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I don't know that it's more "unfair" to the younger generations to not increase property taxes than it would be to the home owners to do so. Why would someone w

I don't know that it's more "unfair" to the younger generations to not increase property taxes than it would be to the home owners to do so. Why would someone who bought a house for 100k be expected to pay taxes on 2M years later? A lot of these people probably had normal jobs and incomes, they didn't chose for Google/Apple/Facebook to move into town and send the property prices sky high. Yes, they benefit as owners but this rule only takes effect if they don't sell their house and continue to live in it. The alternative is that we basically force people out of houses they've bought by gouging them with taxes. That seems much more unfair than the alternative.

ariwilson 7y ago
We live in society; everyone is interconnected. One's own self interest cannot outweigh the needs of the group and, in California, all the stats are showing that the group is suffering due to the needs of the few. Prop 13 is part of the problem and should be reduced in effect (commercial property taxes, max rise of 3% annually) alongside changes to zoning until the housing crisis abates.
- la6470 7y ago
  Sensible take the middle road folks
WWLink 7y ago
Apple has been in the same general area since the 1970s, and all of the many companies that came before them lol.
- malvosenior 7y ago
  Yes, but they weren't the money printing machine back then that they are now and it's highly doubtful they had a meaningful impact on Bay Area real estate prices in the 1970s.
klipt 7y ago
Of course prop 13 "seems" fair, that's how it got passed. But it has terrible consequences. Adjusted for inflation, it makes taxes drop to 0 in the limit, which means there's no incentive for rich people to ever sell. Which means real estate becomes hoarded across generations by the wealthy class, which recreates the main feature of feudalism.
- Merrill 7y ago
  Other disincentives to sell are fairly high realtor commissions and fees, as well as capital gains taxes on the amount over the exclusion, which isn't very high given CA prices. Think of Prop 13 as "rent control" for homeowners.
BubRoss 7y ago
It's not like these things happened over night. If someone bought a house for 100k and it is now worth two million, I'm not sure they can claim they are being gouged on a 2000% increase of equity. Buying land still doesn't entitle you to be able to perpetually afford to live in one of the most desirable places on earth.
- scarface74 7y ago
  Well. No one is “entitled” to live in California. There are 49 other states in the US. There are also many other cities where the pay vs cost of living makes a lot more sense.
  - BubRoss 7y ago
    I'm not sure what point you are trying to make, this just sounds like a generalization of what I was saying (although not all of California is expensive).
    - scarface74 7y ago
      It sounds like you saying that it would be more fair to make them leave by pricing them out so other people can buy their homes.
      - BubRoss 7y ago
        Pricing property taxes to be consistent with the value of a home is not 'making someone leave'. In this case 'so someone else can buy their home' is actually 'they can decide to sell their house for an enormous profit of twenty times what they bought it for if that is their choice'. To be clear here, if someone else bought the house, that person would pay the proper property tax, so why is someone's inaction so valuable?
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coenhyde 7y ago
Because they have a house and ~$1.9M in free equity. The younger generation doesn't have that opportunity. If they can't afford the property tax they can downsize easily. It's not easy for young people to afford $2M houses, especially when paying high state income taxes to make up for the lack of sufficient property taxes.
- malvosenior 7y ago
  The younger generation can do the same thing the older generation did and buy a house in a cheaper real estate market. It's funny that people feel entitled to buy a house in the most expensive place on earth. I think a lot of the people who bought houses for 100k in California in the 1970s would not have expected to buy a condo at the same time on 5th Ave in Manhattan (for instance). It's a recent phenomena that young people feel they should own property in world cities.
  - Fainsan 7y ago
    Since values where falsely supported by corrupt mortgages and appraisals then further supported by our government bailout not allowing the market to work as it should, why shouldn't people also expect to not be priced out of their neighborhoods? Shouldn't median income have anything to do with what housing costs should be in any given area? Everywhere in California for example isn't 5th ave or Silicone valley, so your argument is flawed.
    - malvosenior 7y ago
      Housing prices are dictated by supply and demand. The supply is artificially low due to zoning (this needs to be fixed), the supply was artificially high due to the issues you stated. None of that has anything to do with taxing home owners. When you buy a house you should be taxed on what you paid for it. The government shouldn't have a back door to come and raise your taxes as high as it wants.
  - coenhyde 7y ago
    I think it's funny that people feel entitled to these property tax breaks. I'm less concerned about individuals feeling left out, and more concerned about the systemic issues lack of home ownership for this generation will cause. We've distorted the market so much through a variety of bad policies, i don't think it is an unreasonable request to start reversing the trend.
FreakyT 7y ago
> The alternative is that we basically force people out of houses they've bought by gouging them with taxes. I would argue that being able to afford a place in the 1970s does not endow one with an inalienable right to remain there forever. Locking the property taxes creates an artificial incentive to hold onto property forever, thus creating market stagnation.
- tremon 7y ago
  Yes, of course, and after we've driven them from their home, maybe we can put them in a reservation instead /s
- la6470 7y ago
  The taxes should simply increase for the folks who has brought it in the 70s adjusted for inflation and senior citizen discount. But it should not stay the same. Gawd why can’t we ever take the middle road and only have to take fucking extreme positions in every damn thing???
- almost_usual 7y ago
  I honestly think it has less to do with money than the younger HN community realizes. Older people don't like change, especially significant changes like moving. Most of the people who have been here for decades stay because it's their home and they have no where else to go. Getting rid of Prop 13 and raising taxes to tech market rate is the equivalent of deporting someone from their home.
