Isn’t there now a move afoot to repeal the “car tax” (tax on personal property)?
Just a side note: The last Republican governor did that here in VA, and it contributed to a huge deficit, polarized the Republican party, caused gridlock in the legislature, and eventually cost the Governor’s hand-picked succesor (Governors are limited to one term here) the election. Local governments rely on personal property taxes to pay for local government services - something the Gov. seemed to forget.
Stoid: Heh. Sure looks to me like you’re not “Stoid of the liberals” on this one. You didn’t get mugged, you just bought a house…
You sound very confident in your opinion. I assume, then, that you have some data to back this up. Specifically, some comparative data on per-student educational spending in CA versus other states that have better schools. Do all the states that have better educational outcomes than CA spend more than it does?
Ah, naked self-interest shaping broad public policy. You’d make a hell of a Republican, Stoid.
Nonsense. A home is an asset, just like a car or a bank account or an investment portfolio. And while I have some problems with singling out certain types of property for taxation and not others, it’s silly to have fiscal policy driven by romanticized notions of home and hearth.
And yet Prop 13 actually makes it significantly more difficult for people to afford a home. By creating a huge financial disincentive for people to sell, Prop 13 restricts the supply of available homes. That results in artificially higher prices for the smaller number of homes that are available for sale. That in turn means that new home owners are also paying artificially inflated property taxes.
One other thing worth noting is that the disincentive to sell created by Prop 13 maintains also discourages new building on occupied lots. Buildings that otherwise would have been replaced with something much better instead stay in place because a new building means an updated appraisal value. Maybe you folks in California don’t notice because you’re used to it, but every time I visit out there, I’m shocked at how old and crummy most of your housing is, even in solid middle-class neighborhoods. Seriously, you guys tend to live in what I can only describe as shitholes.
Ah, the American dream . . . to spend way too many years living in junky old rental housing while saving money for a down payment on a crappy old house with a price that’s been artificially inflated so that long-time homeowners and commercial property holders can pay way less than their fair share in property taxes.
“Fair” ain’t got nothing to do with it. Nobody is entitled to immunity from the marketplace. If you’re going to have property taxes–and to repeat, I’m not a big fan of property taxes in the first place–you’d darned well better assess those taxes based on something resembling market values or you’re going to have all sorts of nasty consequences, both on government revenue and the marketplace itself. If the result of that is that people are in danger of losing their homes, then the proper way to address that is by adjusting the tax rates or finding alternative sources of revenue. However you identify the problem, Prop 13 is a terrible solution.
I should have pointed out that Stoid, in fact, did a great job of listing many errors in your post. I won’t rehash it-- just read his post.
The fact that you suggest people go into debt to pay taxes is simply absurd. Especially when one considers that many of the people adversly affected were elderly (retired) on a fixed income. They are not in a position to increase their future income to offset the added debt.
I’d also like to point out that, as I said earlier, Prop 13 does have it’s problems. But it is better than the system it replaced. To repeal it without a better alternative is simply the wrong thing to do.
Disclaimer: I am a homeowner in California.
The problem I see with the idea of repealing Proposition 13 is that the assessed value of someone’s home is a factor that they only have partial control over. To raise a homeowner’s property tax based on something he did nothing to affect strikes me as fundamentally unfair.
Example: In 1974, my father bought a home in Los Angeles for $150,000. It was a fixer-upper in a modest neighborhood, and he managed to get by at $6/hour through a fair amount of moonlighting and multiple jobs. In the intervening years, though he’s fixed up the place a bit on his own, the house is not significantly different than when he first bought it.
Yet, in the same time, the neighborhood around him has gone up in value – the nearest main street (Wilshire Blvd. for you Los Angelinos) has been renovated to attract more businesses, a massive new shopping center has opened up three miles away, and Hollywood (literally a ten-minute drive) has been undergoing lots of renovations and rebuilding. A fair assessment of his current home would be around $600,000+ – even though he hasn’t himself done anything to warrant the increase in value.
