Well California Dopers (or interested parties) what do you think?
With the California Governor recall/election vote in the offiing there is a lot of discussion surrounding the issue of whether it is desirable to continue with, or scrap, Proposition 13 given CA’s continuing financial crisis. This was advocated most recently by famed investor Warren Buffet in an advisory capacity to Arnold Schwarzenegger’s campaign for governor, but Schwarzenegger quickly backed away from this proposal.
Here is a (IMO) quite good, one page arm’s length overview of how it’s effects have been felt historically and currently by the Public Policy Institute of California - You really should read this.
Is it time to get rid of Prop 13? If it was scrapped would property taxes in CA soon become intolerable again?
CA has a spending problem, not a revenue problem. Spending growth outpaced population growth and the nitwits in Sac didn’t realize that business cycles include down years, too. If you look at income tax rates and slaes tax rates in CA, they are among the highest in the nation.
There are some serious problems with prop 13 (such as the disincentive to trade up in the housing market because your taxes go up so much), but it’s a lot better than the system it replaced (with people unable to afford to live in their own homes because property taxes went up unchecked).
The other problem CA has is an initiative process with which lots of “feel good” issues get passes, and then somehow have to get funded. I’d rather see an overhaul of that process, where funding sources are required to be explicitly detailed in the initiatives, rather than loosening up the prop 13 rules.
I am not familiar with the situation in California but am willing to debate the idea in general. I believe that depressing taxes on property is a bad idea. Property is wealth. If you have wealth you can afford taxes. If you don’t have the money then you don’t get the property. I see no difference between a minimum wage Joe or Jane that can’t afford to buy a house in the suburbs in the first place and someone who can no longer afford to live there unless they can avoid paying their fair share of taxes.
I am unsurprised that Cali has high income and sales taxes given that they are giving the wealthy such a big tax break. ( Here I am defining “wealthy” as someone who holds wealth in the form of real estate. ) I bet they have really high fees too. That’s great if you have old money. You get to keep the family palace at 1970’s property tax rates, you take a hit on income tax but you pay the same fees as everyone else. That the state is spending money on things it shouldn’t be is undoubted. Equally doubtless is that you can’t get people to agree on what should be cut. Despite the higher taxes other than property tax I bet that the state is spending less per capita than it was before Prop 13.
Further I question that property taxes were unchecked before Prop 13. Taxes had to be raised by the legislators and that is never easy to do unless you are raising taxes on someone else. ( Which is why I’m sure the fees are high. Let the poor slobs pay for everything, they aren’t as politically active. ) The idea of imposing a 2/3 rule to raise taxes is unsupportable. The reason the crisis has come to a head right now is because the Republicans refused to compromise. From what I hear they refused to consider any tax increase and why should they? They can stick to their guns and force a crisis while the Democratic governor takes the heat. What you have then is minority rule. The few rule the many.
I think that Proposition 13 was a bad idea. They saw something that they perceived as a “problem” with our tax system, and implemented a fix that was just as unfair, if not moreso, than the original problem. Astro’s cite is a pretty concise explanation of the large scale results, but it doesn’t touch on the basic unfairness of the tax system experienced on a microeconomic level (e.g., mine): people in identical houses right next to each other pay different property taxes.
Here’s my real-life example: I bought a condo for $150K, so my taxes were baselined at $150K. My next door neighbor bought hers for $80K five years earlier. Since the assessed value of her property was limited to 2% appreciation per year, she was paying taxes on about $84K at the same time I was paying taxes on $150K. They’re the same property, we’re protected by the same police and firemen and our kids (not that either of us has any) go to the same schools, but I’m paying 78% more than she is to buy such services. It results in an unfair tax burden on new homeowners.
The horror stories that were presented when Prop 13 was being sold were generally about older people on fixed incomes who were having to pay taxes on $300K homes that they’d paid $30K for. Well, cry me a river. The other way of saying that was that they were sitting on top of $270K in gains, and if their homes were too valuable to afford taxes on, they could sell them and buy less expensive homes elsewhere. It always bugs me when people gripe about paying too much in taxes because they have so much more income or property to tax. To me, Prop 13 is analogous to the insane New York rent control situation – legislatively tinkering with market forces and making things worse. (Sound like a Republican, don’t I? The irony’s not lost on me).
When Arnold Schwarzenegger cites unfair tax burden in the same sentence as he voices support for Prop 13, it sounds hollow. Sure, as an aggregate, maybe we are paying too much in property taxes, but on an individual level, some of us are paying way too much and some of us are paying way too little. Personally, I’m pleased that Warren Buffet’s assessment is similar to mine.
