakeside does that too--in the winter sun we can almost heat the entire house built in the early 1940s.

I grew up in northern Illinois and even in the 1940s and 1950s I saw many out-buildings of similar concept on farms. They were probably designed by a clever farm wife who helped support the family and send the kids to college with her butter and egg business. These buildings had steep pitches to drop the winter snow and clerestory windows for warmth and light, the nests for the chickens were framed high enough for manure droppings to fall to the floor (also helps with heat and composting), with easy access waist high to reach under biddy for her precious eggs.

Outsiders who come in to rural areas or the inner city or to vacation/leisure towns and set about to recreate a feeling, or to preserve the past, or to establish a name for design, need to realize that eventually, the locals will not be able to afford to live there. I've seen that myself at Lakeside, where my husband has beautified the town with about 35 projects, being the architect for a renovation, a total remodeling or completely new designs on empty lots. When an area is "improved" the property values around it go up, and then the taxes go up. The early sellers do quite well; those who wait or who want to stay there because of location (ice fishing, boating) or family (generations of quarry workers from east Europe) may be out of luck. We have home owners from across the nation coming there for a few weeks in the summer to stay in fabulous cottages--that would have never happened before the 1970s gasoline crisis when leisure spots closer to home began to look more desirable to Ohioans, and the idea spread. Water mains and gas lines were laid and roads improved, and real estate development boomed. I've seen many homes in Lakeside, Marblehead and Catawba leave a family after 3 or 4 generations because the heirs cannot afford to own it, so it is sold to wealthier families. And I've seen owners sell because although they haven't "preserved" or "renovated," the neighbors have and they can't afford the taxes and insurance on a home they only use a few weeks of the year.

Most noticeable is what happens to the urban poor, what happens when a city neighborhood is "improved" or as we say these days "gentrified?" When I drive through some of the wonderful neighborhoods of user friendly townhouses in downtown Chicago full of white and light brown yuppies, close to the parks, the lake, museums and shopping, I do wonder what happened to all those poor and black welfare families of razed Cabrini Green. Did they go on to be middle or upper class citizens, no longer dependent on the government for housing?

When we moved to Columbus in the 1960s, one of the first architectural tours we took was German Village, which had been a run-down slum, and was experiencing a new birth. It was so exciting to see--I still have the fading color photos we took. Tiny brick houses and duplexes that still looked quite traditional on the outside and were already being subjected to some fairly rigid codes, were light, airy and contemporary on the inside--never really reflecting the humble origins of the German working class that built them in the 19th century. That was 42 years ago, so I'm sure those kitchens I lusted for have been done over again, once or twice, and now maybe are being subjected to all sorts of green remodeling to conserve energy, fight radon or remove toxic materials installed just 20 or 30 years ago. So where did the poor go when the gay decorators and lawyer-doctor trendy couples moved in? Well, they moved further out, maybe rented or got a foreclosed house with help from the government and started that neighborhood on a downward slide with trucks up on blocks and broken windows covered with plywood.

Some may have ended up on the Hilltop, where in the past 10-20 years non-profit housing groups with government grants have been trying to "improve" the housing, fairly solid early 20th century 4-squares cut up into 4-plexes. If they succeed, they will push the poor further away from jobs and city services, which are being cut back anyway, strangled by new environmental codes and regulations and the housing meltdown created by our government's belief that everyone needed a piece of the real estate pie.

I don't have a solution; but every improvement, whether private or government, has consequences. The green ones more than most.

Sneaky new taxes

Murray's a bit suspicious of some of Obama's plans to only raise taxes on the rich. I haven't checked out either one of these, but I do own a second home and the county that taxes us should have gold plated computers and diamond studded swim pools in their schools, because few in the community have children (in that district). Based on square footage and what we cost the county in services, it is pure robbery. I can't imagine why this would be considered "double dipping"--we pay huge taxes for what we receive--a county sheriff driving through occasionally. He writes today in an e-mail

"There are new rules taking place in your financial world that your legislators seem to think you don't need to be aware. Like in the first bailout there is a provision that says you can no longer double dip on the tax savings with your vacation home and personal residence. You will pay taxes on your residence only if you exceed the limits but the vacation home, rental or flipper must be taxed. I'm not totally clear on this since it is written like most tax laws, so if it affects you, you might want to check it out.

Then in Obama's "save everyone" plan he says he's going to lower the PAYROLL tax tables so that individuals will have more money each week to spend. THIS IS NOT A TAX REDUCTION! It only means there is less tax taken out on payday, but at tax time you are still going to have to pay on what you earned. People who do this are going to owe big time on 4/15. I may be wrong on this but it's the way I see it.

Who knows what other changes were in the bailout that's been kept quiet. With all the jockeying around with the tax code makes it almost impossible to plan your financial future. You must remember this. The government's source of income is YOUR TAXES. So, with the current federal debt, the bailout plus Obama's grandiose plan TAXES WILL BE GOING UP UP UP in spite of what any of your favorite party members say. So you better plan now as best you can particularly with your taxable retirement funds."

The bailout and the run on handouts certainly can not be laid at BO's feet--except in the sense that he and McCain were two of the senators who thought it had to be signed immediately or the world would collapse, and put into play a contract with America that any 5 year old should have questioned. Everyone with a retirement plan from age 20-90 is participating in a loss of trillions in value, and now he plans a few more trillion to "stimulate" the economy. FDR tried this for a decade and the Depression didn't budge. Governments don't grow the economy by taxing us and spending our money on public works projects. The recent drop in gas prices from over $4 a gallon in the summer to under $2 in December amounted to a couple of thousand in the wallet for most families--especially Californians for whom driving is like breathing. But it didn't stimulate the economy. (It just proved all the libs were wrong that announcing drilling would bring down prices immediately.) We were on a credit binge (spending $117 for each $100 earned) and the hangover isn't pretty. Going into more debt is not the way to fix this.

Welcome to vacation land

In today's USATody a Brit complains that his Florida property taxes in Palm Beach have risen from $4,500 to $20,000 in 4 years. A "homesteader" Floridian pays $3,000 for the same unit next door.

Yes, Mr. Rich European, we've experienced that at our second home, too, although Danbury Township would sock it to us even if we lived there 6 or 7 months of the year. Lakeside, Ohio, is the golden goose in that taxing district, and it makes no difference that we send almost no children to the schools--the fact is, we can't vote. This is the rub in all 2nd home communities. Celebs like the McCains, Kerrys and Clintons who have multiple homes have enough money that it doesn't matter. It really is taxation without representation. The children of Marblehead, Ohio should be using gold plated computers and swimming in diamond studded natatoriums courtesy of the vacationers who don't live permanently in the area. I could move 100 ft. to the west and lower my taxes. If the children who attend Danbury schools aren't excelling in every academic area, leading the state in testing and contests, then it's a sure sign that money isn't what makes a good school.