Should he be forced to go into debt to pay the taxes for his home? Or be forced to move out when he can’t afford it? I can’t see a convincing argument why he should.
I lived in California when Proposition 13 passed. It was a bad proposition, but not because of the long-term effects on property taxation, which, of course, can simply be avioded through taxation by other means. Of course, California managed to really make a mess of things by extending the concept of a super-majority to virtually all taxation of any kind, but all this really means it that the state needs to be more frugal in its expenditures than it might be if it could raise and lower taxation rates more freely.
The main trouble with Proposition 13 came at the time it passed. Not only did it put a cap on the rate at which assessed values could increase, but it also returned assessment levels to those used in earlier years (I forget just how far back they went and am way to lazy this morning to look it up). Unfortunately, schools and local government, the primary beneficiaries of property taxes at the time, had already increased their expenditures to take into account the increased revenue stream occuring from the very quick growth in property valuations. Sacramento was forced to provide bailout money to the institutions which faced suddenly decreased revenue streams. Shortly thereafter, the economy (which, as those of you alive at the time will recall wasn’t exactly in the best of shape in 1978 already) began to go sour and this put revenue pressures on the state, as well as local government. Frankly, it isn’t clear to me that California ever did overcome the consequences of trying to cope with the short term effects of Proposition 13.
Nevertheless, the fundamental idea behind the proposition seems sound to me. Unlike other property, we treat homes in a special way. Note that there are special rules regarding taxation of the increased valuation of a home over time, rules intended to prevent homeowners from having to give up in money a part of the increase in value of their home. As a former homeowner in California, it was quite helpful to know that I could predict with certainty year to year what my property taxes would be. It was also nice to know that a sudden increase in interest on the part of others to live where I did wouldn’t cause me to have to look elsewhere for a home. In short, property taxes in California provide a stable base income for local government. While the value of that revenue stream lags periods of increased interest in local property (or periods of significant inflation), as noted above there are other ways to provide for increased revenue, ways that don’t threaten your ability to stay in your home.
I’m not sure why anyone would think it desirable for people to be forced out of a home simply by it’s suddenly increased value. The only possible consequence would be the further stratification of society, with poor and fixed-income people forced into undesirable locations (Bakersfield does come to mind…) while those with money and/or constantly increasing incomes can live wherever they want. Contrary to what one might think, too, it wasn’t just swank areas that were affected by the valuation rise of the mid-70’s; one of the strongest areas of support for the proposition was Los Angeles County, especially the San Fernando Valley and the various suburbs located up against the foothills.
OK, I lied. I’m energetic enough to look it up. Rates were rolled back to the 1976 assessed levels.
For a brief view of the effect of Proposition 13 on state and local finance in California, go here. The web site belongs to the Public Policy Institute of California.
In the end run, Proposition 13 forced a switch of fiscal responsibility for local programs to the state government. It was not Proposition 13 that caused fiscal difficulties for California; it was the inability of the Democratically controlled legislature and the Republican-controlled (for most of the time since) administration to keep spending in line with revenue resources; a difficulty exacerbated by subsequent propositions passed by the citizens of the state.
OK, let us take your real life example and apply it to some other taxes. Let us say you earn $80k/year (note all these numbers are made up, entirely) thus you pay so much in State income taxes, and Ca Income taxes. You other neighbor is living on child support, a part time job, and a tax free annuity she inherited. She pays no Sate income tax, and far less sales tax than you. But she stil gets the same “Police & fire prot, and her kids go to the same schools”. Clearly- unfair- you get the same benefits, thus all should be taxed the same, right? :rolleyes: :dubious: Now, we’ll also take another neighbor- both you and he own Honda sedans (again, entirely made up, you might own a Hummer or only a bicyle for all I know). Yours is brand new, his is 10 years old. However, thus he pays way less Car tax (which is based upon the value of your car, you might know it as “registration”, but most of that is a Tax), in fact he pays 1/5th what you pay. But you get the sme roads to drive on, right? Same freeways? In fact, he owes the same car- well, sure his is worth less than a tenth of yours, but so?. Clearly unfair, again. :rolleyes:
Since when has taxes paid had anything to do with benefits recieved? No one gets faster fire response because he pays more taxes. I don’t get to check our better or more books at the public library because I pay more taxes than a poor student. My kid does not get more individual attention from his teachers just beacues I pay more taxes than anyone else who goes to the same school. This arguement is completely specious.
