4 ms·

The article comes off as a little rant-y, but I found it to be quite an enjoyable read. A lot of sources water down prop 13 as "maybe bad", but any of us who've

by brandur 10y ago

The article comes off as a little rant-y, but I found it to be quite an enjoyable read. A lot of sources water down prop 13 as "maybe bad", but any of us who've moved to San Francisco (or even California) in the past 5-10 years should be far more outraged about the situation than we are. This guy is eminently quotable too: > “Revolt” sounds too noble to me, even “populist.” I prefer to call it feudalism. And on the popular anti-tech sentiment: > New, young computer programmers with six-figure salaries may easy to scapegoat as the emblem of the Bay Area’s 21st Century inequality, but even if they can afford real estate, their privilege is chump change compared to that of pre-1979 homebuyers and their descendants. A few key observations in there: * The power imbalance between buyers and renters in the country is already bad due to the interest rate deductions, but Prop 13 adds insult to injury. While rent control (for renters) is not widespread, owners in California (who are often the upper class stratas, especially in the Bay Area) have built-in rent control everywhere, forever. You can even pass it down to your kids! * He uses the term BMR (Below Market Rate) instead of "affordable housing". There's been a concerted attempt by politicians to conflate these terms to buy more populist votes. As noted in the article, an important aspect of BMR is that its cost is passed on to new buyers; the perfect political tool: a tax that's not called a tax! * Many of the local anti-development politicians are riding off the aforementioned "feudal" privilege. Kudos to the author for pulling information on a few of them. Of course the data is anecdotal, but it's amazing how many of these high-income people inherited their primary residence from their parents during their working lifetimes. That's very hard to imagine in most of North America.

jmspring 10y ago
The biggest issue with Prop 13 is the allowance for commercial properties. Prop 13 for protecting individual residential property owners on a fixed income from escalating "assessed" property values makes a good deal of sense. Especially in a state like California, if left unchecked, would be raising all sorts of taxes and fees for failed experiments. (Note - born/raised/ life long Bay Area resident) Prop 13 needs a revision to exempt commercial property...
- Camillo 10y ago
  No. The biggest issue is the enormous and growing transfer of wealth from people engaged in productive economic activity to a caste of rentiers who extract money while producing nothing. This is what is meant by feudalism, and it manages to be bad both in terms of justice and in terms of economic efficiency. From this point of view, commercial property is at least used for economic activity. Exempting it from Prop 13 would reduce inequitable treatment of different commercial property owners, yes, but it would also impose yet another burden on productive activity, and ultimately on the overtaxed serfs. Instead of reducing feudalism, it would exacerbate it. No, the biggest problem is precisely residential property.
  - jmspring 10y ago
    Nope. Track 13 and the commercial revenue space and the ease with which getting around 13 is available. Sorry corporations aren't people. A librarian inheriting property worth an interesting amount shouldn't be forced to sell it based on tax predictions... when corporations have exemptions that shelter them from the same exemptions... It is always interesting reading HN libertarian comments from people who haven't grown up in a region or community. The discussion on manhattan and traffic is classic. Maybe spend a few years living and understanding. Looking forward to the down votes.
  - davidfischer 10y ago
    Commercial property -- to which I'm including multi-family residential for this post -- is almost definitely the bigger problem. The reason arises from the fact that these properties very rarely trigger a reassessment of property taxes and as a result tons of commercial property owners are paying 1980s era property taxes. Firstly, commercial properties are often held by long time/indefinite property owners -- companies -- who rarely sell and don't "die" (deaths especially those involving split inheritances commonly cause property sales which trigger a reassessment). Secondly, in the event a company does sell, they can usually avoid triggering a reassessment by only selling a "stake" in the property. If that stake is below a certain threshold, there's no reassessment. You can read about this by googling "close the prop 13 loophole". Residential properties are very simply reassessed more frequently on average than commercial and this problem is going to get worse over time. Oftentimes, properties in California (especially multi-family residential) are owned by a corp/LLC which owns nothing other than that single property. That corp is then owned by a larger company who can sell a stake in single property company if the right buyer comes around. The CPAs have avoiding a prop 13 reassessment down to a science. If you write a rent check to a company that has your street number or street name in the company name, that's why. Much of valuable property in this state was developed before 1978 and as a result the owners are paying just a fraction of what their taxes would be after a assessment. Sales and income taxes are subsidizing this difference. Now, the counterpoint to this is that raising property taxes will result in some of those taxes being passed on to renters. While this is true, not all of it could be due to simple supply and demand. The worst offenders will be able to pass on the least of that difference. The state would also be able to lower corporate, sales or income taxes as a result of phasing in market property taxes too. Maybe that last part is just wishful thinking on my part. Regardless of your take on residential vs commercial property and prop 13, this is a problem that is only going to get worse with time. With no changes, 50 years from now, there will literally be people and companies paying property taxes like it is 1990. The result is that in order to make up that difference, corporate, sales, income and "new" property taxes will have to be higher than they are today. If those other taxes rise enough, people leave the state for greener pastures and property values fall or stagnate which is another more painful way to equilibrium. Significantly higher property/land taxes in this state than we have now would solve or curb a lot of problems. From housing bubbles (probably merely curbed) to encouraging cities like SF to build more densely to allowing lower income/sales/corp taxes to encourage investment, many of the states problems were created or exacerbated by prop 13. When Warren Buffett was Schwarzenegger's economic advisor during the campaign he said that prop 13 doesn't make sense. He was right.