  - pound 7y ago
    non-primary residences as well as commercial properties are also covered by it. It's about wealth, not about keeping someone in their home.
    - almost_usual 7y ago
      I can get on board with amending non-primary residences and commercial properties.
x0x0 7y ago
Why should someone who bought a house for $100k get $2m years later?
- collias 7y ago
  Why should someone who bought $100k of Apple stock get $2m years later?
  - thrower123 7y ago
    You can't live inside of Apple stock. Well, I suppose you might be able to make some kind of structure if you had enough physical stock certificates...
  - x0x0 7y ago
    Well, you pay tax on your gains on that stock sale. The claim is you shouldn't on houses; it should be a tax-free investment.
    - collias 7y ago
      You definitely pay taxes on a sold property (capital gains, like stock), assuming your profit is over $250k, like this example. Prop 13 doesn't affect that.
spaced-out 7y ago
I think you would agree, though, that people shouldn't be able to get Prop 13 benefits on properties that aren't their primary residence. For example, someone owning multiple houses and renting them out at market rates.
- novok 7y ago
  Or corporate properties such as office towers.
  - rcpt 7y ago
    Or golf courses. My god how are people ok with private golf courses in the middle of cities?
Kalium 7y ago
> The alternative is that we basically force people out of houses they've bought by gouging them with taxes. That seems much more unfair than the alternative. Oh no! People with a multiple millions in assets have to choose between paying taxes on their immense wealth or selling it! Sarcasm aside, this is how it's done most places in the US. It works just fine in those places and isn't considered unfair. Why is paying taxes on your wealth considered unreasonable here?
- tzs 7y ago
  > Why is paying taxes on your wealth considered unreasonable here? If I buy a painting from a young, unknown artist for $100, for example, and 30 years later the artist is well known and that painting could be sold for $1 million, we don't make me pay taxes on the $999900 my wealth has increased due to owning the painting. Instead, we keep track of what I paid for the painting, and when I eventually do sell it and so the wealth represented by the painting gets converted into money we tax me on the gain then. Offhand, real estate is about the only thing I can think of where you can own something, and because someone else would be willing to buy it for a lot more than you paid, you have to pay taxes based on that much higher amount. Why should real estate wealth be treated different than other forms of wealth?
  - Kalium 7y ago
    The difference is that real estate isn't just a financial asset. It's an exclusive claim on a sizable chunk of immobile physical space that potentially has many other uses, none of which can happen when it's full of whatever's there right now. This isn't true of a bond or a painting. It's in the general interest of society to ensure that land is economically productive because it's central to a great many other aspects of life. This is generally intended to be reasonably in line with what its potential is. This also really isn't true of a bond or painting. My answer is that real estate wealth is qualitatively different in ways both important and relevant from other forms of wealth.
  - rcpt 7y ago
    This is an old old discussion. I'll defer to Churchill who can speak to it far better than I: > Nothing is more amusing than to watch the efforts of land monopolists to claim that other forms of property and increment are similar in all respects to land and the unearned increment on land. They talk of the increased profits of a doctor or lawyer from the growth of population in the town in which they live. They talk of the profits of a railway, from the growing wealth and activity in the districts through which it runs. They talk of the profits from a rise in stocks and even the profits derived from the sale of works of art. > But see how misleading and false all those analogies are. The windfalls from the sale of a picture -- a Van Dyke or a Holbein -- may be very considerable. But pictures do not get in anybody's way. They do not lay a toll on anybody's labor; they do not touch enterprise and production; they do not affect the creative processes on which the material well-being of millions depends. > If a rise in stocks confers profits on the fortunate holders far beyond what they expected or indeed deserved, nevertheless that profit was not reaped by withholding from the community the land which it needs; on the contrary, it was reaped by supplying industry with the capital without which it could not be carried on. > If a railway makes greater profits it is usually because it carries more goods and more passengers. > If a doctor or a lawyer enjoys a better practice, it is because the doctor attends more patients and more exacting patients, and because the lawyer pleads more suits in the courts and more important suits. > At every stage the doctor or the lawyer is giving service in return for his fees. > Fancy comparing these healthy processes with the enrichment which comes to the landlord who happens to own a plot of land on the outskirts of a great city, who watches the busy population around him making the city larger, richer, more convenient, more famous every day, and all the while sits still and does nothing. > Roads are made, streets are made, services are improved, electric light turns night into day, water is brought from reservoirs a hundred miles off in the mountains -- and all the while the landlord sits still. Every one of those improvements is effected by the labor and cost of other people and the taxpayers. To not one of those improvements does the land monopolist, as a land monopolist, contribute, and yet by every one of them the value of his land is enhanced. He renders no service to the community, he contributes nothing to the general welfare, he contributes nothing to the process from which his own enrichment is derived. http://www.landvaluetax.org/current-affairs-comment/winston-churchill-said-it-all-better-then-we-can.html http://www.landvaluetax.org/current-affairs-comment/winston-...
JOnAgain 7y ago
It's what it costs to provide the services around it. They are getting all the benefits that tax dollars are paying for and not paying an equitable contribution towards those benefits. Yes, they would be forced to sell for 10x-20x their investment and be forced to move somewhere more affordable.
damnyou 7y ago
Totally agreed. Repeal prop 13 and allow deferring property taxes on market value gains until the property is sold.
jdross 7y ago