Then- why should a retired couple be forced to sell their house, destroy their roots, move away from their family just becuase their old house is now surrounded by homes that sell for 10X what they bought theirs for?
Remember- California is still around the middle in overall tax burden. Prop 13 did NOT reduce overall tax revenues. Schools are NOT hurting because of prop 13 (if you think they are, show me that their budget has gone down since it’s passage). True, it does reduce local control over how & where the moeny is spent (as the link our OP supplied said), but still the OVERALL amount of money spent on the CA schools has not decreased- in fact I think it has increased.
Then, Minty Green comes up with the idea that somehow Prop 13 creates a housing shortage as it “creates a disencentive to sell”. Well, sure. But how does that create a housing shortage? I mean, if you SELL a house, then supposedly you’re also going to be BUYING a house, right? If you sit in your old house, or go out and buy a new one- still you are sitting in ONE house, thus no shortage is created. Next- is his idea that no one improves property due to Prop 13. Huh? Just like BEFORE Prop 13- improvements raise the value of your property by the value of that improvement. Thus, Prop 13 CREATED no new disencentive to improve your property. Your tax would increase the same either way. No unbiased analysis of Prop 13 has come up with either of Minty’s conclusions. And, outside of bad neighborhoods (which exist in very state) no one would come up with the idea Californians live in “shitholes”. In fact, due to our economy, our housing is very, very nice indeed, thank you, and I live here, and travel all around our State- thankyouverymuch. Strike 3. In fact, I am on a local government housing panel, and altho housing prices and such are hotly debated- along with Prop 13, and rent control- no one has come up with these specious arguements. Dude- I LIVE here, you don’t.
In fact, there are only two fair and unbiased arguements against Prop 13- and both are in the link our OP has supplied (which is fairly unbaised). 1. Local control of Prop taxes has decreased. 2. Other ways of increasing income (like fees, cigarrete taxes, and the like) have had to increase. Now, one can argue that more local controlof how & where Prop taxes are spent is a GOOD thing- but since this results in schools in rich neighborhoods having many times the per student spending as “inner city” schools, I don’t agree, myself. One can also argue that raising the tobacco tax is BAD, and taxing old folks out of their homes is GOOD. But I also disagree on that.
BUT overall , taxes have remained about the same (CA was in about in the middle of overall tax burden before Prop 13, it remains so today), and so has spending. Just the “how & where” the taxes & spending has changed.
And in response to the rather silly post from minty green, let’s just keep in mind that real property is the only property owned by individuals taxed repeatedly year after year. Income is taxed once; after that we leave it alone (except to the extent we tax the cost of a purchase with it). Stock and other vehicles of investment aren’t taxed on the gain in their value until those gains are realized. And so forth.
But property taxes are in reality an ongoing expense of ownership (in California, as in some states, cars share this burden, and you’ll notice part of Grey Davis’ current unpopularity relates to his proposal to significantly increase THAT cost of ownership). And this cost of ownership isn’t just paid by homeowners; the increased cost of rental property ownership leads to higher rents; the increased cost of commercial property ownership is passed on to customers and purchasers. So, even though property is an asset, the taxes adjusted by Proposition 13 are not the same as the taxes we levy upon other “assets.” I seriously doubt that minty green is in favor of a yearly assessment upon the value of investment holdings, such as common stock, bonds, the old piano in the corner of your room, etc.
As for treating homes differently from stocks or other assets, I’ll simply note that you don’t live in other assets. I’m certain that minty green’s tone would change if faced with the loss of home. This difference is established in numerous aspects of the law, including bankruptcy procedings, inheritance taxation, etc.
