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Prop 13 was a reaction against confiscatory taxes that broke an important social contract. The contract: If you save, invest, and pay off your home mortgage so

Prop 13 was a reaction against confiscatory taxes that broke an important social contract. The contract: If you save, invest, and pay off your home mortgage so that you own it free and clear, later in life when you are retired and living on a fixed income no one can come along and confiscate the property that you bought and paid for fair and square. The contract breech: Property taxes going up so fast that the only possible solution was to sell your home. Now, of course the value of the home was going up, which was what was driving the taxes. But forcing pensioners to sell their homes, disrupting/destroying a life-time of plans and work was never going to be a smooth ride -- who could have thought that it would be? The government pre-Prop 13 was viewed as kleptocratic by a sizeable portion of the population, with arguably good reason. So, do you have a better solution that has empathy for pensioners that played by the rules all their lives and have plans to settle into modest enjoyment of their so-called "golden years"? Prop 13 was an attempt to stop perceived thievery, a crude bludgeon, perhaps, but a sufficient number of desperate people saw it as a solution to get it enacted.

asdfgasd 7y ago
>The contract breech: Property taxes going up so fast that the only possible solution was to sell your home. Now, of course the value of the home was going up, which was what was driving the taxes. But forcing pensioners to sell their homes, disrupting/destroying a life-time of plans and work was never going to be a smooth ride -- who could have thought that it would be? Financial instruments that prevent that already exist. If your home is worth millions of dollars it's not that hard to find a way to pay the property tax. "Having more money" is rarely a real problem. > a sufficient number of desperate people saw it as a solution to get it enacted. No, people who's material interests are in direct conflict with a functional society pushed for it. It passed through a combination of "think of the elders" concern-trolling and libertarian dark money.
- zepto 7y ago
  Your solution is to make real estate into just a rental from the state. That’s not a great one either.
  - asdfgasd 7y ago
    > Your solution is to make real estate into just a rental from the state. What's wrong with that? I'm not really sure where this idea that we have a 'right' to property ownership of land came from, especially when that property is largely a consequence of genocide. A better solution would be distributed cooperative ownership of property with state oversight (avoids the perverse incentives of a powerful state), but that would require massive changes to the legal frameworks surrounding property---so I'm not sure it's likely anytime soon.
- wmf 7y ago
  Specifically, you could use a reverse mortgage to pay property tax. A similar solution that has been proposed is that unpaid property taxes could accumulate as a lien and thus be paid when the house is sold.
  - selimthegrim 7y ago
    I thought this was standard-it happened to many properties after Katrina
beat 7y ago
Just because a solid majority of people think something is a good idea doesn't make it a good idea. That's the problem with Prop 13, and with democracy in general.
Ensorceled 7y ago
It’s hard to have sympathy for people whose home has skyrocketed in value and they now “can’t afford” the property tax on their multimillion dollar homes. What it needed is a way for people whose homes had only gone up a small amount from getting budget busting increments. Once your home has doubled in value, there are other financial mechanisms to solve that problem and you can afford to pay the increase.
- zepto 7y ago
  Why do you have no sympathy? If you are a retiree who has worked hard the paper value of your home if you were forced to sell is not a real gain.
  - sharx 7y ago
    There are other options beside selling e.g. reverse mortgage or heloc
  - Ensorceled 7y ago
    Because they own a multi-million dollar asset? They can, worse case, take out a reverse mortgage and live happily ever after. There are better financial options available than a reverse mortgage but anyway you look at it they are rich. What do you mean by "is not a real gain"?
    - zepto 7y ago
      Asset gains only become real when the asset is sold. That’s what I mean. Also - a financial instrument based on the value of collateral can easily go south if the value of the collateral falls. There is no guarantee that home values will remain stable nor that whatever assets you put the loan into will perform adequately too. Given that retirees typically don’t have the ability to correct for investments gone wrong out of future earnings, your recommendations would be foolhardy for most. Simply buying a house to live in is fine. The only reason we are having this discussion is that the people complaining about prop 13 want a mechanism to force older people out of their homes so they can take have them instead.
taffer 7y ago
That is why Prop 13 will not go away in a foreseeable future, but the whole idea of tying all your savings to your house is flawed. Apart from putting all your eggs in one basket, it also creates all sorts of bad incentives like Prop 13.
- zepto 7y ago
  Are you proposing that there is something safer than your house to put your savings in that would either allow you to outpace property taxes if prop 13 was abolished, or trivially move if it were? It’s not meaningful to say something is a bad strategy if you can’t articulate an alternative.
  - taffer 7y ago
    There are many existing alternatives like 401(k).
    - zepto 7y ago
      Those are projected to underperform and are vulnerable to mismanagement in a way that owning your own home is not.
      - asdff 7y ago
        That is until homes eventually get properly taxed
sdenton4 7y ago
Sending the post-work population to a nice quiet farm upstate doesn't sound so bad to me... It's hard for me to have much sympathy for the dream of keeping your home forever when the great majority of people I know have basically no hope of ever owning a home in the area.
- zepto 7y ago
  Why don’t you go upstate then? (Serious question - how do you justify sending retirees away from their homes, rather than simply working somewhere else?)
  - threwawasy1228 7y ago
    I've gotten offers from places like this, the pay deduction is staggering. If I got an offer that paid even the median of what I can make on the coasts, in a place like upstate New York I would get out of the coasts in a heartbeat and buy a house.
