4 ms·

It all comes back to Proposition 13, which crippled local governments.

by jfb 11y ago

narrator 11y ago
Imagine how many people who've owned their homes for years would be forced to sell and move elsewhere in San Francisco if prop 13 were repealed.
- jfb 11y ago
  Imagine a state where decisions about local concerns are handled by local government, rather than getting kicked up to the statehouse.
- secabeen 11y ago
  Okay, let's just remove prop 13 protections for commercial property. That's at least a start. This isn't an all-or-nothing thing.
- ScottBurson 11y ago
  Prop. 13 could be fixed without forcing people out of their homes. Instead of capping the tax, we should cap the amount of the tax that actually has to be paid in a year in which the property does not change hands. That number could be limited according to the Prop. 13 formula; the city or county would receive a lien for the difference, that lien not becoming due until the property does change hands. This wouldn't change anyone's cash flow until the property is sold, at which time the city or county would receive the unpaid amount out of the sale. The unpaid amount will be a fraction of the amount by which the property appreciated (or if its value fell, the unpaid amount will be zero), so this will be relatively painless. I've read that this has been done somewhere, though I don't recall where. It's clearly possible. No one is forced to sell, and the localities still get their tax money.
  - douche 11y ago
    If I am reading this idea correctly, this would create some perverse incentives to hold onto property that has appreciated in value, particularly the longer the property has been held. If the "missing" tax amount gets tacked onto the lien every year, but only comes due when the property is sold, why would you ever sell? You'd keep locked into your pre-existing low tax rates, and lease out the property for income, or use it as an asset, or whatever, but you wouldn't sell it. You would go through elaborate legal gyrations to find loopholes that would allow you to pass on the property to your descendants without it being a sale, so that the lump-sum back-taxes collection isn't triggered. So the housing supply largely freezes, and prices go up higher.
    - ScottBurson 11y ago
      Let's look at some numbers. If you own a property for 10 years, during which time it doubles in value -- let's say it does that at the steady rate of 7.2% per year -- and your property tax rate is 1%, and the increase in your payments is capped at 2% per year, the amount of unpaid tax due when you sell the property is about 3% of your gain on the property. If you held it for 20 years, during which it continued to appreciate at the same rate, the unpaid tax due would be a little under 6% of your gain. If you held it for 30 years, during which it doubled in value again, the unpaid tax due would be about 8% of your gain. Consider that the standard commission paid to the listing agent when you sell a property is 6% of the sale price, and you'll see that these amounts are not significant disincentives to selling.
- eru 11y ago
  Is that a bad thing?

It all comes back to Proposition 13, which crippled local governments.

by jfb 11y ago

It all comes back to Proposition 13, which crippled local governments.

Imagine how many people who've owned their homes for years would be forced to sell and move elsewhere in San Francisco if prop 13 were repealed.

jfb 11y ago
Imagine a state where decisions about local concerns are handled by local government, rather than getting kicked up to the statehouse.
secabeen 11y ago
Okay, let's just remove prop 13 protections for commercial property. That's at least a start. This isn't an all-or-nothing thing.
ScottBurson 11y ago
Prop. 13 could be fixed without forcing people out of their homes. Instead of capping the tax, we should cap the amount of the tax that actually has to be paid in a year in which the property does not change hands. That number could be limited according to the Prop. 13 formula; the city or county would receive a lien for the difference, that lien not becoming due until the property does change hands. This wouldn't change anyone's cash flow until the property is sold, at which time the city or county would receive the unpaid amount out of the sale. The unpaid amount will be a fraction of the amount by which the property appreciated (or if its value fell, the unpaid amount will be zero), so this will be relatively painless. I've read that this has been done somewhere, though I don't recall where. It's clearly possible. No one is forced to sell, and the localities still get their tax money.
- douche 11y ago
  If I am reading this idea correctly, this would create some perverse incentives to hold onto property that has appreciated in value, particularly the longer the property has been held. If the "missing" tax amount gets tacked onto the lien every year, but only comes due when the property is sold, why would you ever sell? You'd keep locked into your pre-existing low tax rates, and lease out the property for income, or use it as an asset, or whatever, but you wouldn't sell it. You would go through elaborate legal gyrations to find loopholes that would allow you to pass on the property to your descendants without it being a sale, so that the lump-sum back-taxes collection isn't triggered. So the housing supply largely freezes, and prices go up higher.
  - ScottBurson 11y ago
    Let's look at some numbers. If you own a property for 10 years, during which time it doubles in value -- let's say it does that at the steady rate of 7.2% per year -- and your property tax rate is 1%, and the increase in your payments is capped at 2% per year, the amount of unpaid tax due when you sell the property is about 3% of your gain on the property. If you held it for 20 years, during which it continued to appreciate at the same rate, the unpaid tax due would be a little under 6% of your gain. If you held it for 30 years, during which it doubled in value again, the unpaid tax due would be about 8% of your gain. Consider that the standard commission paid to the listing agent when you sell a property is 6% of the sale price, and you'll see that these amounts are not significant disincentives to selling.
eru 11y ago
Is that a bad thing?