While Stoid’s comment was not directed to me I think she is right about the tone of this thread. Or at least the tone of my posts here. I’ll try to spend less time dwelling on the motivations for making an argument and more upon the argument itself. Speaking of the arguments, I note in addition to the other items I pointed out in my last post that the Prop 13 advocates are ignoring I have disputed the assertion that an increase in value is meaningless until you sell and that argument has also remained unaddressed.
Thank you, desdinova, for that well-informed and informative post.
Hi, welcome to Texas. We’ve also got a homestead exemption, which basically lops off a chunk of your property’s assessed/taxable value if you also live there. Since most folks’ only real property is where they live, that means most folks in Texas get a big “deduction” from their property taxes. I completely support this, by the way.
Very much agreed. My ideal would be a more or less equal combination of property, total wealth, and sales taxes, all keyed to the bottom line of what government needs to fund its spending.
You want lower taxes? Fine, cut your total spending. Short of that, suck it up and take it like a responsible, non-whiny citizen.
Sorry, that should have been “a more or less equal combination of property, income, and sales taxes.”
Go back and read what you wrote again, ** minty.** Your tone and the words you chose weren’t especially subtle. If you have elected to be more civil, swell.
I didn’t. I’m saying that if you are looking at doubling your house, from 200k to 400k, it is a given that the taxes will be higher and they are considered * simply as part of the greater cost of purchasing a much more expensive home. * You, on the other hand, appear to continue to insist that people actually sit and think to themselves: “My house that is now worth $200k is only costing me 1k in taxes. If I buy a house worth 400k, my taxes will go up to 4k a year! Way too much…forget it!” and I’m telling you that’s just not the way most people think. They think “this house is costing me $1000 a month. A 400k house will cost me 3000 a month. I can/can’t do it.” Period.
Taxes are considered only as part of the total cost, virtually never independently, and why would they? Thanks to (sensible) Prop 13, they are a mere 1% of the total cost, and as such are a relatively minor consideration when we are talking about 400, 500, 600k for a home. You are arguing that taxes are creating shortages of homes because people won’t move because they are so freaked out by the greater tax burden, when that just doesn’t make any sense under any circumstances, but considering your argument that Prop 13 is bad law, it makes * even less! * “Oh, I’d be happy to take on that extra $15000 per year in mortgage and interest, if it weren’t for that backbreaking $2000 in taxes!” It’s just nonsensical, and you haven’t defended the logic of it, you just keep reasserting it as a given.
As a matter of fact, I just got something in the mail from the assessor about this today. Apparently we can exempt a whole 7,000 from taxation! Whoop de do!
Yes, and what is the effect of that on a prospective homeseller/mover? Under Prop 13, any long-term homeowner is going to be paying far less in property taxes than they otherwise would. Thus, they’re not just trading a $200K-based tax bill for a $400K-based tax bill. They’re more likely talking about a $250K increase in taxable property. That means–wait for it–the buyer has to give them more money to make the sale economically advantageous to the seller.
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::sigh:: I’m despairing of ever getting through to you, Stoid. But let me try one last time. The $400K house will cost the potential seller/mover $3000 a month under Prop 13 . . . but without Prop 13, the house would cost less than $400,000.
Say your friend can afford $400K on a home. Great, congratulations, they deserve it. But without Prop 13, they’d be acting in a significantly more competitive marketplace for housing, so they’d only have to spend $360K to purchase a comparable home. And while maybe your friend is truly indifferent to that extra $40,000, most people are not that irrational. So maybe your friend buys the same house and keeps the extra money, or maybe your friend buys a nicer house for the $400K that she can afford. Either way, your friend’s purchase money goes farther without Prop 13, simply by eliminating Prop 13’s severe disincentives to moving.
Actually, it’s 1% plus an additional amount to pay for debt service on any bonds approved by local vote. But the point still stands. Whether you choose to acknowledge it or not, tax burdens are a cost of moving that rational consumers consider and adjust their behavior to account for. Prop 13 increases the tax burden for a person who is contemplating moving over and above the increase that would ordinarily be expected due to purchasing a more expensive home. This makes the transaction more expensive to potential movers and discourages them from moving, restricting the supply of housing available for sale and raising the prices of those homes that are available.
