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One reason this is less of a problem in Texas is the high property tax rates (about 3% per year vs. 1% here in California). Combine that with no prop 13 and you

One reason this is less of a problem in Texas is the high property tax rates (about 3% per year vs. 1% here in California). Combine that with no prop 13 and you have homeowners with mixed incentives — yes, equity appreciation is nice, but ouch the tax bill! Thus you have a lot of home owners who support keeping costs down via supply growth. In Texas, taxes are heavily leavied against _wealth_ and _lifestyle_: high property tax, high sales tax (but none on staple goods and tax holidays for back to school etc.), and no income tax. Conversely in CA, the tax structure makes it easy to shelter wealth (low property taxes AND they never increase), with moderate sales tax and high, almost flat income taxes (the brackets ramp quickly to 9.5% at $45k then are flat to $1m/yr). Not surprising so many people are moving to Texas in search of an easier ladder to climb. Having made the opposite move for a big tech job, the headwinds here against upward mobility are really striking.

option 8y ago
No, the property tax is not low in CA. What you pay is tax_rate*assesed_value. Because value is high what you actually pay is huge amount of money on what is considered a very modest house in other places
- klipt 8y ago
  But if you bought your $2 million house for $200k a few decades ago, you're still paying taxes on it like it's $200k (plus some tiny increases that fall well below inflation). Thanks Prop 13!
  - option 8y ago
    yes, thanks to the prop 13 a teacher or retired couple are able to keep the house the’ve lived in for a huge part of their lives. And even with prop 13 the taxes are increasing every year (by~2% I think)
    - SamReidHughes 8y ago
      Texas also has a law about that for retired people. But they only defer the taxes until death.
    - viscanti 8y ago
      Anyone who buys property now subsidizes (through higher property taxes) EVERYONE who bought properties in the past. Some of those previous owners might be teachers or retired couples. But many other are movie stars and tech millionaires or billionaires. New home owners in California are subsidizing everyone else who bought property in the past. It creates a disincentive to sell as people want to be locked in to below market rates. It might help some people that we hope to help, but it also helps lots of people who should be paying their fair share that they're instead pushing off to new home buyers.
      - newnewpdro 8y ago
        You're drawing a disproportionately weighted link between high property values and the low taxes of past property owners, it's just not there. This is a problem in the especially desirable pockets of California, and people don't want to give up a good thing once they've got it, especially when it's increasingly scarce due to the low rates of residential development. You wouldn't have fixed the housing shortage by raising taxes, you'd just have accelerated the concentration of wealth displacing people who luckily got to live out their lives in a place they could no longer really afford to compete in. It would still be exorbitantly expensive IMHO.
        lostapathy 8y ago
        It would be expensive but the tax burden would be fair if based on your property value. Now it’s more based on how long you’ve owned it, which is just the people who got there first stealing from those who happened to come later. Whatever happened to equal opportunity?
      - lostapathy 8y ago
        Prop 13 is essentially the old stealing from the young. It’s disgusting.
  - burlesona 8y ago
    Exactly, sheltered wealth for the rich! :)
    - lamarpye 8y ago
      That is true is some cases, but not for everyone.
- burlesona 8y ago
  I’m not sure what about 1% being a third of 3% isn’t self-evident... In Texas a “typical” house for about $350k would come with an annual tax bill of $10,500. And it goes up if housing gets more expensive. Around me in SF an entry level home at $1M would have a tax bill of $10,000. But it’s locked forever. The same bill for a property 3x more valuable... it makes an enormous difference in the monthly payment which also has a meaningful impact on the ability for prices to shoot up in the first place.
  - jjav 8y ago
    > Around me in SF an entry level home at $1M would have a tax bill of $10,000. But it’s locked forever. Property tax in CA goes up 2% every year. So, year 0: $10,000 year 1: $10,200 year 2: $10,404 And so on... maybe it doesn't go up as fast as you'd like (until you own a place) but it is by no means locked in.
    - Dylan16807 8y ago
      That's less than inflation! It doesn't count as going up. (It will peak over inflation in some years, but it's still effectively a freeze. Even a modest property appreciation like 50% will stay out of reach of an annual 2%-minus-inflation effectively forever.)