First, prices being where they are is at least partially a consequence of taxes staying the same which encouraged NIMBYism to build free equity instead of building. Second, people who now have 2 million in equity with a 100k cost basis can take out financing for a portion of that to cover taxes into perpetuity and still have a huge equity appreciation. Third, none of this precludes a slow path to getting people to paying FMV taxes by, for instance, capping tax increases at 10% per year. It'll take 20 years to catch up, but that's better than now. And it should probably accelerate if you hand the property down to the next generation. Fourth, why does Prop 13 exist for people who rent out their homes or for commercial property? That's just a subsidy to the existing.
georgeecollins 7y ago
Why should prop 13 cover businesses? It is always defended because some poor retired home owner. Newsflash: not many retired home owners in California are poor anymore. But meanwhile car dealerships and shopping malls are also protected from fair market taxes on their land use.
thrower123 7y ago
It's not particularly disastrous in the rest of the country, however.
triceratops 7y ago
> The alternative is that we basically force people out of houses they've bought by gouging them with taxes. So presumably you're also in favor of rent control^? The alternative is that we basically force people of out houses they've lived in forever by letting landlords (themselves benefiting from Prop 13) gouge them with crazy rent increases^^. ^ For the record I think both Prop 13 and rent control are bad ideas. ^^ The crazy rents are themselves due to Prop 13 removing any incentives for property owners to sell or upzone because property taxes on single-family homes are unaffordable.
- rcpt 7y ago
  CA didn't have rent control until after Prop 13 passed. Howard Jarvis rallied renters by claiming that landlords would be nice and pass the tax savings onto their tenants. Somehow people believed this and, when it didn't happen, lashed out with aggressive rent control laws in our major cities.
cactus2093 7y ago
> Why would someone who bought a house for 100k be expected to pay taxes on 2M years later? Well why would someone who bought a 2M house today be expected to pay taxes on it? Because the community has a lot of expenses - fire fighters and police will protect their valuable asset, the school system needs to pay its teachers to live somewhere in the vicinity of this expensive neighborhood, the lawmakers (who these homeowners have elected) need money to regulate vaping and plastic straws and run the most inefficient homeless services in the country. Someone who bought a house 30 years ago is getting all these same benefits as someone who just bought a house. And since they've been voting there longer, they're arguably an even bigger part of the reason that all these costs exist than the newcomers. They're also a much bigger part of why the housing supply is so constrained, they've been going to community hearings for decades to block any new construction. Why shouldn't they have to pay for it? If anything I would be more convinced by an argument that newcomers should pay a lower tax rate than people who've been there a long time. But that's obviously quite an extreme position, I would settle for everyone paying the same property tax rate that our elected officials have set. If we think that's too high, then lower it for everyone equally.
- ericmay 7y ago
  A question I have here is are we asking for people to pay taxes on the value of the home because it is at some dollar amount, or are we asking to pay taxes for the cost of services? If my modest home (really it’s modest) doubled in value, I’m not using “double the services”. Why would my property taxes increase? What if it’s an entire neighborhood? Maybe salaries go up for firefighters and teachers... ok? What if they don’t live in my neighborhood? Let’s say we want higher property taxes to subsidize/provide services for other areas. Why not just raise their property taxes as well? This would offset the price of the homes and make them cheaper. I’m getting the feeling part of the issue lies in people realizing the true costs for things. I don’t have the first clue how much it costs to have a fire department, or a school. They always just want more money (which I basically always vote to give them - maybe I shouldn’t ?).
  - yonran 7y ago
    Like all progressive taxation, the property tax is not solely a fee for government benefits received by the taxpayer. The property tax is a tool to reduce inequality—especially when it is applied to gains in land value. If we did not have property taxes (or when we protect existing landowners regardless of land rent increases under Proposition 13), then increases in land value from increased population would be entirely a zero-sum transfer from the new renters or buyers to the old owner, resulting in greater wealth inequality, since unlike capital the supply of land at a particular location is purely inelastic (see the first 4 chapters of Rethinking the Economics of Land and Housing for more https://www.amazon.com/Rethinking-Economics-Land-Housing-Ryan-Collins/dp/1786991187 https://www.amazon.com/Rethinking-Economics-Land-Housing-Rya...).
nerfhammer 7y ago
You're saying that taxes on a 2 million dollar windfall is unfair.
- masonic 7y ago
  "Windfall" 8s an odd term to use. The problem is that long term capital gains are not indexed to inflation, let alone in correlation to increasing RE values. If you index the cap gains tax to inflation alone, you'd find a huge added turnover in properties. Prop 13 provisions can be altered anytime by another initiative OR by the Legislature. In either case, only a simple majority is needed for voter passage. The Legislature has been under Democrat control for over 22 years. Ask yourself why no change has even been attempted.
- malvosenior 7y ago
  It's not a windfall if you live there for 35 years and don't sell. It's just your home.
  - akavi 7y ago
    Make the back taxes due on sale then. Simple.
    - rcpt 7y ago
      That would really exacerbate the lock in effect
  - rcpt 7y ago
    Just because it's not a cash asset doesn't mean it's not an asset. There are myriad of financial instruments to work with. Increased property values translate to increased borrowing power.
    - malvosenior 7y ago
      Why should people be forced to get in debt to keep the house they've already paid for?
TulliusCicero 7y ago
There's tons of other alternatives. For example, you could deduct the market rate taxes that would've been paid from the eventual sale price. You could also give people a choice: they can either pay property taxes based on an artificially low valuation, and then sell at that low valuation, OR they can choose to accept the market rate property taxes and be able to sell at market rate. Another thing that could be done is only apply Prop 13 to: - Residential property, not commercial - Only your primary residence, not second homes or homes you rent out - People who bought the home, not their kids they left it to in a will - People for whom the increase in property taxes represents an actual burden relative to their income
