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TL;DR Prop 13 main focus was it reduced property tax increases to a fixed level because retired residents were being gentrified out of their homes when they cou

TL;DR Prop 13 main focus was it reduced property tax increases to a fixed level because retired residents were being gentrified out of their homes when they could no longer afford to pay taxes on their increasingly valuable homes. My grandparents benefited from this enormously as they bought a home in 1968 near Los Gatos for $30,000 and it's now worth over $1,000,000 but they have Prop 13 and so are able to afford property taxes. Most anyone whom moves loses this protection, so residents tend to cling to their homes because of the fear of losing Prop 13, and so many very elderly residents in California rarely, if ever, move. Prop 13 was a half-baked, short-term solution to a terrible issue. Real-estate taxes should be scaled with both income and wealth progressive tests to prevent both obscene burdens and tax dodging, so that they are affordable, encourage people both to attract residents to the state and pay their fair shares, but knowing how Sacramento dances around hardly doing anything, it's unlikely to ever be revisited without a sustained, on-message campaign and buckets of crowdfunded cash.

bufordsharkley 10y ago
If you're going to ask me about what should be the case, I'd certainly want to move more towards a land value tax[0], which captures the rental value of the land, but doesn't tax the improvements on top of it. It's agreed upon by many economists and ethicists to be fair, efficient, and consistent with sustainable urban planning and finance. It's arguably the most progressive tax. Prop 13, FWIW, is almost precisely the opposite of a LVT. It's been putting more of the burden of financing California onto income, sales taxes, etc, in order to subsidize landowners. [0] https://en.wikipedia.org/wiki/Land_value_tax https://en.wikipedia.org/wiki/Land_value_tax
- refurb 10y ago
  How does that help in the situation of a homeowner not being able to afford their tax bill because their property increased in value?
  - bufordsharkley 10y ago
    How does it help? By creating a competitive market in housing, it should ensure that the housing stock is full enough to create new affordable living for the person to move to. But... does that still mean people might be taxed out of their home? I hope it would be rare, because it is a bummer, but I am convinced that there is no sustainable system in which people wouldn't be "taxed out of their home" in some cases. However, consider that they'd still get a sizeable payout, and plenty of available options in their community. It's the sad truth about land-- if someone is using it inefficiently (which is the case with the single-family households having trouble with property taxes), it's a market signal that the land should be developed more densely...
    - throw_away 10y ago
      Would it not be possible to defer these taxes for people over a certain age and make it work like a lien on the house when it is sold and collected from their estate? Sure, it probably makes the income for the government less regular, but surely there could be some sort of financial instrument that could be created to smooth out these inflows, no?
      - bufordsharkley 10y ago
        Yes, some have outlined a deferement, roll-up option that would work to do this.[0] Another option would be a Community Land Trust[1], which would take the responsibility of land ownership away, and allow residents to have more stability at the cost of not directly being responsible for land stewardship. [0] http://kaalvtn.blogspot.co.uk/2013/01/a-poor-widow-bogey.html#1 http://kaalvtn.blogspot.co.uk/2013/01/a-poor-widow-bogey.htm... [1] https://en.wikipedia.org/wiki/Community_land_trust https://en.wikipedia.org/wiki/Community_land_trust
    - URSpider94 10y ago
      This. This. This. In both places I've lived in the Bay Area, there were vacant houses on the block. In the old town, apparently the house was owned by an old widow who is in a nursing home and who refuses to sell. In the new neighborhood, the house has fire damage. The owner apparently has several properties around the Bay, and just isn't in a hurry to do anything -- the house has been that way for five years or more. I hear from people living in Palo Alto that their neighborhoods are dotted with vacant homes owned by overseas investors. Meanwhile, people making $200k a year are commuting an hour each way because they can't afford to live any closer. Market rate property taxation would provide a strong incentive for these owners to either sell or rent out their properties.
refurb 10y ago
What makes no sense to me is why would you cap someone's tax rate when the cause of it going up is their house is worth a shit ton more? They have the financial means to pay it (equity in the house)! It would make more sense to me to either do nothing and let home owners get a reverse mortgage and use that to pay their tax bill or have the gov't just put a lien on the property and when the next sale happens they get their cut. It would seem to me that homeowners facing a higher tax bill because their home drastically increased in value should be the last ones you subsidize.
- URSpider94 10y ago
  It's a textbook case of populism. The people voting are, by definition, the current residents of the state, and many of them are homeowners. Capping their tax rate and pushing any increase off on newcomers looks like a wonderful idea.
  - bufordsharkley 10y ago
    You could call it a form of generational theft, from the 1978 population of California against all future generations to move there. Nordlinger v Hahn (1992)[0] challenged the Constitutionality of this under the Equal Protection Clause of the 14th Amendment. They ruled 8-1 that it was (John Paul Stevens dissenting)[1]. Stevens' dissent is worth reading. To excerpt: > These property owners (hereinafter Squires) are guaranteed that, so long as they retain their property and do not improve it, their taxes will not increase more than 2% in any given year. As a direct result of this windfall for the Squires, later purchasers must pay far more than their fair share of property taxes. [0] https://www.oyez.org/cases/1991/90-1912 https://www.oyez.org/cases/1991/90-1912 [1] https://supreme.justia.com/cases/federal/us/505/1/case.html https://supreme.justia.com/cases/federal/us/505/1/case.html
- vinhboy 10y ago
  I don't agree with that. If I was an old person, and I bought a house at 30K, and its paid off after years of hard work. It would freaking suck if my tax bill is suddenly more than what I can afford to pay, forcing me to move. That's not fair. I am young so I do not benefit from Prop 13, but I can see why its an undue burden on people who just want to live their life. Someone suggested pegging it off of income, or other assets, and I think that's fair. Maybe it's even more fair to peg the local government budget based on what could be collected from the surrounding homeowners. If the government can't afford to keep the neighborhood super nice, then perhaps the home value would remain low, thus self-justifying the low tax.
solatic 10y ago
> Real-estate taxes should be scaled with both income and wealth progressive tests to prevent both obscene burdens and tax dodging, so that they are affordable, encourage people both to attract residents to the state and pay their fair shares Ultimately, this will not sufficiently increase housing stock enough to solve the problem. The problem here isn't that the State of California isn't making enough money in income taxes, but that there's an artificial ceiling on the tax base, because people can't afford to move in (to new developments) and start paying property taxes themselves. Ultimately, allowing people to stay will only exacerbate the problem. NIMBY is a political phenomenon advanced by an artificially small voting base which is acting in its own interests. If their taxes normalize, and they start to move out, then so does their political influence also start to wane. This will gradually allow for new development to start up and for new people to move in, which will both bring additional tax revenue and proportionally reduce political support for NIMBY. Over time, this becomes a self-reinforcing positive cycle for development. And no, I don't have any sympathy for Grandma and Grandpa having to move. First of all, because they're going to get a massive payday for doing so, since their real estate is worth so much. And second of all, because the laws of economics are blind. Are Grandma and Grandpa really more deserving of affordable housing than anybody else? Prop 13 is the government picking winners and losers, and calling Grandma and Grandpa "losers" because they were forced to sell for millions is, quite frankly, offensive to anybody who is losing under Prop 13.