And, with all due respect, which isn’t much, “fair” is ALWAYS a part of proper governance. Governments which forget fairness are subject to adjustment.
Which is precisely why I don’t like property taxes. But if you’re going to have them, you damn well better assess those taxes based on market value, or you’re going to end up distorting the market in ways that are detrimental to a lot of people, i.e., everyone who’s looking to buy a home or who has just bought a home and now gets to pay a wildly dispropotionate tax rate because of that purchase.
Depends. Florida has a “wealth tax,” as I recall. You pay an annual tax based on you complete bottom line. That would be far more fair, in my view, than most taxes on real property, but that’s neither here nor there given that we’re talking about Prop 13.
Homes don’t magically appear out of thin air, you know. When we bought our house, we cashed in a good chunk of change from other investments to make a hefty down payment. In a very real sense, mrs. green and I are living in those “other assets.”
See what I mean about naked self-interest, Stoid? What’s good for minty green is good for the rest of the country, right? How absurd.
Sure. But “fair” doesn’t have anything at all to do with the free market, and it’s the market that determines the value of people’s housing. Prop 13’s manipulation of that market hurts a whole lot of people in ways that never should have happened.
The proper way to go about tax relief is to cut tax rates, not to arbitrarily restrain the “value” of the items subject to taxation. Or would you argue that it would be wise to pass a similar law w/r/t federal income taxes, providing that nobody’s taxable income should rise more than 1% in any year? Sorry, the denial of reality in such circumstances is just too silly for words.
Oh yeah. And that’s worked out so well for California, hasn’t it?
I have had the “benefit” of living in another state with a similar problem to the one we now face in California.
In the 1980s, the same people that got Proposition 13 passed in CA also got “Proposition 2 1/2” passed in Massachusetts, using the same arguments used in California. Property tax rates were not allowed to increase more than 2.5% per year under any circumstances.
Now, MA is a much smaller economy than CA, and the effects were felt in a few short years.
First, all the arts and other electives were removed from many of the school curriculums, which received the usual idiotic hemming and hawing about belt-tightening and questions about what real use cultural education was to American society anyway, and so forth.
Then all areas of the schools had to cut back, cutting salaries, losing more competent teachers to less cheap states and private schools, etc., which resulted in more blather from the penny-pinchers about inflated salaries, damn those unions, blah, blah, blah.
Eventually, the schools had been cut as far as they could be, and my town had to put several Prop. 2 1/2 overrides on the local ballot in order to fund adequte police, fire, and hospitals. The voters passed all of them readily (even the ones that put arts back into the schools), to keep the community from diving into the toilet.
Several years later, in a town nearby that did not pass any overrides, the grade school students I was teaching were protesting the schools to keep adequate science instruction (no more arts to cut).
California is a lot bigger, and it would take a much longer time for the negative effects of Proposition 13 to be felt. I have not lived in the state long enough to compare the past to the present, but even if Prop 13 isn’t already hurting the state, it eventually will. At some point, all the “fat” has been trimmed, and services that everyone except the devoted skinflints can all agree are essential become degraded. The people who provide state services like to eat, and food prices aren’t going down anytime soon. The price of services will rise, and unless they are paid for with matching revenue, you get less and less, in terms of both quantity and quality.
Granted, the state is currently in the hands of fiscal morons, so it’s difficult to say if Warren Buffett is correct right NOW, but his statements that Prop 13 must go will eventually be painfully true.
You will hear various imbecilic remarks along the lines of “I didn’t get no cultural edjamacation and it ain’t done me no harm”, “I don’t need police as long as I have my shotgun”, and perhaps even “I can buy my own underwater tank and small emergency pumping system for much less than my share of what the town pays the Fire Department each year”, but the bottom line is this: People who think this way aren’t worth living near, and communities that result from this thinking aren’t worth living in, and eventually a majority of the people realize this.