jread 7y ago
> The alternative is that we basically force people out of houses they've bought by gouging them with taxes. I agree with Prop 13 for primary residences until death. My beef is that it also covers second homes, commercial property and with follow on Props 58 and 193, children and grandchildren can inherit the tax base in perpetuity. It creates an almost feudal system with younger generations of renters at the bottom often with very little upward possibilities.
_jwilde 7y ago
Not sure I agree— 1. A lot of these property values wouldn’t be 2M if current owners had to pay the taxes. Prop 13 directly incentivizes home owners to (a) never sell and (b) block new housing in their neighborhood that might increase supply. 2. Prop 13 directly incentivizes cities to court Google/FB/Apple to come in. With Prop 13 limiting access to property taxes, most cities look to sales and business tax income to fill in the difference. 3. It’s not all or nothing like ”we need Prop 13 or seniors get kicked out of their homes!” Prop 13 is unique in that it blindly exempts large businesses and wealthy folks who can afford to pay, not just folks who need help. Other regions (e.g. Boston area) address this with targeted property tax breaks for vulnerable communities, and California would be better served with a well-tested, reliable solution like that. But that’s hard to implement because California ballot props are wildly difficult to get rid of.
bachmeier 7y ago
Tax deferral seems fair. A lower tax overall does not.
deleted 7y ago
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tmh79 7y ago
>> The alternative is that we basically force people out of houses they've bought by gouging them with taxes. That seems much more unfair than the alternative. This... isn't true at all. The alternative is that people pay accrued property taxes plus a small amount of interest on the sale of the property. Many states do this and it works great. Sorry that when you sell your 2m dollar home you're only netting 1.6m instead of 2m because you werent able to pay property taxes for 35 years....
bryanlarsen 7y ago
There are plenty of ways to benefit from the appreciation in value without selling the house.
seiferteric 7y ago
Two things, property values would be a lot different (lower) today if prop 13 never existed. Second, the absolute property tax rate could be lower if everyone had to pay the same rate.
kec 7y ago
"oh no, this asset appreciated too much, woe is me! Now I'll have to sell and become a homeless millionaire"
mistermann 7y ago
> I don't know that it's more "unfair" to the younger generations to not increase property taxes than it would be to the home owners to do so. Why would someone who bought a house for 100k be expected to pay taxes on 2M years later? A lot of these people probably had normal jobs and incomes, they didn't chose for Google/Apple/Facebook to move into town and send the property prices sky high. Yes, they benefit as owners but this rule only takes effect if they don't sell their house and continue to live in it. I've always found it weird this dichotomy that seems to exist where so many people (who aren't even home owners) find it "logically" inappropriate for home owners to pay any increased taxes based on returns on housing (via prop 13, capital gains exemptions, etc), yet find it completely reasonable that those who earn more money working should pay not just higher total dollars in taxes, but also a higher percentage of their income to taxes, and are outraged at any suggestions to the contrary. Higher earned income is typically a result of some combination of investment in education, risk taking, and hard work (things that actually require effort), whereas noteworthy returns on real estate, at least for the average Joe home owner, seems to be typically little more than just being in the right place at the right time, doing the same thing that most anyone does: buy a house and live in it. Rewarding dumb luck and "punishing" hard work seems like the exact opposite of how a society should be run. As for what to do with all these complexities that have built up over time in our societies, I increasingly think we should look to China and see what they do, because from all the Youtube videos I watch on that country (aka reality itself, or at least a portion of it, whereas reading books and news articles can easily give completely polar opposite impressions of reality), because whatever it is they are doing certainly seems to be bearing fruit that is extremely beneficial to broad society, across all income classes.
- malvosenior 7y ago
  Since you're replying to me, I'll say that dichotomy doesn't exist in my mind. I don't think people who earn more should pay a higher percentage of their taxes, mainly for the reasons you list.
  - mistermann 7y ago
    > I don't think people who earn more should pay a higher percentage of their taxes, mainly for the reasons you list. And I assume you mean that extends to gains on housing as well. Sorry if it seemed I was implying that, I considered putting some comment in noting the fact that whenever these things are being discussed (anything involving behavior of groups....so basically politics in general), it is literally not possible to know who belongs to what group. Reality is now so complex, I'm starting to wonder if it may be possible that democracy, at least in its current form and with its current constituents in their current form, is literally incapable of handling the world the scientists and indutrialists have built. I think it is perfectly plausible that a benevolent, authoritarian dictatorship is the only thing that has a chance of getting things right. Not that this isn't fixable, necessarily, but I suspect it would require us to spend a considerable amount of time investing the same effort we've put into developing science, technology, industry, supply chains, etc into understanding how individuals and societies work, and modify our institutions and methodologies accordingly (once again, something an authoritarian state doesn't have to bother with). Everyone seems to think and behave as if we know well enough how they work, but I highly doubt this is the case based on the rapidly increasingly amount of inequality, emotional polarization, and outright bizarre and chaotic behavior that can easily be observed in Western democratic societies. And very few powerful, influential, or even simply intelligent people seem the slightest bit curious(!) about why people are increasingly behaving this way....rather, most of what I hear is Group X is "just wrong" and needs to be educated on how it is, and then the problem will be solved. To that I say, good luck expecting shallow thinking like this to solve multiple interrelated problems in the most complex systems in existence. It seems to me there is some saying like ~"before man can learn humility, first he must be destroyed", but can't recall the exact words.