klipt 8y ago
California loves taxing HENRYs (High Earning Not Rich Yet)
- deleted 8y ago
  [deleted]
ProfessorLayton 8y ago
One point for clarification: It's 1% at the state level, however, depending on which county you live in there's plenty of other local taxes (School districts etc.) that end up nudging it to ~1.8% (SF and Oakland). Add "Special Assessments" which aren't %-based and it's even more. So "1%" is a bit misleading. Unincorporated areas end up being a little less at around 1.3%, in the Bay Area at least. Add state income tax + sales tax (9.75% where I am!) and California is a hilariously expensive state to live in.
- jedberg 8y ago
  I just checked my tax bill. I live in Cupertino, one of the highest cost areas in the state, and even including all special assessments and fees, my bill is 1.34%. But here's the problem: It's 1.34% of my base rate. I've lived here for 10 years. Using Zillow as a guide, my real tax rate is 0.56% thanks to Prop 13. My neighbor, who has owned their house for 35+ years, is paying 0.08% on a house worth just slightly less than mine. And more than 1/2 of that is special assessments. That's the problem with California property tax. We are all totally disincentivized to move or the encourage a drop in our property values, since eventually we want to sell it for top dollar and retire out of state.
rayiner 8y ago
Texas is in some ways the egalitarian sort of place California pretends to be. I was talking to a cab driver in Austin who had immigrated from Morocco. He and his friends bought houses in the suburbs with pools in good school districts, which they were able to pay off in 15 years with a cab drivers’ salary. What really strikes me visiting there compared to the coastal cities is relative prosperity among ordinary people, especially the kind of people (immigrants, etc.) that people in the coastal cities like to talk a lot about. Texas also does a better job educating students from disadvantaged groups than California, despite spending less money on education: https://www.forbes.com/sites/chuckdevore/2015/06/30/which-of-the-five-most-populous-states-do-best-in-k-12-education/#44a5a4dd2021 https://www.forbes.com/sites/chuckdevore/2015/06/30/which-of.... For math and science, Texas has some of the highest NAEP scores in the country for black and Hispanic students, while California has some of the worst.
- deleted 8y ago
  [deleted]
- pcwalton 8y ago
  The Texas Public Policy Foundation is one of the worst organizations you could cite. They're infamous for being just a front for Rick Perry's ambitions and as such are one of the groups directly responsible for the decreasing quality of Texas's higher education system. (Higher education in Texas is much worse than that of California.) There's no denying that California has a problem with K-12 education due to Prop 13. But I grew up and was educated in Texas, and I can say the government of Texas has always been significantly more dysfunctional than the government of California. The "Texas Miracle" thing during GWB's campaign was obviously an attempt to take credit for the fact that the oil industry attracted the kind of people who care about education, not because of anything related to the government. In fact, attempting to recreate the "Texas Miracle" nationwide led to the disastrous No Child Left Behind law. I more-likely-than-not won't end up having kids, but if I did, I would want them educated here, not in Texas. The government of Texas plays games with education to score political points in a way that the government of California does not. Besides, I question how sustainable Texas education is going to be without an income tax, and income tax is the third rail of Texas politics.
WillPostForFood 8y ago
I agree with your point overall, but you say Texas has "high sales tax" and California has "moderate sales tax", but Texas' sales tax rate is 6.25% and California is 7.25%. Comparing rates with local additions, Los Angeles is 9.5%, San Francisco is 8.5%, Dallas/Houston/Auston is 8.25%,
- burlesona 8y ago
  I thought the base state tax in CA was 6%, but actually you’re right anyway. The total rates are pretty similar. Mental error on my part. Ref: https://www.avalara.com/taxrates/en/state-rates/california/cities/san-francisco/ https://www.avalara.com/taxrates/en/state-rates/california/c...
- masonic 8y ago
  San Jose is 9.25%.
nostrademons 8y ago