How bad it needs to get before this happens is anyone’s guess.
Nonsense. A home is exactly that: a home, a nest, a place to come to at the end of the day that makes you feel safe and comfortable, a place where memories are made. The vast majority of homeowners made their buying decisions based on personal needs, not investment considerations. Where do I want my children to go to school? What is near work? Who are the neighbors? Will I be happy waking up here in the morning? Is it beautiful, peaceful, roomy, satisfying?
Do you actually live here? Because I was the last among my friends to buy a home, and I gotta tell you, not ONE person I know has ever even mentioned taxes or Prop 13 as having any impact whatsoever on their homebuying and selling decisions. None. Zip. Nada. If you mentioned taxes to them as being a factor in their decision making, I am sure they would look at you like you were from another planet.
Fact is, there are desirable areas and undesirable areas. The desirable areas are pretty much built, most long ago. There is a fixed number of properties and that raises their value, along with some other factors. No, they are not turning over all the time, because most people don’t buy and sell houses like they buy and sell cars.
Also, I might be mistaken on this, someone tell me, but my understanding is that a re-fi requires a reapppraisal, and that new appraisal means new taxes. If your position was correct, then no one would re-finance their home. In face, I don’t know anyone who has NOT refinanced their home in the last two years.
Gee, thanks. :rolleyes: (You made me use the rolleyes smiley. I won’t forget that!)
I don’t know where you hang out when you visit, but the solid middle class neighborhood I just moved into is charming. Tree-lined, beautiful landscaping, lovely. The differences are usually in whether you are looking at a mostly rental neighborhood or mostly owner-occupied. In owner-occupied neighborhoods, it’s more than fine.
That’s exactly what they do. That’s what you’ve spent a whole post bitching about. What am I missing here?
???
Are you sure about that? In 1973 my mother bought a very nice duplex on top of a hill with a gorgeous view overlooking the city, a total of 4000 square feet, in good condition for $42,000. What kinda modest neighborhood fixer upper for $150K was your dad buying a mere year later?? My mom’s old place is currently worth about 1.7 million! (God, I wish she’d been able to hold on to it…)
Stoid: A Refinance may require a reassessment for the bank’s purpose, but it does not affect your taxes. And I agree on the 1974 $150k home price-- way too high. Maybe 1984.
Yes, but capital gains are something the typical investor cannot affect AT ALL, yet I am happy to tax them.
Stoid,
Everyone else,
Well, I was only about six at the time, so I could have gotten the numbers wrong. 
But I’ll mention that our family needed three minimum-wage incomes in those early years to get by, so it wasn’t exactly pocket change.
:eek:
Big deal. I love my car. It makes me feel safe and comfortable, a place where memories are made while driving cross-country. I made my buying decision on personal needs, not considerations of resale value. Cloth or leather? V6 or 1.8T? How fast will it get me to work? Who else owns this model? Will I be happy driving it around town every day? Is it beautiful, quiet, roomy, satisfying?
But at the end of the day, if some s.o.b. trashes my car, I’m going to get fair market value for it from the insurance company. No premium because I really love it, no discount because my insurer has had to pay too many claims this quarter. Fair market value.
Okay, so either your friends are idiots or you’re all just irrational actors. You’d have to be insane to buy a house without taking property taxes into account. I knew very well how much I would be paying in property taxes before I made an offer on our home, and I adjusted my bid accordingly.
Similarly, you’d have to be crazy not to take property taxes into account when deciding whether to sell a home, if moving means that you’re going to face a steep increase in taxes. That’s a significant financial consideration, and most people act rationally when making such decisions. YMMV.
Congratulations on completely ignoring the point, which is that Prop 13 limits housing supplies even further. Tightened supply means increased prices, right? I wonder, how much extra did you pay for your house because other potential home sellers decided to sit on their Prop 13 tax exemptions instead of selling and moving elsewhere?