ariwilson 7y ago

We live in society; everyone is interconnected. One's own self interest cannot outweigh the needs of the group and, in California, all the stats are showing that the group is suffering due to the needs of the few. Prop 13 is part of the problem and should be reduced in effect (commercial property taxes, max rise of 3% annually) alongside changes to zoning until the housing crisis abates.

la6470 7y ago
Sensible take the middle road folks

WWLink 7y ago

Apple has been in the same general area since the 1970s, and all of the many companies that came before them lol.

malvosenior 7y ago
Yes, but they weren't the money printing machine back then that they are now and it's highly doubtful they had a meaningful impact on Bay Area real estate prices in the 1970s.

klipt 7y ago

Of course prop 13 "seems" fair, that's how it got passed. But it has terrible consequences. Adjusted for inflation, it makes taxes drop to 0 in the limit, which means there's no incentive for rich people to ever sell. Which means real estate becomes hoarded across generations by the wealthy class, which recreates the main feature of feudalism.

Merrill 7y ago
Other disincentives to sell are fairly high realtor commissions and fees, as well as capital gains taxes on the amount over the exclusion, which isn't very high given CA prices. Think of Prop 13 as "rent control" for homeowners.

BubRoss 7y ago

It's not like these things happened over night. If someone bought a house for 100k and it is now worth two million, I'm not sure they can claim they are being gouged on a 2000% increase of equity. Buying land still doesn't entitle you to be able to perpetually afford to live in one of the most desirable places on earth.

scarface74 7y ago
Well. No one is “entitled” to live in California. There are 49 other states in the US. There are also many other cities where the pay vs cost of living makes a lot more sense.
- BubRoss 7y ago
  I'm not sure what point you are trying to make, this just sounds like a generalization of what I was saying (although not all of California is expensive).
  - scarface74 7y ago
    It sounds like you saying that it would be more fair to make them leave by pricing them out so other people can buy their homes.
    - BubRoss 7y ago
      Pricing property taxes to be consistent with the value of a home is not 'making someone leave'. In this case 'so someone else can buy their home' is actually 'they can decide to sell their house for an enormous profit of twenty times what they bought it for if that is their choice'. To be clear here, if someone else bought the house, that person would pay the proper property tax, so why is someone's inaction so valuable?
      - deleted 7y ago
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      - 7y ago

coenhyde 7y ago

Because they have a house and ~$1.9M in free equity. The younger generation doesn't have that opportunity. If they can't afford the property tax they can downsize easily. It's not easy for young people to afford $2M houses, especially when paying high state income taxes to make up for the lack of sufficient property taxes.

malvosenior 7y ago
The younger generation can do the same thing the older generation did and buy a house in a cheaper real estate market. It's funny that people feel entitled to buy a house in the most expensive place on earth. I think a lot of the people who bought houses for 100k in California in the 1970s would not have expected to buy a condo at the same time on 5th Ave in Manhattan (for instance). It's a recent phenomena that young people feel they should own property in world cities.
- Fainsan 7y ago
  Since values where falsely supported by corrupt mortgages and appraisals then further supported by our government bailout not allowing the market to work as it should, why shouldn't people also expect to not be priced out of their neighborhoods? Shouldn't median income have anything to do with what housing costs should be in any given area? Everywhere in California for example isn't 5th ave or Silicone valley, so your argument is flawed.
  - malvosenior 7y ago
    Housing prices are dictated by supply and demand. The supply is artificially low due to zoning (this needs to be fixed), the supply was artificially high due to the issues you stated. None of that has anything to do with taxing home owners. When you buy a house you should be taxed on what you paid for it. The government shouldn't have a back door to come and raise your taxes as high as it wants.
- coenhyde 7y ago
  I think it's funny that people feel entitled to these property tax breaks. I'm less concerned about individuals feeling left out, and more concerned about the systemic issues lack of home ownership for this generation will cause. We've distorted the market so much through a variety of bad policies, i don't think it is an unreasonable request to start reversing the trend.

FreakyT 7y ago

> The alternative is that we basically force people out of houses they've bought by gouging them with taxes. I would argue that being able to afford a place in the 1970s does not endow one with an inalienable right to remain there forever. Locking the property taxes creates an artificial incentive to hold onto property forever, thus creating market stagnation.

tremon 7y ago
Yes, of course, and after we've driven them from their home, maybe we can put them in a reservation instead /s
la6470 7y ago
The taxes should simply increase for the folks who has brought it in the 70s adjusted for inflation and senior citizen discount. But it should not stay the same. Gawd why can’t we ever take the middle road and only have to take fucking extreme positions in every damn thing???
almost_usual 7y ago
I honestly think it has less to do with money than the younger HN community realizes. Older people don't like change, especially significant changes like moving. Most of the people who have been here for decades stay because it's their home and they have no where else to go. Getting rid of Prop 13 and raising taxes to tech market rate is the equivalent of deporting someone from their home.
- pound 7y ago
  non-primary residences as well as commercial properties are also covered by it. It's about wealth, not about keeping someone in their home.
  - almost_usual 7y ago
    I can get on board with amending non-primary residences and commercial properties.

