7 ms·

This is a great time to call out California and its Prop 13 (1978) where property taxes are capped at 1%ish and can grow no more than 2% from time of purchase.

• rcpt 8y ago
  Oh God prop 13 - the destroyer of California. I recently learned that, after winning, Howard Jarvis made this supervillain-tier exclamation (read in the voice of Cobra Commander for maximum effect): > The most important thing in this country is not the school system, nor the police department nor the fire department. The right to have property in this country, the right to have a home in this country, that’s important.
  • crdoconnor 8y ago
    The ugliest thing about the Howard Jarvis Taxpayer Foundation's campaign was that it was almost entirely based upon the idea that old people shouldn't be priced out of their own home because of rising taxes. Now it has made a lot of very rich people even richer (not to mention driven elderly renters out of their homes) as well as caused a budgetary crisis in California. Jon Coupon's (current president) response to this budgetary crisis that they helped caused is to argue that California state pensions add up to too much of an unfunded liability and should be slashed.
  • claydavisss 8y ago
    Firefighters and police are doing just fine in California. Indeed, public employee compensation is driving the CalPERs fiasco which is even more dangerous to the state than Prop 13 ever was.
  • gascan 8y ago
    Yeah, I've read a handful of conservatives who proclaim that the one thing that makes America great is a 'strong institution of property rights'. What I can't tell is whether they really believe it, or are advancing their own interests.
• zjaffee 8y ago
  Adding onto this, is that it's not only a massive subsidy to homeowners, but also the many private equity firms that have purchased a ton of property all throughout California (where this is relevant because the private equity firm has the ability to outlive any one person). Additionally, if you compare the percentage of renters in California to other states, it's often much higher, and this is a result of the fact that the cost of purchasing a home is substantially higher than renting the same home. Prop 13 enables this because these same PE firms who are able to leverage long term action are willing to prop up the value of homes in the short term since it is incredibly cheap in the long term.
• inferiorhuman 8y ago
  One of my favorite references on how California is destroying itself was Peter Schrag's book Paradise Lost.
• njarboe 8y ago
  Can grow no more than 2% per year from time of purchase. What is called the assessed value (the value of the property used for taxation) starts at the purchase price and goes up by California inflation or 2%, whichever is lower, per year. Additions, however, are added to the assessed value. But this still leads to great inequities on how much taxes people pay. You can see what your neighbors pay quite easily by using zillo and looking at the Tax History section of a property. The fact that Prop 13 assessed values can be passed down to children and grandchildren and is also applied to corporations causes its unfairness to continue to increase each year. The sooner it is repealed the better.
• ghouse 8y ago
  Throw in US federal estate rules permitting a write-up in basis to fair market value at the time of death, allows heirs to have property tax basis from 40 years ago, but investment basis of today. Both of these policies decrease liquidity in the market and consequently increase prices further.
• imh 8y ago
  I think of prop 13 as rent stabilization for a thing you've actually bought. If you buy a new $1.5M home around here, you're paying around $19K (1.25%) per year to the government in taxes. It's almost $1600 / month in taxes alone. I'd imagine a ton of the people who bought at $500k can't afford $1600/mo on top of their mortgages. If I offer you a ton of money to buy your house, you can accept that or reject it. Rejecting it is a fine choice. But you still have to pay higher "rent" to the government just because I'm willing to buy your house for a lot? It's nice to stabilize people's homes against the market.
  • xyzzyz 8y ago
    I'd imagine a ton of the people who bought at $500k can't afford $1600/mo on top of their mortgages. I wish I had a problem like this — I could just sell the house, cash in the profit and retire...
    • eanzenberg 8y ago
      There's plenty of people that don't want to do that or can't due to poor and ailing health, and convenience to where they live. Kind of interesting there are those who want certain people kicked out of the area (elderly homeowners) but not others (homeless).
      • s0rce 8y ago
        Offer a tax credit to elderly or disabled if absolutely needed. Don't fix rate increases across the board and for corporations.
      • xyzzyz 8y ago
        There are plenty of people of poor and ailing health, who don’t even have an option to do that, because they are paying high rents due to policies that protect homeowners’ profit. I don’t want to kick anyone out of the area, but I don’t think people who made a million of dollars (in the example above) are the ones who need the protection the most.
• branchless 8y ago
  When I first heard the details of prop 13 I just couldn't believe it. It's the absolute opposite of american values. Your dad lived here for a while and do the same job as someone else? You have a better life than them. An insane law from an insane generation.