bufordsharkley 10y ago

If you're going to ask me about what should be the case, I'd certainly want to move more towards a land value tax[0], which captures the rental value of the land, but doesn't tax the improvements on top of it. It's agreed upon by many economists and ethicists to be fair, efficient, and consistent with sustainable urban planning and finance. It's arguably the most progressive tax. Prop 13, FWIW, is almost precisely the opposite of a LVT. It's been putting more of the burden of financing California onto income, sales taxes, etc, in order to subsidize landowners. [0] https://en.wikipedia.org/wiki/Land_value_tax https://en.wikipedia.org/wiki/Land_value_tax

refurb 10y ago
How does that help in the situation of a homeowner not being able to afford their tax bill because their property increased in value?
- bufordsharkley 10y ago
  How does it help? By creating a competitive market in housing, it should ensure that the housing stock is full enough to create new affordable living for the person to move to. But... does that still mean people might be taxed out of their home? I hope it would be rare, because it is a bummer, but I am convinced that there is no sustainable system in which people wouldn't be "taxed out of their home" in some cases. However, consider that they'd still get a sizeable payout, and plenty of available options in their community. It's the sad truth about land-- if someone is using it inefficiently (which is the case with the single-family households having trouble with property taxes), it's a market signal that the land should be developed more densely...
  - throw_away 10y ago
    Would it not be possible to defer these taxes for people over a certain age and make it work like a lien on the house when it is sold and collected from their estate? Sure, it probably makes the income for the government less regular, but surely there could be some sort of financial instrument that could be created to smooth out these inflows, no?
    - bufordsharkley 10y ago
      Yes, some have outlined a deferement, roll-up option that would work to do this.[0] Another option would be a Community Land Trust[1], which would take the responsibility of land ownership away, and allow residents to have more stability at the cost of not directly being responsible for land stewardship. [0] http://kaalvtn.blogspot.co.uk/2013/01/a-poor-widow-bogey.html#1 http://kaalvtn.blogspot.co.uk/2013/01/a-poor-widow-bogey.htm... [1] https://en.wikipedia.org/wiki/Community_land_trust https://en.wikipedia.org/wiki/Community_land_trust
  - URSpider94 10y ago
    This. This. This. In both places I've lived in the Bay Area, there were vacant houses on the block. In the old town, apparently the house was owned by an old widow who is in a nursing home and who refuses to sell. In the new neighborhood, the house has fire damage. The owner apparently has several properties around the Bay, and just isn't in a hurry to do anything -- the house has been that way for five years or more. I hear from people living in Palo Alto that their neighborhoods are dotted with vacant homes owned by overseas investors. Meanwhile, people making $200k a year are commuting an hour each way because they can't afford to live any closer. Market rate property taxation would provide a strong incentive for these owners to either sell or rent out their properties.