x0x0 7y ago

Why should someone who bought a house for $100k get $2m years later?

collias 7y ago
Why should someone who bought $100k of Apple stock get $2m years later?
- thrower123 7y ago
  You can't live inside of Apple stock. Well, I suppose you might be able to make some kind of structure if you had enough physical stock certificates...
- x0x0 7y ago
  Well, you pay tax on your gains on that stock sale. The claim is you shouldn't on houses; it should be a tax-free investment.
  - collias 7y ago
    You definitely pay taxes on a sold property (capital gains, like stock), assuming your profit is over $250k, like this example. Prop 13 doesn't affect that.

spaced-out 7y ago

I think you would agree, though, that people shouldn't be able to get Prop 13 benefits on properties that aren't their primary residence. For example, someone owning multiple houses and renting them out at market rates.

novok 7y ago
Or corporate properties such as office towers.
- rcpt 7y ago
  Or golf courses. My god how are people ok with private golf courses in the middle of cities?

Kalium 7y ago

> The alternative is that we basically force people out of houses they've bought by gouging them with taxes. That seems much more unfair than the alternative. Oh no! People with a multiple millions in assets have to choose between paying taxes on their immense wealth or selling it! Sarcasm aside, this is how it's done most places in the US. It works just fine in those places and isn't considered unfair. Why is paying taxes on your wealth considered unreasonable here?

tzs 7y ago
> Why is paying taxes on your wealth considered unreasonable here? If I buy a painting from a young, unknown artist for $100, for example, and 30 years later the artist is well known and that painting could be sold for $1 million, we don't make me pay taxes on the $999900 my wealth has increased due to owning the painting. Instead, we keep track of what I paid for the painting, and when I eventually do sell it and so the wealth represented by the painting gets converted into money we tax me on the gain then. Offhand, real estate is about the only thing I can think of where you can own something, and because someone else would be willing to buy it for a lot more than you paid, you have to pay taxes based on that much higher amount. Why should real estate wealth be treated different than other forms of wealth?
- Kalium 7y ago
  The difference is that real estate isn't just a financial asset. It's an exclusive claim on a sizable chunk of immobile physical space that potentially has many other uses, none of which can happen when it's full of whatever's there right now. This isn't true of a bond or a painting. It's in the general interest of society to ensure that land is economically productive because it's central to a great many other aspects of life. This is generally intended to be reasonably in line with what its potential is. This also really isn't true of a bond or painting. My answer is that real estate wealth is qualitatively different in ways both important and relevant from other forms of wealth.
- rcpt 7y ago
  This is an old old discussion. I'll defer to Churchill who can speak to it far better than I: > Nothing is more amusing than to watch the efforts of land monopolists to claim that other forms of property and increment are similar in all respects to land and the unearned increment on land. They talk of the increased profits of a doctor or lawyer from the growth of population in the town in which they live. They talk of the profits of a railway, from the growing wealth and activity in the districts through which it runs. They talk of the profits from a rise in stocks and even the profits derived from the sale of works of art. > But see how misleading and false all those analogies are. The windfalls from the sale of a picture -- a Van Dyke or a Holbein -- may be very considerable. But pictures do not get in anybody's way. They do not lay a toll on anybody's labor; they do not touch enterprise and production; they do not affect the creative processes on which the material well-being of millions depends. > If a rise in stocks confers profits on the fortunate holders far beyond what they expected or indeed deserved, nevertheless that profit was not reaped by withholding from the community the land which it needs; on the contrary, it was reaped by supplying industry with the capital without which it could not be carried on. > If a railway makes greater profits it is usually because it carries more goods and more passengers. > If a doctor or a lawyer enjoys a better practice, it is because the doctor attends more patients and more exacting patients, and because the lawyer pleads more suits in the courts and more important suits. > At every stage the doctor or the lawyer is giving service in return for his fees. > Fancy comparing these healthy processes with the enrichment which comes to the landlord who happens to own a plot of land on the outskirts of a great city, who watches the busy population around him making the city larger, richer, more convenient, more famous every day, and all the while sits still and does nothing. > Roads are made, streets are made, services are improved, electric light turns night into day, water is brought from reservoirs a hundred miles off in the mountains -- and all the while the landlord sits still. Every one of those improvements is effected by the labor and cost of other people and the taxpayers. To not one of those improvements does the land monopolist, as a land monopolist, contribute, and yet by every one of them the value of his land is enhanced. He renders no service to the community, he contributes nothing to the general welfare, he contributes nothing to the process from which his own enrichment is derived. http://www.landvaluetax.org/current-affairs-comment/winston-churchill-said-it-all-better-then-we-can.html http://www.landvaluetax.org/current-affairs-comment/winston-...