“Freaked out”? I never said any such thing. But it’s a simple fact of life that some people would move if their new home would cost them $2000/mo., but will not if that home will instead cost them $2250/mo. Except, of course, for you and your friends, who apparently don’t care how much you pay for a house or what kind of house you purchase, so long as you get to exercise your privilege of paying more for that house than you would have needed to in a market free of Prop 13.
That’s because it IS a given everywhere else in the known universe that an additional annual expense of $2000 WILL make moving unaffordable for a certain percentage of people who could otherwise afford to move.
You just purchased your home. That exemption will grow larger and larger every year you live there, so long as the house appreciates in value more than 1% annually. That it is a relatively small exemption now in no way obliterates the fact that it will be a very large exemption indeed in 10, 15, or 20 years.
Stoid:
Actually, I live in CA and have considered selling my current home and buying a new one. If I did so, my taxes would probably quadruple, and that has been a big dissintive to me. I may not be typical though, because I have to admit that the financial burden is less of an issue than just the idea of having to pay so much more taxes just because I bought the house across the street. It makes remodelling a bit more attractive, although your taxes will still go up if you add any sq footage.
At any rate, anythig that adds to the cost of something is going to decrease the demand for it (all other things being equal). That’s basic economics. I do agree, however, that any effect prop 13 has had on CA housing prices is minimal. Other factors, especially the demand side in certain fully built up areas, are much more significant.
Oops. for “dissintive” read “disinsentive”.
Minty: I despair as well. If I accept your starting premise “Prop 13 causes the houses to be more expensive” then the rest can reasonably follow. I do not accept your starting premise, and I have now told you that repeatedly, and you have still failed to prove that it’s true. You just continue to say it’s true because this is how people think and feel about it and this is the results that have, without anything except your (derisive) opinion that every rational person is thinking and acting as you do. This simply does not fly here, as you know. If you have some research that demonstrates that your underlying assertion is a fact, I’d be happy to look at it. Til then, it’s just your opinion of what you think is probably true because it seems to make sense.
John Mace’s post would seem to agree with me:
If one is making a mostly lateral move, that makes a certain amount of sense. But most people don’t, do they?
And the square footage thing is what threw me off on the re-fi. Friend of mine just refinanced and took money out to add square footage to her house and her taxes went up. I wasn’t thinking of part 2, the remodel, as separate from the re-fi.
Thank you… my point exactly. Perhaps Minty’s theories would fit perfectly if we were talking about Wisconsin or Alabama. California has it’s own special real estate madness that has little to do with taxes. We’re all just nuts. 
(And we happen to live in one of the more desirable places in this great big land of ours. Funny how such a bunch of shitholes still draw and keep so many millions, aint’ it?)
Or disincentive? 
Another California homeowner here. Let me give non-Californians my perspective, with some dollar amounts attached.
In 1973, my family moved into a pleasant home in Palo Alto, for about $40k.
In 1978, Prop 13 passed.
In 2000, I bought a pleasant home in a town near Palo Alto, for almost $600k. (What can I say, I wanted to time it at the top of the market.)
My property taxes are $440 a month. My mom, who still lives in the Palo Alto home, pays that much per year.
Even though her house has been appraised at $1.2 million.
This is the kind of insanity that Warren Buffet was referring to.
But what to do about it? I don’t want my mom to start paying 20 times more in property taxes; it’s not as if the Palo Alto schools need that money. However, she’s pretty much staying in that house until she passes away, because she doesn’t want to leave California. I think this is what minty is referring to when s/he describes the influence Prop 13 has on the housing supply; my mom–and a lot of her neighbors–haven’t left the neighborhood, even though their kids have long since moved out. My mom’s house is a four bedroom/three bath currently being occupied by two people.
Personally, I’d certainly reform the sections on corporate property taxes. Screw the rich! But as for personal real estate, that’s a sticky wicket indeed.
Please, follow along and tell me which statement you disagree with:
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Prop 13 makes moving more expensive.
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More expense in moving means a financial disincentive to move.
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The financial disincentive to move can be overcome by additional revenue from the sale of the existing house.
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If the financial disincentive is not overcome by additional sales revenue or personal factors that make the move worthwhile to the homeowner (e.g., it’s worth an extra $50K to me to live closer to work or in a better school district), the homeowner will not move.
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Fewer potential sellers means tightened supply of housing and increased prices for buyers.