by brandur 10y ago

jmspring 10y ago

The biggest issue with Prop 13 is the allowance for commercial properties. Prop 13 for protecting individual residential property owners on a fixed income from escalating "assessed" property values makes a good deal of sense. Especially in a state like California, if left unchecked, would be raising all sorts of taxes and fees for failed experiments. (Note - born/raised/ life long Bay Area resident) Prop 13 needs a revision to exempt commercial property...

Camillo 10y ago
No. The biggest issue is the enormous and growing transfer of wealth from people engaged in productive economic activity to a caste of rentiers who extract money while producing nothing. This is what is meant by feudalism, and it manages to be bad both in terms of justice and in terms of economic efficiency. From this point of view, commercial property is at least used for economic activity. Exempting it from Prop 13 would reduce inequitable treatment of different commercial property owners, yes, but it would also impose yet another burden on productive activity, and ultimately on the overtaxed serfs. Instead of reducing feudalism, it would exacerbate it. No, the biggest problem is precisely residential property.
- jmspring 10y ago
  Nope. Track 13 and the commercial revenue space and the ease with which getting around 13 is available. Sorry corporations aren't people. A librarian inheriting property worth an interesting amount shouldn't be forced to sell it based on tax predictions... when corporations have exemptions that shelter them from the same exemptions... It is always interesting reading HN libertarian comments from people who haven't grown up in a region or community. The discussion on manhattan and traffic is classic. Maybe spend a few years living and understanding. Looking forward to the down votes.
- davidfischer 10y ago
  Commercial property -- to which I'm including multi-family residential for this post -- is almost definitely the bigger problem. The reason arises from the fact that these properties very rarely trigger a reassessment of property taxes and as a result tons of commercial property owners are paying 1980s era property taxes. Firstly, commercial properties are often held by long time/indefinite property owners -- companies -- who rarely sell and don't "die" (deaths especially those involving split inheritances commonly cause property sales which trigger a reassessment). Secondly, in the event a company does sell, they can usually avoid triggering a reassessment by only selling a "stake" in the property. If that stake is below a certain threshold, there's no reassessment. You can read about this by googling "close the prop 13 loophole". Residential properties are very simply reassessed more frequently on average than commercial and this problem is going to get worse over time. Oftentimes, properties in California (especially multi-family residential) are owned by a corp/LLC which owns nothing other than that single property. That corp is then owned by a larger company who can sell a stake in single property company if the right buyer comes around. The CPAs have avoiding a prop 13 reassessment down to a science. If you write a rent check to a company that has your street number or street name in the company name, that's why. Much of valuable property in this state was developed before 1978 and as a result the owners are paying just a fraction of what their taxes would be after a assessment. Sales and income taxes are subsidizing this difference. Now, the counterpoint to this is that raising property taxes will result in some of those taxes being passed on to renters. While this is true, not all of it could be due to simple supply and demand. The worst offenders will be able to pass on the least of that difference. The state would also be able to lower corporate, sales or income taxes as a result of phasing in market property taxes too. Maybe that last part is just wishful thinking on my part. Regardless of your take on residential vs commercial property and prop 13, this is a problem that is only going to get worse with time. With no changes, 50 years from now, there will literally be people and companies paying property taxes like it is 1990. The result is that in order to make up that difference, corporate, sales, income and "new" property taxes will have to be higher than they are today. If those other taxes rise enough, people leave the state for greener pastures and property values fall or stagnate which is another more painful way to equilibrium. Significantly higher property/land taxes in this state than we have now would solve or curb a lot of problems. From housing bubbles (probably merely curbed) to encouraging cities like SF to build more densely to allowing lower income/sales/corp taxes to encourage investment, many of the states problems were created or exacerbated by prop 13. When Warren Buffett was Schwarzenegger's economic advisor during the campaign he said that prop 13 doesn't make sense. He was right.