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When compared to other states, CA has a middle of the road per capita budget. It's not much more than Washington - which actually has zero income tax. CA has
by bcrosby95 7y ago
When compared to other states, CA has a middle of the road per capita budget. It's not much more than Washington - which actually has zero income tax.
CA has a high income tax rate, but property taxes aren't that high - they're pretty average for the nation. And the effective property tax rate is even lower due to prop 13. You can actually search this on many property tax websites - on average the effective tax rate for property in some counties is less than half the actual property tax rate.
California has huge budget problems whenever there is an economic downturn due to its heavy reliance on income taxes (which is due to prop 13), which is heavily reliant upon the stock market. This is why certain people love to talk about how its going to "fail" whenever this happens.
Prop 13 does California wrong on so many levels. We're sacrificing our future via the additional perverse incentives it gives for NIMBYism, and unfairly overtaxing productive citizens via the income tax. The state really needs to develop a plan to sunset it.
- nemo44x 7y agoYeah I've read that CA is fairly nervous about another big tech crash as so much of their revenue right now is related to IPO's and stock awards that are worth a lot.
- novok 7y agoLaws like AB5 & the CCPA doesn't help them in that regard.
- microcolonel 7y agoProperty taxes turn out to be a better way for states to do the bulk of tax collection. The focus on income taxes is probably a big part of why the property values in some of Cali are so insane.
- nemo44x 7y agoThat and interest rates. As rates fall property values will rise in proportion. A home’s value is what people that want to live there are willing to pay and can afford each month. So it either goes to the bank, the owner, or the tax collector.
- zzzzzzzza 7y agosaying low interest rates case high property values is putting the cart before the horse, mortgages cause high home prices. You could have high interest rates, but if they gave high interest loans out like candy to anyone who wanted one, home prices would still rise.
- nemo44x 7y agoI think it's both. Ultimitly, a home will rise in value due to a few things such as improvements, inflation, or a certain area becoming a hot/cold real estate location. However, the ultimate selling price for a home is going to be greatly affected by interest rates. We've seen it in the last year where rates have gone 1% since a year ago, you've seen houses rise in value quite a bit and in proportion to that. 1% difference on a 30 year term is pretty significant and will be noticeable on the monthly payment. Even though some people can or do pay cash for a home, they are not a significant population. Very often people that can pay cash will make a cash bid, prove they have it and still get a mortgage because money is cheap and the opportunity cost of trading that money for a house is generally unfavorable. A home is generally a market lagging investment when considering maintenance and taxes. Throw in interest and it's a lousy investment but you can live in it so it's rational depending on your lifestyle. What people can afford in an area they want to live is what prices homes - taxes, mortgage rates, and price combine to generate a monthly payment that people are willing to pay. That's how the market works. In some areas the price can outpace the other 2 if wages are rising, like we've seen in SV for awhile now. But that's the exception and not the rule.
- akira2501 7y agoProposition 13 is actually what causes this. The government has no choice. https://en.wikipedia.org/wiki/1978_California_Proposition_13 https://en.wikipedia.org/wiki/1978_California_Proposition_13