• prop13blows 8y ago
  A two-bedroom house around the corner from me in Oakland, barely larger than 1,000 square feet, just sold for $1,175,000. But what's even crazier is the Prop 13 assessment on this house. It last sold in 1977 for $30,500. Over the last 40 years, climbing at 2% a year as allowed by Prop 13, it's current assessed value is $60,716, nearly 20X under its actual market value! This past year, the owners paid $1,857.78 in property taxes: $724.40 in ad valorem tax at a rate of 1.3486% and $1,133.38 in fixed parcel taxes. The new owners will pay $16,979.43 in property taxes, with $15,846.05 due to the ad valorem portion. That's 9X the previous owner, which works out to $1,414.95 a month in taxes! And the old owners were probably angry about the increasing fixed portion, which went from $548.28 in 2005, to $1,133.38 this past year, and which for them makes up the bulk of their property taxes. When you look at the actual, concrete numbers, it really is mind-boggling. Prop 13 aside, this house has appreciated 40x in 40 years, only 4x of which is due to inflation. Do you think the new owners will see another 10x in real returns over the next 40 years? Will the sales price in 2058 really be $45 million dollars? Somehow, I doubt it.
  • gnarcoregrizz 8y ago
    The 2% growth thing is the biggest mistake. It should follow the CPI or some other inflation metric. That way, you are taxed on the fair market value, but the growth follows the market. It's still not fair, but it is better than what is there now. They made the same mistake with legislating 7% growth into pensions. I still hate the "fair market valuation lock-in". So much of it comes down to timing and nothing else. When rates were high in the 70s and 80s, people locked in a tax rate at a low price. Therefore, it's probably advantageous, from a property tax perspective, to buy in a high rate environment in CA. Rates have been going down consistently since then, and thus we have all of these older people that have locked in their property tax rate at a ridiculously low valuation. There is just so much the market can do that legislating these things like growth into the law just has too many unpredictable effects. I was renting a place for 2500/mo from a woman's son who paid $600/year in property taxes. He wasn't the least bit interested in maintaining it either.
    • supertrope 8y ago
• ravar 8y ago
  One thing that always bothers me is how it is framed as something for the rich. Yes the rich do benefit, however prop 13 also does a lot of good for old people who live off a fixed income. My grandparents are really poor, in terms of savings and assets, and often times get help from my family. If it weren't for prop 13 they would have had to leave California a long time ago, and move away from all their family. I know that in other states , like New Jersey, the property taxes can cause a lot of stress for older people who live off fixed incomes. I am not entirely sure about the actual value for prop 13 for the entire state. But prop 13 does provide a lot of value for older people and that can't be ignored.
  • zrail 8y ago
    You could preserve the value for "old people", as you say, by removing the caps for property held by businesses (similar to homestead in other states, I don't know if CA has homestead) and treating inheritance as a purchase for purposes of property tax reassessment.
    • toast0 8y ago
      California has a homestead exemption of about $7000 of assessed value; or about $70 savings annually. I don't think this gets adjusted ever, or if it was ever a meaningful amount. It's also tied into a renter's income tax credit, so I suspect it's fairly difficult to change. My opinion is that Prop 13 provides useful planning benefits to property owners and municipalities, and the rate of increase could be adjusted to still give those benefits, without having quite the same distortion. 5% annual assessment increase cap would probably be much too high, but 3% or 4% might be enough to stay within throwing distance of current values. As a soon to be former CA property owner it was nice to be able to know for sure my taxes would basically grow at 2% once prices started climt. Municipalities could count on property tax revenues staying flat or even continuing to grow during the housing market collapse because so many owners had their assessments constrained, and many of the sellers had assessments below even the depressed market value. Having constrained assessments also reduces the burden of assessment appeals, which I've heard is significant in locales without constraints.
  • 8y ago
• dawnerd 8y ago
  Kinda similar here in Oregon. Doesn't really get passed on when the property is sold but if you were lucky and got a place when it was cheap, the recent value jumps haven't screwed you. Assessed values can only increase 3% per year. Not only that but we effectively have a 1.5% cap on real market value (if I understand it right, taxes are confusing as hell).
• cascom 8y ago
  How many people would no longer be able to afford to live in their home if prop 13 were to be repealed?
  • TheRealDunkirk 8y ago
    The bigger question to me is: would the housing market have gotten so ridiculously over-priced if the tax rates had not been capped in the first place?
    • cascom 8y ago
      If the housing market is so overpriced you should short it - CME has futures. But my main point is that it seems unfair (for lack of a better word) to force someone to have to sell their home because it’s paper value has increased.
• RestlessMind 8y ago
  Perhaps it is time to chip away at Prop 13 bit by bit? - remove Prop 13 protections for non-people owners (i.e. corporations, trusts etc) - remove Prop 58 protections (inheritance benefits) for non-primary residences - remove Prop 13 protections for non-primary residences Let's inundate California voters with ballots which will start removing Prop 13 protections from those who don't deserve them. Some ballot initiatives will fail, but some will succeed and things will be better for them.
• wdr1 8y ago
  > This is a great time to call out California and its Prop 13 (1978) where property taxes are capped at 1%ish and can grow no more than 2% from time of purchase. This is incorrect. It's limited to an annual increase of 2%. That's still limited, but far different from 2% of the original purchase price. https://www.californiataxdata.com/pdf/Prop13.pdf https://www.californiataxdata.com/pdf/Prop13.pdf