"Having made the opposite move for a big tech job, the headwinds here against upward mobility are really striking." CA (at least the Bay Area) incentivizes a very different sort of upward mobility: striking it rich through owning equity in a business doing fundamental innovation in its area. If you're hoping to steadily build wealth by working for a big tech company, staying in CA long-term, and saving your money, you're playing the wrong game. (And I say this as someone who came to CA to work at a big tech company, has been here a decade, and married a local.) There are three basic paths to wealth in Silicon Valley: 1. Found a company outside of the valley. Do all the initial work in a low-CoL area, get customers and traction there, and then move to Silicon Valley for fundraising and scaling. Enjoy your equity appreciation, and cash out a billionaire. 2. Move here in your 20s. Get on a rocketship - a company that is likely to go public in the next 5 years. Stick it out for 5-ish years, enjoy your equity appreciation, and cash out a millionaire. Move to some other low-CoL area to buy a house and retire. 3. Get a time machine. Buy a house 15 years ago. Enjoy your equity appreciation as successive waves of #1 and #2 bid up housing prices. Cash out now, and move to some other low-CoL area to retire. If you're moving here hoping to work for one company the rest of your life, save up, and eventually own a home, you're in for a rude shock. Most of the housing stock is taken up by #3, and #1 and #2 will be able to bid up the rest far higher than any ordinary worker can afford without using a perilously high proportion of their salary. If there's a market downturn or shift in the tech industry, you get laid off, your employer's stock takes a hit, and you're screwed because many lenders count stock compensation as part of your income for deciding how much mortgage to give you. And housing prices in Silicon Valley are heavily correlated to the fortunes of the tech industry, so if there's ever a permanent downturn, this place will be the next Detroit.
- jldugger 8y ago
  > If you're hoping to steadily build wealth by working for a big tech company, staying in CA long-term, and saving your money, you're playing the wrong game. Eh, I really thing big tech is a feasible means to building wealth. Just don't confuse 'publicly traded' for 'big tech.' I understand the source of emotional pessimism, but wages for big tech seem to start around 200k, and increase annually with RSU refreshers. It is entirely feasible to save away 100k a year in that scenario. Invested prudently, that'll compound up well with a far lower risk than the startup equity lottery, and is far more liquid. You don't even have to invest in real estate, if you're happy renting, and the current tax situation makes home ownership marginally less appealing.
lazyasciiart 8y ago
Washington also has no income tax, high sales tax, but lots property tax. How does that fit your argument?
- burlesona 8y ago
  Structurally WA has many of the same benefits. It’s not a perfect comparison though because Seattle is struggling with fierce nimbys against a tech boom, and also tax rates are around 1% like in CA. Note that Austin has some of the same issues with housing prices surging due to nimbys. The biggest difference is that outside the city proper there’s a lot of land and a lot of suburbs that are thrilled to have Austin aggressively push the growth “out,” and also it was a much smaller city to begin with so this is the first ring of suburbs we’re taking about, not a second or third ring as you’ll find in bigger cities. My main argument is just that property tax is a more effective wealth tax and lends itself towards a more progressive overall tax system.
jjav 8y ago
> (low property taxes AND they never increase) Under Prop 13, property taxes go up 2% every year. Sure, that doesn't quite keep up with appreciation in boom years, but not the same as "never increase".
- Redoubts 8y ago
  I wish my tax burden was capped under inflation.
- TheCoelacanth 8y ago
  A 2% nominal increase every year is a decrease every year in real terms. Annual inflation has averaged above 2% every decade since the 30s, often far above 2%[1]. [1] https://inflationdata.com/Inflation/Inflation_Rate/Long_Term_Inflation.asp https://inflationdata.com/Inflation/Inflation_Rate/Long_Term...
skookumchuck 8y ago
In Washington, no income tax, there are 12 billionaires. Of course, there are constant calls for a state income tax to squeeze them. But I bet Washington wouldn't be home to Amazon and Microsoft if there was a state income tax.
- Latteland 8y ago
  Sure they would. The microsoft founders (as in Bill Gates and Paul Allen) gave significant funding and public support towards the capital gains tax initiative here.
  - skookumchuck 8y ago
    Allen isn't one of the 12. He has passed away. That leaves one out of 12. (BTW, in their efforts to pass a capital gains tax in Washington, the proponents argue it isn't an income tax. I don't agree with that, but there it is.)
    - Latteland 8y ago
      Well I was thinking of the ones that mattered. Gates is still alive of course. Mickeysoft was really founded in New Mexico but moved to Seattle because they were both from here.
whydoineedthis 8y ago
Nah. The reason it's 1percent is the median home price is over .5million. not the same in Texas.