You are mistaken on that. Prop 13 merely limits the growth of assessed values for purposes of property taxes. An appraisal on a house for purposes of refinancing does not affect the cap on valuation for taxes.
I calll 'em as I see 'em, and I see a bunch of hideously expensive, low-quality homes throughout SoCal. Of course, if I had to blow that kind of money for the privilege of owning a shack in L.A., I’d probably go on and on about the landscaping too. Perspective is everything, I guess.
Quite a lot, apparently. The entire point of Prop 13 is that it limits increases in property appraisals to 1% a year, regardless of the increase in the property’s actual value. That 1% limit has nothing to do with market values. Shit, it doesn’t even keep up with the basic rate of inflation, which is several times that each year.
If you buy a house for $100,000 you pay taxes that first year based on a value of $100,000. If the house increases in value the next year by 5% to $105,000 you will pay taxes on only $101,000. If it increases another 5% the next year to $110,500 you will only pay taxes on $102,100. Add that up for 10 or 15 years and you’re talking about a major, major discrepancy between the market value of the home–i.e., what a willing buyer would pay to a willing seller in a normal sale–and the taxable value of the home as limited by Prop 13. It’s accounting that would make Arthur Andersen piss their pants with joy.
What the hell are you on about? Refer to DS’s post on how one’s home is treated differently than other investments by the government in almost all instances. It absolutely DOES have a special aspect that sets it apart from other investments, no matter what your opinion of that fact may be. And well it should.
Well, yeah, my friends are all idiots, that’s it!
Knowing one’s taxes, and making one’s selling decisions based on the taxes are two different things. You were asserting that all kinds of consequences followed from the way Prop 13 affects taxes, that people have a disincentive to sell, etc. I’m telling you that you are wrong. That doesn’t mean that no one takes takes into account when determining whether one can afford a home, it’s obviously part of the budget.
Can ya cool the sideways slams, pal? Not at all necessary.
See above. You buy a more expensive house, it is a given that all aspects will cost more. Big fat duh. That’s the reality withor without Prop 13!
Yes, but you haven’t made the case that taxes have an effect on the supply. The supply is what the supply is. If there are 400 houses in a given area, and no open lots, well, that isn’t going to change no matter what the taxes are, now is it?
You keep insisting that everyone is sitting around worried about their tax burden, without proving it at all. You simply assume and assert. My own personal observation of California home buyers is that you are mistaken in your assumptions. In your reality, why isld everyone be moving all the time? Again, everyone I know moves or stays based on their needs, not on their tax burdens.
Why are you being so incredibly snotty and rude, minty? Do you really think it’s called for here?
Well, as has been pointed out many times and many ways in this thread, “value” doesn’t mean anything until you sell, and many people, myself included (both before and after becoming a homeowner myself, 2sense), believe it would be ridiculous to continually raise taxes on a property’s “value” when no real money is changing hands. Particularly when we are talking about one’s home, vs. any other kind of investment or asset, since it is unique.
So, which part of “supply and demand” are you having trouble with, Stoid?
But what I’m telling you is that Prop 13 raises the price you have to pay for housing by restricting people’s ability and willingness to sell. That’s quite a different consideration from whether you can afford to spend $X on a home.
Calm down. Rational and irrational are totally common terms when you’re talking about economics. The vast majority of buyers and sellers are rational, meaning that they strive to make the economic decisions that are most advantageous to them. Some few buyers and sellers are irrational actors, meaning that they don’t care or don’t understand the consequences of their economic decisions.
As for the subjective desirability of middle-class neighborhoods in SoCal, I stand by my observations, and I see no reason for you to get offended by them.
Apparently it’s the “supply” side you’re having trouble with. Allow me to explain. It doesn’t matter how many open lots there are in the subdivision. Any one of those property owners will be willing to sell and move elsewhere if it is sufficiently advantageous to them to do so. That means a buyer has to offer sufficient money for one of those sellers to fork over the property. But the mere fact that the property owners will face increased tax liability if they sell and move elsewhere means that you, the buyer, will have to pay them even more money to make it economically advantageous.
