Latest / Inflation and Your Money with Fexingo: Protecting Purchasing Power and Beating Inflation / How Inflation Is Quietly Recalculating Your Property Tax Bill
Transcript
- Lucas: If you own a home — or rent one — there's a good chance your biggest inflation headache isn't groceries or gas. It's property tax. Luna: Yeah, that one sneaks up on you. It's not like the price of eggs where you see it every week. It hits once a year — or through escrow — and suddenly your payment jumps two hundred dollars a month. Lucas: Exactly. And the mechanism is actually pretty fascinating. Property tax doesn't track CPI directly. It tracks assessed home values — which have been climbing steadily — and mill rates, which are set by local governments. We just got May CPI data: 334.0, up from 332.41. That's about 0.5% month over month. But property tax bills in many counties are rising 6 to 8 percent year over year. Luna: So the gap is real. What's driving it — is it mostly reassessments catching up to the pandemic run-up in home prices, or are local governments just raising rates? Lucas: It's both, but the timing matters. Most jurisdictions reassess every one to three years. So we're still seeing the tail end of that 2021–2023 price surge feeding into tax bills now. On top of that, local budgets are stretched — inflation raises their costs for salaries, materials, everything — so they're pushing mill rates higher too. Luna: Right. And the combination can be brutal. I saw a case study from a suburb outside Atlanta — a $400,000 home assessed at $380,000 last year, now reassessed at $410,000. The mill rate went from 28 to 29.5. That's an extra $600 a year. Lucas: That's a 7.5 percent increase on the tax line, while CPI goods inflation is running around 3 percent. And here's the kicker: property tax is one of the few costs that doesn't have a good substitute. You can't switch to a cheaper brand of housing the way you can with cereal. Luna: Unless you move — but moving costs are huge. So what do you do? Besides hoping for a Proposition 13-style cap, which most states don't have. Lucas: There's one practical move that too few people use: challenge your assessment. Most homeowners never appeal, even though the success rate is surprisingly high — in some counties, 40 to 50 percent of appeals result in a lower assessed value. Luna: Really? I always thought those were a long shot. Lucas: It depends on the market. If comparable sales in your neighborhood have softened — which they have in some areas — you can make a data-driven case. Also, if your assessment is based on a flawed square footage count or an outdated condition rating. One homeowner I know got their bill cut by $800 a year just by pointing out their basement was unfinished, but the assessor listed it as finished. Luna: So it's about being the squeaky wheel — but with comps. That's actually doable. Lucas: Absolutely. And the window to appeal is usually tight — 30 to 60 days from the assessment notice. So if you get that letter, don't just file it. Look at it. Luna: Alright, let's take a quick breather here. Lucas, I want to say something that's been on my mind. A lot of listeners write in saying these episodes help them think about their money differently — and that's exactly why we do them. Lucas: Yeah, we hear from people who've used a tip from the show to save on insurance, or challenge a tax bill, or rethink an investment. It's genuinely rewarding. Luna: And the only reason we can keep this ad-free and focused on the numbers is listener support. If our conversations have helped you, a couple of dollars a month at buy me a coffee dot com slash fexingo makes a real difference. No pressure — just if it's added value for you. Lucas: Totally. And we're grateful for every coffee. Now — back to property tax. There's another layer to this that affects renters directly. Luna: Oh, this is the pass-through, right? Landlords don't just eat higher tax bills. Lucas: Exactly. In most markets, property tax increases get passed through to rent dollar for dollar within a lease cycle. So even if you don't own a home, you're paying that 6 to 8 percent increase through your rent. It's one reason shelter inflation has been sticky even as goods inflation cools. Luna: That matches what we're seeing in the data. The 10-year breakeven inflation rate just dipped to 2.21 — down from 2.23 — suggesting markets expect overall inflation to ease. But shelter components lag, and property tax is part of that lag. Lucas: Right. The Fed's favorite inflation gauge, core PCE, came in at 129.6 for April, up from 129.32. Modest. But property tax isn't even in PCE — it's in CPI's shelter category. So there's a data blind spot. Luna: Which means the official inflation numbers might be underestimating the actual cost pressure on homeowners and renters. That's a big deal for anyone trying to budget. Lucas: It is. And it's why we're talking about it. One more thing: if you're in an area with rapid reassessment cycles — annual, like California does for some properties after a sale — the bill can spike immediately. But in places like New York, reassessment is every three years, so the increase feels like a sudden jolt when it hits. Luna: So the advice is: know your local assessment cycle, and plan for the jolt. If you're three years in, start setting aside a little each month. Lucas: Exactly. And if you get a reassessment notice, don't wait. Challenge it. The worst they can say is no, and the best case is hundreds of dollars back in your pocket. Luna: That's the kind of practical inflation fighting we're all about. Next time we'll look at another hidden inflation vector that's quietly eating your purchasing power. Lucas: Until then, keep an eye on that assessment notice. It might be the most important piece of mail you get all year.