  - sdenton4 7y ago
    I'm reminded of all the boomers who said that one should simply work a summer job to pay for college, and then simply get a job when the degree is done... My impression, as a person under 60, is that the older land-owning generation largely had things much, much easier, and have been blissfully unaware of the changes society has undergone. Or else perfectly aware, but unwilling to recognize their debts to society and circumstance and pay it forward. Those low property taxes translate directly into booming tuition, as the state funding for higher education has been systematically gutted. The higher tuitions, in turn, imply massive student debt. Simply get a summer job, rite? As for me? I work where it makes most sense for me to work. Not-working can happen anywhere. So for retirees, my advice is this: Sell the house, take the millions of dollars in windfall, and go to Bali or Florida or something already. I'm sorry if you have to make new friends; please consider this outcome the next time you settle for a societal structure without robust community. But in getting out, you'll reduce the demand pressure slightly, improve the depressed tax base, and have enough money for a long, long vacation.
AnimalMuppet 7y ago
When you put it that way, the solution is obvious - the state government needs to spend less money. Note well: I said "obvious", not "easy" or even "politically possible". But I think it's useful to note that, in important ways, California is doing this to itself.
- asdfgasd 7y ago
  > When you put it that way, the solution is obvious When it's put in an ideologically biased way that ignores practical solutions to paying taxes on an increasing property value, it implies another ideologically biased solution that favours the material interests of the rich... Sure.
  - AnimalMuppet 7y ago
    Note that "the government has to spend that money, so here are some ways that you can manage to afford to pay your taxes" is also an ideologically biased viewpoint. (It's the current default viewpoint, but it's still ideologically biased...)
    - asdfgasd 7y ago
      Of course, everything is ideological. I'm a socialist so I'm plenty familiar with going against the status-quo and my HN karma reflects that. I'm arguing against hiding your ideological motive (lower taxes) under the guise of 'logical deduction' or 'obviousness'.
      - kortilla 7y ago
        HN is open to sound arguments against “the status quo” (whatever you think that is). If your karma suffers it’s likely because you’re not actually making well reasoned comments but are instead just spewing ideology.
        asdfgasd 7y ago
vonmoltke 7y ago
> Prop 13 was a reaction against confiscatory taxes that broke an important social contract. > The contract: If you save, invest, and pay off your home mortgage so that you own it free and clear, later in life when you are retired and living on a fixed income no one can come along and confiscate the property that you bought and paid for fair and square. That doesn't explain why Prop 13 applies to commercial, industrial, and rental properties.
- jacobolus 7y ago
  Helping large-scale property owners to collect unearned economic rents was the primary motivation for Prop 13. Crippling the state and local governments’ democratic power to collect taxes was the secondary motivation. Sob stories about retirees on fixed incomes getting taxed out of their homes was only the propagandistic sales pitch, a clever way to convince a majority of voters to support the referendum. The wealthy anti-tax activists who promoted prop 13 didn’t actually care about unwealthy elderly people per se. If such people had been the main focus, it would have been straightforward to come up with a much less dramatic remedy.
honkycat 7y ago
We cannot halt society's progress because a small amount of wealthy people's privilege will be injured. I am sure there are reasonable solutions other than: "Do nothing and let the country rot."
scarejunba 7y ago
This is not an adequate explanation for why Prop 13 tax basis can be inherited or why it is valid for commercial buildings. The "sell their homes" rhetoric does not work for investment properties either.
deleted 7y ago
[deleted]
guelo 7y ago
That's true everywhere that property taxes exist. Why was it only banned in California?
- vonmoltke 7y ago
  California is unique in applying this limit to all real estate. Many states have taxable value caps for owner-occupied residences. Also, nothing is "banned" by Prop 13.
  - guelo 7y ago
    Annual assessment of real estate value is banned under prop 13.
    - vonmoltke 7y ago
      No, it isn't. The increase is just capped at a low number.
musicale 7y ago
I am pretty OK with not forcing pensioners to sell their homes in order to pay ever-increasing taxes. It also seems nice to not tax small businesses out of existence. On the other hand, it would be nice to not have as many closed storefronts and vacant lots in prime locations.
troydavis 7y ago
> The contract breech: Property taxes going up so fast that the only possible solution was to sell your home. Now, of course the value of the home was going up, which was what was driving the taxes. The State of California offers another solution. It's called Property Tax Postponement: https://www.sco.ca.gov/ardtax_prop_tax_postponement.html https://www.sco.ca.gov/ardtax_prop_tax_postponement.html "The State Controller’s Property Tax Postponement Program allows homeowners who are seniors, are blind, or have a disability to defer current-year property taxes on their principal residence if they meet certain criteria including 40 percent equity in the home and an annual household income of $35,500 or less." The taxes are deferred until a change of control, like due to a sale or transfer to next of kin. Many or most high-cost-of-living jurisdictions have similar programs.
- x3n0ph3n3 7y ago
  So the future home purchaser ends up paying all of those deferred taxes? Yikes.
  - jacobolus 7y ago
    No, the future purchaser pays market price, but some portion of the money that the seller gets from the sale goes to paying back the deferred taxes they owe.
- zeveb 7y ago
  That’s a really low annual household income, particularly for California. But perhaps it's tweakable.
  - jacobolus 7y ago
    This is aimed at elderly people making a living from a pension, social security, etc. Not for people currently earning a full-time salary.
    - zeveb 7y ago
      Yeah, but $35,000 from one's pension/401(k)/Social Security is still peanuts for California. That's got to be well below effective poverty level for someone living in San Francisco, LA or San Diego, even without rent.