Say the homeowner has a house that was purchased for $100K and that would currently be valued at $200K in a competitive market free from Prop 13. But because of Prop 13, the homeowner is only paying taxes based on a value of $125K. That’s $75,000 per year that the homeowner has completely exempt from property taxes, but if he turns the $200K into a new home elsewhere, he will have to pay property taxes on the whole shebang. At California tax rates, that’s what, an extra $2000 or so a year? Not cheap.
So what do you have to do to get the homeowner to sell when the result to him will be increased tax liability? Easy. You have to offer him more money. Anyone around who can calculate the present-day value of a $2000 per year liability in perpetuity? Probably $25,000 or more? Any way you slice it, the buyer gets screwed on the deal.
So if you take a cashiers check for $200K to the non-Prop 13 neighborhood, it’s pretty well guaranteed that at least one of those homeowners is going to take your offer. But if you take it to the Prop 13 neighborhood, ain’t nobody selling you nothing, because you’re still tens of thousands of dollars short of what it will take to make the sale advantageous to the property owners.
If noboy ever worries about their taxes, how did you end up with Prop 13 in the first place?
Any number of reasons. House is too big without the children, house is too small with a child on the way, house doesn’t have a pool, house doesn’t have central air conditioning, house is too far away from work, house is just entirely the wrong shade of purple. You name it. But it’s ridiculous to claim that people don’t consider the costs and benefits of moving when deciding whether and where to move. Prop 13 makes homeowners less willing to sell because of their added tax burden in moving, and that forces buyers to pay more for the sellers’ homes. What’s not to understand about that simple proposition?
You have very strange friends if they don’t consider their tax burdens when deciding where to live. But of course, your own thesis in this thread is that Prop 13 is a good thing because high property taxes force people to move. So I don’t really think your friends are as irrational as you seem to be claiming.
So let’s see if it works the other way around. You spend $200K on a new home, then it gets struck by lightning and burned to the ground. Also, your homeowner’s insurance wasn’t paid up, so you can’t afford to build a new house on the now-vacant lot. Should you still get taxed every year on your $200K purchase price? Or would it be “fair” to tax you only on its fair market value of $40K, the value of the land alone?
Lemme guess, naked self-interest, right?
Let’s look at some facts. Source
Since 1989, there has been indeed growth in several areas. The biggest by far is K-12 education, 42.17% of the growth. Health and human services is 18.3%, Corrections is 16.9%, and general government is 22.2%. Now before you have a fit about this last category, understand that much of this increase comes from tax reductions, since the state had to backfill the revenues lost by local governments. Now, which of these do you think should be cut?
For the absolute numbers, with the 89-90 numbers adjusted for inflation and population growth, K-12 education grew from just over $25 billion to just under $30 billion, Corrections grew from $4.5 billion to $5.5 billion, General government grew from $3 billion to $5 billion, Health and human services from $22 b to $24 b. Higher education shrank slightly, and other major categories (legislative, judical, executive, consumer services, business transportation and housing, and environment were flat.)
It is true that the drastically underfunded schools got a big increase in the last years of the bubble, but this was number one in the voters priority list, and the increase was supported by almost everyone. Test scores have been increasing. I moved here from New Jersey, where students have one period more a day. My daughter was almost a year ahead of her grade level when we moved here, just from more time. She also got art and music, all the things now gone from most California schools. But, my taxes did go down for a more expensive house - and they were a lot more than paid by the people who sold it to me.
What Buffett said, remember, was that he thought it absurd to be paying less in taxes for a more expensive house than he did for his other house in another state. That’s when Arnie told him to shut up.
Somehow people manage to keep their homes in states without Prop. 13. How? Well, taxes are assessed locally. When values go up everywhere, the tax rate goes down in order to preserve a constant stream of revenue. Even then new home buyers will probably pay a bit more, but this will be evened out before long by a reassessment that keeps things fair.