JOnAgain 7y ago

It's what it costs to provide the services around it. They are getting all the benefits that tax dollars are paying for and not paying an equitable contribution towards those benefits. Yes, they would be forced to sell for 10x-20x their investment and be forced to move somewhere more affordable.

damnyou 7y ago

Totally agreed. Repeal prop 13 and allow deferring property taxes on market value gains until the property is sold.

jdross 7y ago

First, prices being where they are is at least partially a consequence of taxes staying the same which encouraged NIMBYism to build free equity instead of building. Second, people who now have 2 million in equity with a 100k cost basis can take out financing for a portion of that to cover taxes into perpetuity and still have a huge equity appreciation. Third, none of this precludes a slow path to getting people to paying FMV taxes by, for instance, capping tax increases at 10% per year. It'll take 20 years to catch up, but that's better than now. And it should probably accelerate if you hand the property down to the next generation. Fourth, why does Prop 13 exist for people who rent out their homes or for commercial property? That's just a subsidy to the existing.

georgeecollins 7y ago

Why should prop 13 cover businesses? It is always defended because some poor retired home owner. Newsflash: not many retired home owners in California are poor anymore. But meanwhile car dealerships and shopping malls are also protected from fair market taxes on their land use.

thrower123 7y ago

It's not particularly disastrous in the rest of the country, however.

triceratops 7y ago

> The alternative is that we basically force people out of houses they've bought by gouging them with taxes. So presumably you're also in favor of rent control^? The alternative is that we basically force people of out houses they've lived in forever by letting landlords (themselves benefiting from Prop 13) gouge them with crazy rent increases^^. ^ For the record I think both Prop 13 and rent control are bad ideas. ^^ The crazy rents are themselves due to Prop 13 removing any incentives for property owners to sell or upzone because property taxes on single-family homes are unaffordable.

rcpt 7y ago
CA didn't have rent control until after Prop 13 passed. Howard Jarvis rallied renters by claiming that landlords would be nice and pass the tax savings onto their tenants. Somehow people believed this and, when it didn't happen, lashed out with aggressive rent control laws in our major cities.

cactus2093 7y ago

> Why would someone who bought a house for 100k be expected to pay taxes on 2M years later? Well why would someone who bought a 2M house today be expected to pay taxes on it? Because the community has a lot of expenses - fire fighters and police will protect their valuable asset, the school system needs to pay its teachers to live somewhere in the vicinity of this expensive neighborhood, the lawmakers (who these homeowners have elected) need money to regulate vaping and plastic straws and run the most inefficient homeless services in the country. Someone who bought a house 30 years ago is getting all these same benefits as someone who just bought a house. And since they've been voting there longer, they're arguably an even bigger part of the reason that all these costs exist than the newcomers. They're also a much bigger part of why the housing supply is so constrained, they've been going to community hearings for decades to block any new construction. Why shouldn't they have to pay for it? If anything I would be more convinced by an argument that newcomers should pay a lower tax rate than people who've been there a long time. But that's obviously quite an extreme position, I would settle for everyone paying the same property tax rate that our elected officials have set. If we think that's too high, then lower it for everyone equally.

ericmay 7y ago
A question I have here is are we asking for people to pay taxes on the value of the home because it is at some dollar amount, or are we asking to pay taxes for the cost of services? If my modest home (really it’s modest) doubled in value, I’m not using “double the services”. Why would my property taxes increase? What if it’s an entire neighborhood? Maybe salaries go up for firefighters and teachers... ok? What if they don’t live in my neighborhood? Let’s say we want higher property taxes to subsidize/provide services for other areas. Why not just raise their property taxes as well? This would offset the price of the homes and make them cheaper. I’m getting the feeling part of the issue lies in people realizing the true costs for things. I don’t have the first clue how much it costs to have a fire department, or a school. They always just want more money (which I basically always vote to give them - maybe I shouldn’t ?).
- yonran 7y ago
  Like all progressive taxation, the property tax is not solely a fee for government benefits received by the taxpayer. The property tax is a tool to reduce inequality—especially when it is applied to gains in land value. If we did not have property taxes (or when we protect existing landowners regardless of land rent increases under Proposition 13), then increases in land value from increased population would be entirely a zero-sum transfer from the new renters or buyers to the old owner, resulting in greater wealth inequality, since unlike capital the supply of land at a particular location is purely inelastic (see the first 4 chapters of Rethinking the Economics of Land and Housing for more https://www.amazon.com/Rethinking-Economics-Land-Housing-Ryan-Collins/dp/1786991187 https://www.amazon.com/Rethinking-Economics-Land-Housing-Rya...).

nerfhammer 7y ago

You're saying that taxes on a 2 million dollar windfall is unfair.

masonic 7y ago
"Windfall" 8s an odd term to use. The problem is that long term capital gains are not indexed to inflation, let alone in correlation to increasing RE values. If you index the cap gains tax to inflation alone, you'd find a huge added turnover in properties. Prop 13 provisions can be altered anytime by another initiative OR by the Legislature. In either case, only a simple majority is needed for voter passage. The Legislature has been under Democrat control for over 22 years. Ask yourself why no change has even been attempted.
malvosenior 7y ago
It's not a windfall if you live there for 35 years and don't sell. It's just your home.
- akavi 7y ago
  Make the back taxes due on sale then. Simple.
  - rcpt 7y ago
    That would really exacerbate the lock in effect
- rcpt 7y ago
  Just because it's not a cash asset doesn't mean it's not an asset. There are myriad of financial instruments to work with. Increased property values translate to increased borrowing power.
  - malvosenior 7y ago
    Why should people be forced to get in debt to keep the house they've already paid for?

TulliusCicero 7y ago

There's tons of other alternatives. For example, you could deduct the market rate taxes that would've been paid from the eventual sale price. You could also give people a choice: they can either pay property taxes based on an artificially low valuation, and then sell at that low valuation, OR they can choose to accept the market rate property taxes and be able to sell at market rate. Another thing that could be done is only apply Prop 13 to: - Residential property, not commercial - Only your primary residence, not second homes or homes you rent out - People who bought the home, not their kids they left it to in a will - People for whom the increase in property taxes represents an actual burden relative to their income

jread 7y ago

> The alternative is that we basically force people out of houses they've bought by gouging them with taxes. I agree with Prop 13 for primary residences until death. My beef is that it also covers second homes, commercial property and with follow on Props 58 and 193, children and grandchildren can inherit the tax base in perpetuity. It creates an almost feudal system with younger generations of renters at the bottom often with very little upward possibilities.