option 8y ago

No, the property tax is not low in CA. What you pay is tax_rate*assesed_value. Because value is high what you actually pay is huge amount of money on what is considered a very modest house in other places

klipt 8y ago
But if you bought your $2 million house for $200k a few decades ago, you're still paying taxes on it like it's $200k (plus some tiny increases that fall well below inflation). Thanks Prop 13!
- option 8y ago
  yes, thanks to the prop 13 a teacher or retired couple are able to keep the house the’ve lived in for a huge part of their lives. And even with prop 13 the taxes are increasing every year (by~2% I think)
  - SamReidHughes 8y ago
    Texas also has a law about that for retired people. But they only defer the taxes until death.
  - viscanti 8y ago
    Anyone who buys property now subsidizes (through higher property taxes) EVERYONE who bought properties in the past. Some of those previous owners might be teachers or retired couples. But many other are movie stars and tech millionaires or billionaires. New home owners in California are subsidizing everyone else who bought property in the past. It creates a disincentive to sell as people want to be locked in to below market rates. It might help some people that we hope to help, but it also helps lots of people who should be paying their fair share that they're instead pushing off to new home buyers.
    - newnewpdro 8y ago
      You're drawing a disproportionately weighted link between high property values and the low taxes of past property owners, it's just not there. This is a problem in the especially desirable pockets of California, and people don't want to give up a good thing once they've got it, especially when it's increasingly scarce due to the low rates of residential development. You wouldn't have fixed the housing shortage by raising taxes, you'd just have accelerated the concentration of wealth displacing people who luckily got to live out their lives in a place they could no longer really afford to compete in. It would still be exorbitantly expensive IMHO.
      - lostapathy 8y ago
        It would be expensive but the tax burden would be fair if based on your property value. Now it’s more based on how long you’ve owned it, which is just the people who got there first stealing from those who happened to come later. Whatever happened to equal opportunity?
    - lostapathy 8y ago
      Prop 13 is essentially the old stealing from the young. It’s disgusting.
- burlesona 8y ago
  Exactly, sheltered wealth for the rich! :)
  - lamarpye 8y ago
    That is true is some cases, but not for everyone.
burlesona 8y ago
I’m not sure what about 1% being a third of 3% isn’t self-evident... In Texas a “typical” house for about $350k would come with an annual tax bill of $10,500. And it goes up if housing gets more expensive. Around me in SF an entry level home at $1M would have a tax bill of $10,000. But it’s locked forever. The same bill for a property 3x more valuable... it makes an enormous difference in the monthly payment which also has a meaningful impact on the ability for prices to shoot up in the first place.
- jjav 8y ago
  > Around me in SF an entry level home at $1M would have a tax bill of $10,000. But it’s locked forever. Property tax in CA goes up 2% every year. So, year 0: $10,000 year 1: $10,200 year 2: $10,404 And so on... maybe it doesn't go up as fast as you'd like (until you own a place) but it is by no means locked in.
  - Dylan16807 8y ago
    That's less than inflation! It doesn't count as going up. (It will peak over inflation in some years, but it's still effectively a freeze. Even a modest property appreciation like 50% will stay out of reach of an annual 2%-minus-inflation effectively forever.)

klipt 8y ago

California loves taxing HENRYs (High Earning Not Rich Yet)

deleted 8y ago
[deleted]

