3 ms·

> parking lots -- even on land worth $10M+ -- often pay property taxes as little as $100-$1000 a year (thanks to Prop 13). Commercial property is also exempt

by yardie 7y ago

> parking lots -- even on land worth $10M+ -- often pay property taxes as little as $100-$1000 a year (thanks to Prop 13). Commercial property is also exempt under Prop 13?! What a screwed up system. I kind of understand if it applies to primary residences. I think it's ridiculous it also applies to commercial property as well.

onlyrealcuzzo 7y ago
It's insane. And, yes, it does. Same narrative to justify it. We can't increase taxes on poor old grandpa's deli. He'll never be able to compete with all the other delis that also have to pay rising taxes. Think of poor grandpa! Meanwhile, you've got landlords owning those shitty 6-unit dingbat apartments they built in the 70s for $100k, paying taxes of $1k per year, charging rents or $3k/month for each unit. All the while, they're collecting another $1k or so in land value increases per month, that will be taxed at a lower capital gains rate -- of which the state will see almost nothing. AND it's the whole reason no one ever sells those buildings to be redeveloped. They make so much money, since they pay no taxes, that there's no better investment in the world. Why would anyone ever sell one? Even at $10M, you'd still be crazy to sell it. It'll be worth $11M next year, and you get all that tax-free profit. Totally legally, and totally cool.
- zamfi 7y ago
  I agree with what you say completely, but this: > that will be taxed at a lower capital gains rate -- of which the state will see almost nothing ...is not quite correct; California does not have a special reduced cap gains tax rate like the Feds. But this does not make the whole setup any less ridiculous.
qiqitori 7y ago
I don't get property taxes. Why make people pay taxes on land they already paid a bunch of money for?
- patrickthebold 7y ago
  To pay for schools and things like that.
- taffer 7y ago
  There are many reasons, especially for taxes on the value of land: * The value of land is largely created by public services such as schools, infrastructure, parks and public transport. Therefore, it makes sense to recover this value through taxation. * Almost all taxes reduce or distort what is taxed. The supply of land, on the other hand, is fixed and cannot be reduced. This way, public services such as schools can be paid for without distorting the economy. * Property cannot be hidden or moved to tax havens. * Land taxes prevent vacancies and thus speculation. The reduction of vacancies also helps against urban sprawl.
- coldtea 7y ago
  One might as well ask "Why make people pay taxes on income they worked to make?". There's no some god-given justification for taxes. We have them because: a) somebody can enforce their payment b) societies need a money pool to do public things c) societies need to encourage/discourage some things A country could opt not to have taxes, and not maintain an army for example, and live it to the goodwill of the citizens to build infrastructure. That couldn't would be stomped by one that did have taxes and used them to build a good army. So that doesn't work out that good... Now, assuming a society decide it needs taxes, what taxes to have is more a question of "how much money are needed" and "how to present it nicely" and "what to encourage/discourage". Regarding "how much money is needed", the justification for property tax is simple: if income tax money aren't enough, governments might add not just property tax, but even a breathing tax. On the plus side, property is difficult to hide (as money would be e.g. in the Kayman islands). Regarding "what to discourage", the justification for property tax is, not to hog down property and prevent its use. You also want to get some of the value the community/government creates in an area and pushes property values (not just market value, but also use-value, like having a school nearby) up back.
- yardie 7y ago
  That's actually a very good question. There are still places in the US you can buy unincorporated land. The taxes on those properties are none to so low it is nonexistent. To live on it ends up costing you more though. There is no electricity, no roads, no schools, no police, no fire protection, no water and no water treatment. Mail you'll need to pick up at the post office in the closest town. They don't deliver if they have no roads to drive on. This setup works for a very small percentage of the population. If you want an access road to your property you'll need to purchase the right of way from neighbors. And you'll have to live with the fact that the land you bought might not ever sell. As a primary property it's going to be extremely hard to get financing for any improvements so most of these properties are relegated to a cabin in the woods, vacation home.

by yardie 7y ago

onlyrealcuzzo 7y ago

It's insane. And, yes, it does. Same narrative to justify it. We can't increase taxes on poor old grandpa's deli. He'll never be able to compete with all the other delis that also have to pay rising taxes. Think of poor grandpa! Meanwhile, you've got landlords owning those shitty 6-unit dingbat apartments they built in the 70s for $100k, paying taxes of $1k per year, charging rents or $3k/month for each unit. All the while, they're collecting another $1k or so in land value increases per month, that will be taxed at a lower capital gains rate -- of which the state will see almost nothing. AND it's the whole reason no one ever sells those buildings to be redeveloped. They make so much money, since they pay no taxes, that there's no better investment in the world. Why would anyone ever sell one? Even at $10M, you'd still be crazy to sell it. It'll be worth $11M next year, and you get all that tax-free profit. Totally legally, and totally cool.

zamfi 7y ago
I agree with what you say completely, but this: > that will be taxed at a lower capital gains rate -- of which the state will see almost nothing ...is not quite correct; California does not have a special reduced cap gains tax rate like the Feds. But this does not make the whole setup any less ridiculous.

qiqitori 7y ago

I don't get property taxes. Why make people pay taxes on land they already paid a bunch of money for?

patrickthebold 7y ago
To pay for schools and things like that.
taffer 7y ago
There are many reasons, especially for taxes on the value of land: * The value of land is largely created by public services such as schools, infrastructure, parks and public transport. Therefore, it makes sense to recover this value through taxation. * Almost all taxes reduce or distort what is taxed. The supply of land, on the other hand, is fixed and cannot be reduced. This way, public services such as schools can be paid for without distorting the economy. * Property cannot be hidden or moved to tax havens. * Land taxes prevent vacancies and thus speculation. The reduction of vacancies also helps against urban sprawl.
coldtea 7y ago
One might as well ask "Why make people pay taxes on income they worked to make?". There's no some god-given justification for taxes. We have them because: a) somebody can enforce their payment b) societies need a money pool to do public things c) societies need to encourage/discourage some things A country could opt not to have taxes, and not maintain an army for example, and live it to the goodwill of the citizens to build infrastructure. That couldn't would be stomped by one that did have taxes and used them to build a good army. So that doesn't work out that good... Now, assuming a society decide it needs taxes, what taxes to have is more a question of "how much money are needed" and "how to present it nicely" and "what to encourage/discourage". Regarding "how much money is needed", the justification for property tax is simple: if income tax money aren't enough, governments might add not just property tax, but even a breathing tax. On the plus side, property is difficult to hide (as money would be e.g. in the Kayman islands). Regarding "what to discourage", the justification for property tax is, not to hog down property and prevent its use. You also want to get some of the value the community/government creates in an area and pushes property values (not just market value, but also use-value, like having a school nearby) up back.
yardie 7y ago
That's actually a very good question. There are still places in the US you can buy unincorporated land. The taxes on those properties are none to so low it is nonexistent. To live on it ends up costing you more though. There is no electricity, no roads, no schools, no police, no fire protection, no water and no water treatment. Mail you'll need to pick up at the post office in the closest town. They don't deliver if they have no roads to drive on. This setup works for a very small percentage of the population. If you want an access road to your property you'll need to purchase the right of way from neighbors. And you'll have to live with the fact that the land you bought might not ever sell. As a primary property it's going to be extremely hard to get financing for any improvements so most of these properties are relegated to a cabin in the woods, vacation home.