Amending Proposition 13, not to increase tax rates but to make it harder for corporations to escape reassessment. Homeowners can’t disguise a sale as a 100-year lease, so why should banks and insurance companies be able to?
A quote from an editorial “Seeds of an uprising” Sunday 8/24/03 L.A. Times
Prop 13 has crippled our schools. It directly caused the decline of the California public school system. PROP 13 IS WHY OUR SCHOOLS SUCK. There is not getting around it.
I grew up in a suburb that was a big hit in the 1950s, but when the next generation came they moved on to newer brighter suburbs. So most of the neighborhood is old people or rentals paying mere pittances of property taxes.
Since property taxes fund schools, my school was a falling-down failure. Of course the kids in the nice new communities got palaces for schools. So in the end the poor get poorer (through undereducation) and the rich get richer. It’s an abominable scheme that has directly and personally affected the lives of many of my best friends.
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2sense wrote:
I am not familiar with the situation in California but am willing to debate the idea in general. I believe that depressing taxes on property is a bad idea. Property is wealth. If you have wealth you can afford taxes. If you don’t have the money then you don’t get the property. I see no difference between a minimum wage Joe or Jane that can’t afford to buy a house in the suburbs in the first place and someone who can no longer afford to live there unless they can avoid paying their fair share of taxes.
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Prop 13 did not eliminate property taxes so I don’t know how you get the idea that property owners are somehow getting a break. The key issue is the unfairness of taxing someone on something they have absolutely no control over (the increased value of their home) and has no basis in their ability to pay or not. Having your house value double in two years is relatively meaningless unless you plan to sell it and move to a lower cost state.
Property owners are getting a break because their tax rates aren’t allowed to grow along with the rest of the economy. As time passes a smaller and smaller percentage of the tax burden falls on them. This is objectionable because, as I have said, they have wealth. Part of the tax burden is shifted from those people and corporations who can afford it to those who can not without doing without. Unfair.
People certainly do have a say in how much they pay in property taxes. They can choose to live in less expensive homes if they wish. Also the taxes are enacted by their representatives so people do have control of them. Democratic control. Unless, of course, you have stupid rules such as requiring a supermajority to raise taxes. Then you don’t have democracy but minority rule.
Having the value of your house double certainly is a benefit to you whether you intend to sell or not. You can take out a mortgage on it or just list it as an asset when getting a loan. You have the assurance that you have wealth for retirement or to pass on to your heirs giving you not just peace of mind but more disposable income today because you don’t have to save as much. Plus your expensive house will help you socially. It might help get you into the country club, for instance, or let you one up that competitive cousin. Real estate is wealth and wealth is always a benefit.
If you can’t afford the taxes on your home then you can’t afford to live there. To repeat, that is no different than not being able to buy the place in the first place. There is no guarantee of success in a capitalist society. If you can’t afford things then you do without. The person forced to sell will have to console themselves with a 100% profit over a twenty four month period. As groo says, cry me a river. There are homeless people paying more in sales taxes so that the “unfortunate” whose house has doubled in value can get a tax break. Unfair.
Having just become a homeowner, I certainly don’t want to see it repealed, because I think I would in short order be unable to afford my home.
But apart from my own interest, I can’t believe the attitude some of you are taking! “Your house has become more valuable - move it and go live somewhere else!”. That’s just ridiculous! One’s home represents a great deal more than simply an investment, and must be treated as such. Here in California particularly, it’s downright cruel to suggest that it should be the “tough luck” of the folks who worked and saved and paid their mortgage and the interest and their taxes, settled for decades and created a life, often planning to spend the rest of their lives in this nest that they’ve worked hard to have.
It’s hardly as though people who paid 30k for a house that is now worth $300k can take that 300k and live anywhere near as decently anywhere near the neighbohood they’ve put down roots in for 30 years! Sure, take the $270k you made on your house in LA and go live in a shithole in Bakersfield so someone else can scoop up the house you didn’t want to give up in the first place? Why? How is that fair?
Excuse me…who are you to determine who can afford something? Because I own a house that means I can afford any ol’ thing you throw at me? Guess again. Owning a house is damned expensive, I have alot less available coin now than I did when I rented. And as impressive as my house may be on my balance sheet, it doesn’t do anything for my bank account except drain it.
Newflash: loans arent’ income, they are debt, and they have a cost.
No kids. And I only don’t have to save if I plan to sell my house and move to Bakersfield. I don’t.