Quite the contrary. John Mace’s post fully supports my assertions, right down to the statement where he says that the added tax burden has discouraged him from moving. I have no idea whatsoever how you take comfort in his post.
So, John Mace, how much of a tax increase are you talking about here, in dollars? And what’s the discounted present value of that additional annual obligation? $30,000? $40,000? Would you be willing to sell and move if a buyer offered you that much extra cash?
Quite the contrary. Lateral moves are entirely common, particularly in job-change situations.
Of course. I have never suggested that the crazy cost of housing in California is a result of Prop 13. But it should be clear to anyone with even a rudimentary knowledge of economics that Prop 13 inevitably increases property prices above what they would be without Prop 13. Suckers.
There are many reasons to live in California. Housing merely happens not to be one of them.
Of course this is all relative to when one bought one’s house. I pay about $6.5k/yr in property taxes. If I bought an identical house in my neighborhood today, I’d be paying close to $20k. If I wanted to upgrade just a bit, it could easily be $25k.
IIRC, you figure about 1.2-1.3% of the sale price. 1% is State, but there are dozens of local add-ons that bump it up.
Again, for me, is partly just the principle of hacing to pay such extraordinary taxes that bothers me about moving. That and the fact that I have positioned myself with my employement such that I have very little actual income and hence very little tax write-offs. Most people buying $M homes are probably deducting about half their property tax, so it’s not as bad as it seems. So my decision making process is a bit different from what other folks might go thru. Not sure what the discounted present value would be. That would depend on how long I expected to live, or at least how long in CA.
To be fair, the state allowed people who bought homes before the recent crash to reasses the value downwards for tax purposes. That’s pretty unusual-- the gov’t voluntarily gving up some tax revenue. I’m not aware if that aspect is built into the tax code by law.
Please, Stoid, do attempt to convince me that nobody gives a shit about an extra $25,000 each year in property taxes. I eagerly await your attempt.
And John Mace, do attempt to convince me that you’re contemplating moving into a $17 million home. Since that’s what it would take to yield $25K in annual property taxes at a sky-high rate of 1.5%.
Of course, if you really are contemplating moving into such a home, where should I forward my business card?
Minty: 1% of 1M is 10K, not 1K. I’ll leave the lawyering up to you if you leave the math up to me. Deal?
I inherited a 25% share of my father’s home (in a life estate so his wife can stay there until she dies). The property taxes are $800/year. The homeowners insurance is about the same amount.
Of course, when my brothers and I can sell it, we are likely to net quite a bit and the County of Los Angeles will be quite happy to get some added revenue as my parents bought that house in 1962 for about $25K.
A modification of Prop 13 to allow commercial property to be reassessed more frequently would be more equitable, but any discussion of modifying Prop 13 in the slightest gets people in CA very antsy.
Seriously, Minty, I don’t think $2 million homes are really what we’re talking about, now are they? We are talking about homes in the middle class range, and in California, that means condos at $150k to single family homes to 600K, which represent a tax of $1500 to $6000 a year, and relative to the other costs associated with these homes, no, i don’t think most people consider the taxes a make or break factor in their home buying decisions, and if they do, they are making a very risky decision to be living that close the bone and buying a house. For the lower cost house were talking $125 a month, for the upper end we’re talking $500 a month. Those amounts shouldn’t be that alarming to anyone who can afford the house that the cost represents.
And if we ARE including $2 million homes, then the above applies X10.
Excellent point. We have the fifth largest economy in the world. It would help if we had people who knew what they were doing.
Buffett took aim at an obvious way to help stabilize CA’s financial disaster, but it will be an unpopular move. Too bad the people who ruined our state won’t be held accountable.
Btw, if California was a seperate country, we would not have this problem. We could just do what other countries do…
CRANK UP THE PRINTING PRESSES!
Decimal points. Mere trivia! :o
We’re talking about all homes, and have been since the beginning. I swear, the way you keep trying to redefine the problem, we’re eventually going to get down to only your home.
Do you have any idea how tight budgets are for most low- and middle-income families? It is perfectly ordinary for people to be living that close to red ink in paying for a house. Most people do blanch when faced with an extra $1500 to $6000 annual expense (your numbers there, which again ignore the extra taxes assessed to pay for debt service on local bonds).
Now please, address my 5 statements above. Which of them do you dispute, and why?