asdfgasd 7y ago

>The contract breech: Property taxes going up so fast that the only possible solution was to sell your home. Now, of course the value of the home was going up, which was what was driving the taxes. But forcing pensioners to sell their homes, disrupting/destroying a life-time of plans and work was never going to be a smooth ride -- who could have thought that it would be? Financial instruments that prevent that already exist. If your home is worth millions of dollars it's not that hard to find a way to pay the property tax. "Having more money" is rarely a real problem. > a sufficient number of desperate people saw it as a solution to get it enacted. No, people who's material interests are in direct conflict with a functional society pushed for it. It passed through a combination of "think of the elders" concern-trolling and libertarian dark money.

zepto 7y ago
Your solution is to make real estate into just a rental from the state. That’s not a great one either.
- asdfgasd 7y ago
  > Your solution is to make real estate into just a rental from the state. What's wrong with that? I'm not really sure where this idea that we have a 'right' to property ownership of land came from, especially when that property is largely a consequence of genocide. A better solution would be distributed cooperative ownership of property with state oversight (avoids the perverse incentives of a powerful state), but that would require massive changes to the legal frameworks surrounding property---so I'm not sure it's likely anytime soon.
wmf 7y ago
Specifically, you could use a reverse mortgage to pay property tax. A similar solution that has been proposed is that unpaid property taxes could accumulate as a lien and thus be paid when the house is sold.
- selimthegrim 7y ago
  I thought this was standard-it happened to many properties after Katrina

beat 7y ago

Just because a solid majority of people think something is a good idea doesn't make it a good idea. That's the problem with Prop 13, and with democracy in general.