Bullshit. What if the taxes go up to 50% of the value of my home? Would that be just my tough luck?
Huh?
I have news for you… it’s a virtual certainty that I am paying vastly more in sales taxes than Mr. Homeless Man is, PLUS my property taxes.
I suggest you do some reading about Prop 13 and what it actually does before your continue to debate in this thread. You have made so many factually incorrect statements about it that I can only assume you simply do not understand what it does and doesn’t do.
You started your first post with:
and all you have done is confirm that statement with your susequent posts.
I remember how tough it was at school because of Proposition 13. Our teachers took every opportunity to remind us of it. But there’s gotta be another solution other than repealing Prop. 13.
I don’t want to see people run out of the homes; having to continually moving to a shittier and shittier home, just because the taxes constantly are getting too high. People should be able to buy a home and live in it for a long time to come without having to worry about having the rug pulled from underneath them. What is the point of putting down “roots” if they never can feel secure in being able to keep their home?
If the house was definitely within their budget when they first bought it, and their budget does not decrease significantly, why should they have to constantly sweat bullets worrying about being able to afford to keep their damned house? What’s the point of home ownership, anyway?
What a cop out. If you care to point out my mistakes I’ll show you how you are wrong or admit you are right and retract them. Your call.
Stoid,
Did you read my posts? I thought it was clear enough but I’ll try again. I am merely making a simple observation. If you own a house then they can afford to own that house. Part of the cost of homeownership is property taxes. If you can’t afford them then you can’t afford to live there. But you do own and you do live there. QED.
In response to your newsflash, you need collateral to get a loan. Homes are collateral so owning one allows you to get a loan. A more valuable home would allow you to get a larger loan. Therefor there it’s not true that there is no benefit to having your home double in value even if you don’t intend to sell it which was the assertion of John Mace that I was disputing. The comments about retirement were also directed to him and not you, who hadn’t even posted in the thread yet let alone shared your personal details. The comments about 100% profit were offered in the same context.
But now you have posted so lets consider your situation. Granted, a home is more than just a building. But there are more important things. You don’t ever want to move. Fine. Then you better make sure to earn enough to continue living there. If you can’t then I would feel bad for you but not as bad as for the person with no home at all. I don’t care how much money you, or anyone else, pays in taxes. My concern is the effect of that tax burden in human terms. I would rather the government take $1,000,000 from you even if that meant you had to sell and move to Bakersfield rather than take 20 bucks from someone if that meant they wouldn’t be able to buy food or medicine for their kids. I care about people and you can’t tell the burden on people just by counting the money.
I’m quoting that in context in hopes that you will see that you have failed to address my point. To repeat: what is the difference between you no longer being able to afford your home and someone else not being able to afford it in the first place? You make a big deal about being forced to move from your beloved home. What makes you, and other homeowners such as yosemitebabe, so special that it is “downright cruel” for you to lose your home if you can no longer afford it when so many others never could?
As for your statement, if the new assessment is unfair then you should fight it. If you can’t fight it legally then you should do so politically by pressuring your elected representatives. If they won’t help you can work on electing better representatives. What you shouldn’t do, IMO, is try to prejudice the tax system in your favor so that the government can’t assess fair taxes.
2sense, I can see the fundamental difference in our thinking.
I am a liberal.
You are a socialist.
The fact that others lack is certainly cause for concern, but it is not my direct responsibility. I am willing to be taxed, and I am willing for my taxes to go to help the less fortunate in our society, but you obviously believe that everybody needs to be equalized.
I don’t.
We obviously have fundamental differences in how we view the world, this country, government, wealth and poverty. I don’t think we are going to change each other’s thinking in this thread.
Yet Stoid you say your lack is cause for concern to others. If the tax is a certain percentage of the appraised value you should pay that tax. It is not the governments direct responsibility to ensure that you can afford these taxes if you can’t move.
Here’s a fact. Before Governor Davis took office, we a record tax surplus. We were taking in much more in taxes than we were spending, and we spent a lot. After 5 years of Davis, we’re 38 billion in the hole.
Our current fiscal crisis is a result of mismanagement and a poor business climate (partially due to Workmans Comp problems). It is not the result of Prop 13. Granted, changes could help ease the crisis.
I lived in California when it was passed. The sponsor was working for the Apartment Owners’ organization IIRC. Prop. 13 benefits commercial property more than residential property. When a property is sold, the tax rises to 1% of the selling price. Commercial properties tend to turn over less frequently, so the tax remains capped at 1% of the last selling price.