_jwilde 7y ago

Not sure I agree— 1. A lot of these property values wouldn’t be 2M if current owners had to pay the taxes. Prop 13 directly incentivizes home owners to (a) never sell and (b) block new housing in their neighborhood that might increase supply. 2. Prop 13 directly incentivizes cities to court Google/FB/Apple to come in. With Prop 13 limiting access to property taxes, most cities look to sales and business tax income to fill in the difference. 3. It’s not all or nothing like ”we need Prop 13 or seniors get kicked out of their homes!” Prop 13 is unique in that it blindly exempts large businesses and wealthy folks who can afford to pay, not just folks who need help. Other regions (e.g. Boston area) address this with targeted property tax breaks for vulnerable communities, and California would be better served with a well-tested, reliable solution like that. But that’s hard to implement because California ballot props are wildly difficult to get rid of.

bachmeier 7y ago

Tax deferral seems fair. A lower tax overall does not.

deleted 7y ago

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tmh79 7y ago

>> The alternative is that we basically force people out of houses they've bought by gouging them with taxes. That seems much more unfair than the alternative. This... isn't true at all. The alternative is that people pay accrued property taxes plus a small amount of interest on the sale of the property. Many states do this and it works great. Sorry that when you sell your 2m dollar home you're only netting 1.6m instead of 2m because you werent able to pay property taxes for 35 years....

bryanlarsen 7y ago

There are plenty of ways to benefit from the appreciation in value without selling the house.

seiferteric 7y ago

Two things, property values would be a lot different (lower) today if prop 13 never existed. Second, the absolute property tax rate could be lower if everyone had to pay the same rate.

kec 7y ago

"oh no, this asset appreciated too much, woe is me! Now I'll have to sell and become a homeless millionaire"

mistermann 7y ago

> I don't know that it's more "unfair" to the younger generations to not increase property taxes than it would be to the home owners to do so. Why would someone who bought a house for 100k be expected to pay taxes on 2M years later? A lot of these people probably had normal jobs and incomes, they didn't chose for Google/Apple/Facebook to move into town and send the property prices sky high. Yes, they benefit as owners but this rule only takes effect if they don't sell their house and continue to live in it. I've always found it weird this dichotomy that seems to exist where so many people (who aren't even home owners) find it "logically" inappropriate for home owners to pay any increased taxes based on returns on housing (via prop 13, capital gains exemptions, etc), yet find it completely reasonable that those who earn more money working should pay not just higher total dollars in taxes, but also a higher percentage of their income to taxes, and are outraged at any suggestions to the contrary. Higher earned income is typically a result of some combination of investment in education, risk taking, and hard work (things that actually require effort), whereas noteworthy returns on real estate, at least for the average Joe home owner, seems to be typically little more than just being in the right place at the right time, doing the same thing that most anyone does: buy a house and live in it. Rewarding dumb luck and "punishing" hard work seems like the exact opposite of how a society should be run. As for what to do with all these complexities that have built up over time in our societies, I increasingly think we should look to China and see what they do, because from all the Youtube videos I watch on that country (aka reality itself, or at least a portion of it, whereas reading books and news articles can easily give completely polar opposite impressions of reality), because whatever it is they are doing certainly seems to be bearing fruit that is extremely beneficial to broad society, across all income classes.

malvosenior 7y ago
Since you're replying to me, I'll say that dichotomy doesn't exist in my mind. I don't think people who earn more should pay a higher percentage of their taxes, mainly for the reasons you list.
- mistermann 7y ago
  > I don't think people who earn more should pay a higher percentage of their taxes, mainly for the reasons you list. And I assume you mean that extends to gains on housing as well. Sorry if it seemed I was implying that, I considered putting some comment in noting the fact that whenever these things are being discussed (anything involving behavior of groups....so basically politics in general), it is literally not possible to know who belongs to what group. Reality is now so complex, I'm starting to wonder if it may be possible that democracy, at least in its current form and with its current constituents in their current form, is literally incapable of handling the world the scientists and indutrialists have built. I think it is perfectly plausible that a benevolent, authoritarian dictatorship is the only thing that has a chance of getting things right. Not that this isn't fixable, necessarily, but I suspect it would require us to spend a considerable amount of time investing the same effort we've put into developing science, technology, industry, supply chains, etc into understanding how individuals and societies work, and modify our institutions and methodologies accordingly (once again, something an authoritarian state doesn't have to bother with). Everyone seems to think and behave as if we know well enough how they work, but I highly doubt this is the case based on the rapidly increasingly amount of inequality, emotional polarization, and outright bizarre and chaotic behavior that can easily be observed in Western democratic societies. And very few powerful, influential, or even simply intelligent people seem the slightest bit curious(!) about why people are increasingly behaving this way....rather, most of what I hear is Group X is "just wrong" and needs to be educated on how it is, and then the problem will be solved. To that I say, good luck expecting shallow thinking like this to solve multiple interrelated problems in the most complex systems in existence. It seems to me there is some saying like ~"before man can learn humility, first he must be destroyed", but can't recall the exact words.