Often there is tax relief for the elderly who tend to be on fixed incomes. Yes, a local government can jack up tax rates, but if the voters don’t like it, they get voted out. That’s democracy. My town in NJ had higher taxes than the surrounding areas, but we got better services than they did, and that was our choice.
Finally, I’d love to hear one person who says Davis should be kicked out because there is now a deficit say the same thing about Bush.
There’s some confusion here, so I thought some definitions might help:
Market Value: The most probable price your property would fetch given lots of assumptions and conditions, yada yada yada. Property tax assessors (should, at least) determine this for your property first. This is also (typically) the value a private real estate appraiser is estimating.
Assessed (or Taxable) Value: This is the value that the tax assessor can apply the total property tax rate to. This should always be lower than or equal to the market value (if it’s higher, people hire me to do a tax protest). In states like California (and Oklahoma) the assessed value is “capped” from one year to the next at a certain percentage increase. Here in Oklahoma, that’s 5%, actually.
Assessment: The process of arriving at an Assessed Value for property tax purposes, which should include in the process a development of a Market Value.
Appraisal: This typically refers to a private real estate appraiser estimating a Market Value for the purposes of a sale, or refinancing, although some County Assessors refer to themselves as County Appraisers. This has NOTHING to do with your property taxes, at least not directly. If you’re getting your home refinanced, you’re getting your home re-appraised (usually), but not re-assessed. When an independent appraiser comes up with a market value for your home, the local county assessor doesn’t know anything about it.
Some other factoids and such:
1.) How much you actually sell a home for is not necessarily the true “market value” of the home, although in most cases county assessors assume this is the case. I can elaborate on this if anyone wishes.
2.) There are numerous ways around the “your property tax gets bumped up to the sale price” rule of thumb, although most of these are not really readily accessible to your standard homeowner. Having the seller form an LLC for the sole purpose of that property, and then just buying the LLC, is one way. Also, hefty fees to people like me can generate an “ad-valorem tax protest” where we argue that the taxable value is above the true market value. In cases where the taxable value is based on the sale price, it might be that prices have dropped. Or, maybe the buyer was coming out of a 1031 exchange, and we can argue that the buyer was “unduly motivated” which violates the assumptions of “market value.” In any event, there are ways around this that are available to large, commercial interests, but significantly less so to Joe and Jane Taxpayer.
3.) California is certainly not alone in having a property tax system like this, although it may be the most severe case. We cap our assessments here in Oklahoma too. For an example of a state where the taxable value is equal to market value with no restrictions, I believe Kansas is like that, although they are considering their own “Prop 13.” Note that real property appreciation is significantly slower in Kansas than in California (at least in most areas…)
4.) I’ve never seen a case where a property declined in value and the local assessor lowered his value accordingly. This may be because many assessor’s taxable values are so far below “market” that it makes no difference. It’s complicated by the fact that CAMA (Computer Aided Mass Appraisal) software, used by all but the most po-dunk county assessors, isn’t very good at figuring when real estate demand is lower than it once was. Even then, though, in areas of increasing property value, assessors’ market values are almost universally lower than the market values an independent appraiser will come up with. Again, we can thank CAMA.
What I’d like to know, if anyone out in California knows, is this: are there any property tax exemptions out there? Here in OK, we’ve got the “Homestead Exemption” which reduces your assessed value if the property you’re paying taxes on is your own place of residence. We’ve also got property tax freezes for low-income seniors. I prefer these methods of targeting precisely those horror stories we hear, than just tossing the baby out with the bathwater (in either direction). Sure, we’re still capping our property taxes, but it’s at a higher rate than California. However, we also don’t have to deal with wildly inflating property values.
Meh. In the case of California, I don’t see any solutions that are fair and equitable to everyone, without causing significant distortions in the real estate market. I think I agree with some of the other posters: the ideal situation is to jetison the property tax and jack up some other tax (probably income, including corporate). There probably aren’t really any ideal tax schemes, but property taxes seem a crummy way of going about it compared to the alternatives.