refurb 10y ago

What makes no sense to me is why would you cap someone's tax rate when the cause of it going up is their house is worth a shit ton more? They have the financial means to pay it (equity in the house)! It would make more sense to me to either do nothing and let home owners get a reverse mortgage and use that to pay their tax bill or have the gov't just put a lien on the property and when the next sale happens they get their cut. It would seem to me that homeowners facing a higher tax bill because their home drastically increased in value should be the last ones you subsidize.

URSpider94 10y ago
It's a textbook case of populism. The people voting are, by definition, the current residents of the state, and many of them are homeowners. Capping their tax rate and pushing any increase off on newcomers looks like a wonderful idea.
- bufordsharkley 10y ago
  You could call it a form of generational theft, from the 1978 population of California against all future generations to move there. Nordlinger v Hahn (1992)[0] challenged the Constitutionality of this under the Equal Protection Clause of the 14th Amendment. They ruled 8-1 that it was (John Paul Stevens dissenting)[1]. Stevens' dissent is worth reading. To excerpt: > These property owners (hereinafter Squires) are guaranteed that, so long as they retain their property and do not improve it, their taxes will not increase more than 2% in any given year. As a direct result of this windfall for the Squires, later purchasers must pay far more than their fair share of property taxes. [0] https://www.oyez.org/cases/1991/90-1912 https://www.oyez.org/cases/1991/90-1912 [1] https://supreme.justia.com/cases/federal/us/505/1/case.html https://supreme.justia.com/cases/federal/us/505/1/case.html
vinhboy 10y ago
I don't agree with that. If I was an old person, and I bought a house at 30K, and its paid off after years of hard work. It would freaking suck if my tax bill is suddenly more than what I can afford to pay, forcing me to move. That's not fair. I am young so I do not benefit from Prop 13, but I can see why its an undue burden on people who just want to live their life. Someone suggested pegging it off of income, or other assets, and I think that's fair. Maybe it's even more fair to peg the local government budget based on what could be collected from the surrounding homeowners. If the government can't afford to keep the neighborhood super nice, then perhaps the home value would remain low, thus self-justifying the low tax.

solatic 10y ago

> Real-estate taxes should be scaled with both income and wealth progressive tests to prevent both obscene burdens and tax dodging, so that they are affordable, encourage people both to attract residents to the state and pay their fair shares Ultimately, this will not sufficiently increase housing stock enough to solve the problem. The problem here isn't that the State of California isn't making enough money in income taxes, but that there's an artificial ceiling on the tax base, because people can't afford to move in (to new developments) and start paying property taxes themselves. Ultimately, allowing people to stay will only exacerbate the problem. NIMBY is a political phenomenon advanced by an artificially small voting base which is acting in its own interests. If their taxes normalize, and they start to move out, then so does their political influence also start to wane. This will gradually allow for new development to start up and for new people to move in, which will both bring additional tax revenue and proportionally reduce political support for NIMBY. Over time, this becomes a self-reinforcing positive cycle for development. And no, I don't have any sympathy for Grandma and Grandpa having to move. First of all, because they're going to get a massive payday for doing so, since their real estate is worth so much. And second of all, because the laws of economics are blind. Are Grandma and Grandpa really more deserving of affordable housing than anybody else? Prop 13 is the government picking winners and losers, and calling Grandma and Grandpa "losers" because they were forced to sell for millions is, quite frankly, offensive to anybody who is losing under Prop 13.