Ensorceled 7y ago

It’s hard to have sympathy for people whose home has skyrocketed in value and they now “can’t afford” the property tax on their multimillion dollar homes. What it needed is a way for people whose homes had only gone up a small amount from getting budget busting increments. Once your home has doubled in value, there are other financial mechanisms to solve that problem and you can afford to pay the increase.

zepto 7y ago
Why do you have no sympathy? If you are a retiree who has worked hard the paper value of your home if you were forced to sell is not a real gain.
- sharx 7y ago
  There are other options beside selling e.g. reverse mortgage or heloc
- Ensorceled 7y ago
  Because they own a multi-million dollar asset? They can, worse case, take out a reverse mortgage and live happily ever after. There are better financial options available than a reverse mortgage but anyway you look at it they are rich. What do you mean by "is not a real gain"?
  - zepto 7y ago
    Asset gains only become real when the asset is sold. That’s what I mean. Also - a financial instrument based on the value of collateral can easily go south if the value of the collateral falls. There is no guarantee that home values will remain stable nor that whatever assets you put the loan into will perform adequately too. Given that retirees typically don’t have the ability to correct for investments gone wrong out of future earnings, your recommendations would be foolhardy for most. Simply buying a house to live in is fine. The only reason we are having this discussion is that the people complaining about prop 13 want a mechanism to force older people out of their homes so they can take have them instead.

taffer 7y ago

That is why Prop 13 will not go away in a foreseeable future, but the whole idea of tying all your savings to your house is flawed. Apart from putting all your eggs in one basket, it also creates all sorts of bad incentives like Prop 13.

zepto 7y ago
Are you proposing that there is something safer than your house to put your savings in that would either allow you to outpace property taxes if prop 13 was abolished, or trivially move if it were? It’s not meaningful to say something is a bad strategy if you can’t articulate an alternative.
- taffer 7y ago
  There are many existing alternatives like 401(k).
  - zepto 7y ago
    Those are projected to underperform and are vulnerable to mismanagement in a way that owning your own home is not.
    - asdff 7y ago
      That is until homes eventually get properly taxed

sdenton4 7y ago

Sending the post-work population to a nice quiet farm upstate doesn't sound so bad to me... It's hard for me to have much sympathy for the dream of keeping your home forever when the great majority of people I know have basically no hope of ever owning a home in the area.

zepto 7y ago
Why don’t you go upstate then? (Serious question - how do you justify sending retirees away from their homes, rather than simply working somewhere else?)
- threwawasy1228 7y ago
  I've gotten offers from places like this, the pay deduction is staggering. If I got an offer that paid even the median of what I can make on the coasts, in a place like upstate New York I would get out of the coasts in a heartbeat and buy a house.
- sdenton4 7y ago
  I'm reminded of all the boomers who said that one should simply work a summer job to pay for college, and then simply get a job when the degree is done... My impression, as a person under 60, is that the older land-owning generation largely had things much, much easier, and have been blissfully unaware of the changes society has undergone. Or else perfectly aware, but unwilling to recognize their debts to society and circumstance and pay it forward. Those low property taxes translate directly into booming tuition, as the state funding for higher education has been systematically gutted. The higher tuitions, in turn, imply massive student debt. Simply get a summer job, rite? As for me? I work where it makes most sense for me to work. Not-working can happen anywhere. So for retirees, my advice is this: Sell the house, take the millions of dollars in windfall, and go to Bali or Florida or something already. I'm sorry if you have to make new friends; please consider this outcome the next time you settle for a societal structure without robust community. But in getting out, you'll reduce the demand pressure slightly, improve the depressed tax base, and have enough money for a long, long vacation.