ProfessorLayton 8y ago

One point for clarification: It's 1% at the state level, however, depending on which county you live in there's plenty of other local taxes (School districts etc.) that end up nudging it to ~1.8% (SF and Oakland). Add "Special Assessments" which aren't %-based and it's even more. So "1%" is a bit misleading. Unincorporated areas end up being a little less at around 1.3%, in the Bay Area at least. Add state income tax + sales tax (9.75% where I am!) and California is a hilariously expensive state to live in.

jedberg 8y ago
I just checked my tax bill. I live in Cupertino, one of the highest cost areas in the state, and even including all special assessments and fees, my bill is 1.34%. But here's the problem: It's 1.34% of my base rate. I've lived here for 10 years. Using Zillow as a guide, my real tax rate is 0.56% thanks to Prop 13. My neighbor, who has owned their house for 35+ years, is paying 0.08% on a house worth just slightly less than mine. And more than 1/2 of that is special assessments. That's the problem with California property tax. We are all totally disincentivized to move or the encourage a drop in our property values, since eventually we want to sell it for top dollar and retire out of state.

rayiner 8y ago

Texas is in some ways the egalitarian sort of place California pretends to be. I was talking to a cab driver in Austin who had immigrated from Morocco. He and his friends bought houses in the suburbs with pools in good school districts, which they were able to pay off in 15 years with a cab drivers’ salary. What really strikes me visiting there compared to the coastal cities is relative prosperity among ordinary people, especially the kind of people (immigrants, etc.) that people in the coastal cities like to talk a lot about. Texas also does a better job educating students from disadvantaged groups than California, despite spending less money on education: https://www.forbes.com/sites/chuckdevore/2015/06/30/which-of-the-five-most-populous-states-do-best-in-k-12-education/#44a5a4dd2021 https://www.forbes.com/sites/chuckdevore/2015/06/30/which-of.... For math and science, Texas has some of the highest NAEP scores in the country for black and Hispanic students, while California has some of the worst.

deleted 8y ago
[deleted]
pcwalton 8y ago
The Texas Public Policy Foundation is one of the worst organizations you could cite. They're infamous for being just a front for Rick Perry's ambitions and as such are one of the groups directly responsible for the decreasing quality of Texas's higher education system. (Higher education in Texas is much worse than that of California.) There's no denying that California has a problem with K-12 education due to Prop 13. But I grew up and was educated in Texas, and I can say the government of Texas has always been significantly more dysfunctional than the government of California. The "Texas Miracle" thing during GWB's campaign was obviously an attempt to take credit for the fact that the oil industry attracted the kind of people who care about education, not because of anything related to the government. In fact, attempting to recreate the "Texas Miracle" nationwide led to the disastrous No Child Left Behind law. I more-likely-than-not won't end up having kids, but if I did, I would want them educated here, not in Texas. The government of Texas plays games with education to score political points in a way that the government of California does not. Besides, I question how sustainable Texas education is going to be without an income tax, and income tax is the third rail of Texas politics.

WillPostForFood 8y ago

I agree with your point overall, but you say Texas has "high sales tax" and California has "moderate sales tax", but Texas' sales tax rate is 6.25% and California is 7.25%. Comparing rates with local additions, Los Angeles is 9.5%, San Francisco is 8.5%, Dallas/Houston/Auston is 8.25%,

burlesona 8y ago
I thought the base state tax in CA was 6%, but actually you’re right anyway. The total rates are pretty similar. Mental error on my part. Ref: https://www.avalara.com/taxrates/en/state-rates/california/cities/san-francisco/ https://www.avalara.com/taxrates/en/state-rates/california/c...
masonic 8y ago
San Jose is 9.25%.