AnimalMuppet 7y ago

When you put it that way, the solution is obvious - the state government needs to spend less money. Note well: I said "obvious", not "easy" or even "politically possible". But I think it's useful to note that, in important ways, California is doing this to itself.

asdfgasd 7y ago
> When you put it that way, the solution is obvious When it's put in an ideologically biased way that ignores practical solutions to paying taxes on an increasing property value, it implies another ideologically biased solution that favours the material interests of the rich... Sure.
- AnimalMuppet 7y ago
  Note that "the government has to spend that money, so here are some ways that you can manage to afford to pay your taxes" is also an ideologically biased viewpoint. (It's the current default viewpoint, but it's still ideologically biased...)
  - asdfgasd 7y ago
    Of course, everything is ideological. I'm a socialist so I'm plenty familiar with going against the status-quo and my HN karma reflects that. I'm arguing against hiding your ideological motive (lower taxes) under the guise of 'logical deduction' or 'obviousness'.
    - kortilla 7y ago
      HN is open to sound arguments against “the status quo” (whatever you think that is). If your karma suffers it’s likely because you’re not actually making well reasoned comments but are instead just spewing ideology.
      - asdfgasd 7y ago

vonmoltke 7y ago

> Prop 13 was a reaction against confiscatory taxes that broke an important social contract. > The contract: If you save, invest, and pay off your home mortgage so that you own it free and clear, later in life when you are retired and living on a fixed income no one can come along and confiscate the property that you bought and paid for fair and square. That doesn't explain why Prop 13 applies to commercial, industrial, and rental properties.

jacobolus 7y ago
Helping large-scale property owners to collect unearned economic rents was the primary motivation for Prop 13. Crippling the state and local governments’ democratic power to collect taxes was the secondary motivation. Sob stories about retirees on fixed incomes getting taxed out of their homes was only the propagandistic sales pitch, a clever way to convince a majority of voters to support the referendum. The wealthy anti-tax activists who promoted prop 13 didn’t actually care about unwealthy elderly people per se. If such people had been the main focus, it would have been straightforward to come up with a much less dramatic remedy.

honkycat 7y ago

We cannot halt society's progress because a small amount of wealthy people's privilege will be injured. I am sure there are reasonable solutions other than: "Do nothing and let the country rot."

scarejunba 7y ago

This is not an adequate explanation for why Prop 13 tax basis can be inherited or why it is valid for commercial buildings. The "sell their homes" rhetoric does not work for investment properties either.

deleted 7y ago

[deleted]

guelo 7y ago

That's true everywhere that property taxes exist. Why was it only banned in California?

vonmoltke 7y ago
California is unique in applying this limit to all real estate. Many states have taxable value caps for owner-occupied residences. Also, nothing is "banned" by Prop 13.
- guelo 7y ago
  Annual assessment of real estate value is banned under prop 13.
  - vonmoltke 7y ago
    No, it isn't. The increase is just capped at a low number.

musicale 7y ago

I am pretty OK with not forcing pensioners to sell their homes in order to pay ever-increasing taxes. It also seems nice to not tax small businesses out of existence. On the other hand, it would be nice to not have as many closed storefronts and vacant lots in prime locations.

troydavis 7y ago

> The contract breech: Property taxes going up so fast that the only possible solution was to sell your home. Now, of course the value of the home was going up, which was what was driving the taxes. The State of California offers another solution. It's called Property Tax Postponement: https://www.sco.ca.gov/ardtax_prop_tax_postponement.html https://www.sco.ca.gov/ardtax_prop_tax_postponement.html "The State Controller’s Property Tax Postponement Program allows homeowners who are seniors, are blind, or have a disability to defer current-year property taxes on their principal residence if they meet certain criteria including 40 percent equity in the home and an annual household income of $35,500 or less." The taxes are deferred until a change of control, like due to a sale or transfer to next of kin. Many or most high-cost-of-living jurisdictions have similar programs.

x3n0ph3n3 7y ago
So the future home purchaser ends up paying all of those deferred taxes? Yikes.
- jacobolus 7y ago
  No, the future purchaser pays market price, but some portion of the money that the seller gets from the sale goes to paying back the deferred taxes they owe.
zeveb 7y ago
That’s a really low annual household income, particularly for California. But perhaps it's tweakable.
- jacobolus 7y ago
  This is aimed at elderly people making a living from a pension, social security, etc. Not for people currently earning a full-time salary.
  - zeveb 7y ago
    Yeah, but $35,000 from one's pension/401(k)/Social Security is still peanuts for California. That's got to be well below effective poverty level for someone living in San Francisco, LA or San Diego, even without rent.