nostrademons 8y ago

"Having made the opposite move for a big tech job, the headwinds here against upward mobility are really striking." CA (at least the Bay Area) incentivizes a very different sort of upward mobility: striking it rich through owning equity in a business doing fundamental innovation in its area. If you're hoping to steadily build wealth by working for a big tech company, staying in CA long-term, and saving your money, you're playing the wrong game. (And I say this as someone who came to CA to work at a big tech company, has been here a decade, and married a local.) There are three basic paths to wealth in Silicon Valley: 1. Found a company outside of the valley. Do all the initial work in a low-CoL area, get customers and traction there, and then move to Silicon Valley for fundraising and scaling. Enjoy your equity appreciation, and cash out a billionaire. 2. Move here in your 20s. Get on a rocketship - a company that is likely to go public in the next 5 years. Stick it out for 5-ish years, enjoy your equity appreciation, and cash out a millionaire. Move to some other low-CoL area to buy a house and retire. 3. Get a time machine. Buy a house 15 years ago. Enjoy your equity appreciation as successive waves of #1 and #2 bid up housing prices. Cash out now, and move to some other low-CoL area to retire. If you're moving here hoping to work for one company the rest of your life, save up, and eventually own a home, you're in for a rude shock. Most of the housing stock is taken up by #3, and #1 and #2 will be able to bid up the rest far higher than any ordinary worker can afford without using a perilously high proportion of their salary. If there's a market downturn or shift in the tech industry, you get laid off, your employer's stock takes a hit, and you're screwed because many lenders count stock compensation as part of your income for deciding how much mortgage to give you. And housing prices in Silicon Valley are heavily correlated to the fortunes of the tech industry, so if there's ever a permanent downturn, this place will be the next Detroit.

jldugger 8y ago
> If you're hoping to steadily build wealth by working for a big tech company, staying in CA long-term, and saving your money, you're playing the wrong game. Eh, I really thing big tech is a feasible means to building wealth. Just don't confuse 'publicly traded' for 'big tech.' I understand the source of emotional pessimism, but wages for big tech seem to start around 200k, and increase annually with RSU refreshers. It is entirely feasible to save away 100k a year in that scenario. Invested prudently, that'll compound up well with a far lower risk than the startup equity lottery, and is far more liquid. You don't even have to invest in real estate, if you're happy renting, and the current tax situation makes home ownership marginally less appealing.

lazyasciiart 8y ago

Washington also has no income tax, high sales tax, but lots property tax. How does that fit your argument?

burlesona 8y ago
Structurally WA has many of the same benefits. It’s not a perfect comparison though because Seattle is struggling with fierce nimbys against a tech boom, and also tax rates are around 1% like in CA. Note that Austin has some of the same issues with housing prices surging due to nimbys. The biggest difference is that outside the city proper there’s a lot of land and a lot of suburbs that are thrilled to have Austin aggressively push the growth “out,” and also it was a much smaller city to begin with so this is the first ring of suburbs we’re taking about, not a second or third ring as you’ll find in bigger cities. My main argument is just that property tax is a more effective wealth tax and lends itself towards a more progressive overall tax system.

jjav 8y ago

> (low property taxes AND they never increase) Under Prop 13, property taxes go up 2% every year. Sure, that doesn't quite keep up with appreciation in boom years, but not the same as "never increase".

Redoubts 8y ago
I wish my tax burden was capped under inflation.
TheCoelacanth 8y ago
A 2% nominal increase every year is a decrease every year in real terms. Annual inflation has averaged above 2% every decade since the 30s, often far above 2%[1]. [1] https://inflationdata.com/Inflation/Inflation_Rate/Long_Term_Inflation.asp https://inflationdata.com/Inflation/Inflation_Rate/Long_Term...

skookumchuck 8y ago

In Washington, no income tax, there are 12 billionaires. Of course, there are constant calls for a state income tax to squeeze them. But I bet Washington wouldn't be home to Amazon and Microsoft if there was a state income tax.

Latteland 8y ago
Sure they would. The microsoft founders (as in Bill Gates and Paul Allen) gave significant funding and public support towards the capital gains tax initiative here.
- skookumchuck 8y ago
  Allen isn't one of the 12. He has passed away. That leaves one out of 12. (BTW, in their efforts to pass a capital gains tax in Washington, the proponents argue it isn't an income tax. I don't agree with that, but there it is.)
  - Latteland 8y ago
    Well I was thinking of the ones that mattered. Gates is still alive of course. Mickeysoft was really founded in New Mexico but moved to Seattle because they were both from here.

whydoineedthis 8y ago

Nah. The reason it's 1percent is the median home price is over .5million. not the same in Texas.