8 ms·

How has Prop. 13 affected tax distribution in Santa Clara County?

30 points by 80mph 7y ago

tingletech 7y ago
I was in the second grade when prop 13 passed, but I still remember a palpable change in the morale of teachers the day this passed. I think the split roll thing makes sense, but I made the mistake of getting involved in some facebook discussion about this -- some folks are so in love with prop 13, you would think it was the second amendment.
JMTQp8lwXL 7y ago
Prop 13 is rent control by another name. I would love to hear economists speak as damningly about Prop 13 as they regularly do about rent control.
- abtinf 7y ago
  Rent control is using the power of the state to coerce individuals. Limiting tax increases reduces the power of the state to coerce individuals. The two have nothing in common.
  - crdoconnor 7y ago
    Land owners neither made the land they own nor do they make it valuable, yet the state protects their "right" WITH violence to exercise full control over it and exclude others from it. Those taxes should be orders of magnitude higher. If you didn't make the land, you're renting it.
    - mc32 7y ago
      What about landfill areas[1] like the Marina, Embarkadero, SoMa and much of the bay side of SF as well as Treasure Island? Would they get special treatment? Also, land in and of itself isn't desirable if the economy of the area isn't right (lots of rural places around the world are depopulating as cities attract their countrysides). [1]https://qph.fs.quoracdn.net/main-qimg-d7f66b45593b76f812792ee55203e577 https://qph.fs.quoracdn.net/main-qimg-d7f66b45593b76f812792e...
  - JMTQp8lwXL 7y ago
    A reminder that Hacker News has an "assume the strongest interpretation of one's argument" idea. (In case it's not clear, expanding with my thoughts below). What is the primary effect of rent control? Everyone renting before the enactment pays proportionally less in rent than those after enactment. What is the primary effect of Prop 13? Owners who purchased before 1978 pay proportionally less in property taxes than those who purchased after 1978. These are huge, (in my view) obvious parallels between the two. Both policies encourage the market to become sticky: renters won't leave, for fear of giving up their cheap rent as time goes own; for landowners, they are discouraged to sell, knowing an identical property would raise their annual property tax expenses. As property values go up, it further encourages landowners to hold, becoming a negative feedback loop on the housing supply.
    - jedberg 7y ago
      > Owners who purchased before 1978 pay proportionally less in property taxes than those who purchased after 1978. It's even worse than that, since prop 13 isn't a one time thing. Just like rent control, you lock in whenever you purchase. My neighbor pays double what I do for effectively the same house. It's totally unfair to them.
      - JMTQp8lwXL 7y ago
        I'd imagine it's very unfair for people who bought in 2006 vs 2008 vs 2010. One time, I asked an older coworker about this, and he told me that getting a reassessment was popular for those who purchased in the bubble after it popped.
    - Ericson2314 7y ago
      I would say the original motivation for both is the same, but the outcome is definitely worse with Prop 13.
- deleted 7y ago
  [deleted]
- Ericson2314 7y ago
  Yes rent control also unfairly discriminates on basis of how long one lived in a place. But rent control doesn't rob the state of revenue---You could argue it lowers it indirectly by reducing the value of landlords' properties, but it also cuts costs by allowing government employees to live closer to where their work. And it also doesn't point to low density (especially if rent control is transferable if a landlord wants to evict everyone and build a higher-density apartment). In short prop 13 causes a triple whammy of sprawl, poor social services, and unfair taxes, whereas rent control merely causes unfair rents. LVT and prevalent and intermingled[1] public housing is far better, but sadly we're very far from being able to do those. [1]: To avoid low-effort prejudice and anesthetization, along with actual class-based neighbor isolation. Making the "zip code -> P(isPublic)" function as incompressible as possible is key.
  - ac29 7y ago
    > But rent control doesn't rob the state of revenue Sure it does, rental income is taxed like any other income (less allowed expenses).
    - Ericson2314 7y ago
      I mentioned how it also cuts costs, so the revenue loss is compensated.
dartdartdart 7y ago
The benefactors who currently own these homes are passing them down to relatives without passing down the new higher property tax. What's more is that homes that people who were 'lucky' to buy in the past, such as Palo Alto properties, benefited from white-only clauses: "No person not wholly of the white Caucasian race shall use or occupy such property unless such person or persons are employed as servants of the occupants." - https://www.paloaltoonline.com/news/2019/03/29/housings-troubled-history-of-discrimination https://www.paloaltoonline.com/news/2019/03/29/housings-trou... It's historically unfair, and nothing to my knowledge has been done to undo the damage from discriminatory housing policies. If you want to read more, here's a recent 2019 study review on the economic damage from unfair housing policies in Chicago: https://www.npr.org/local/309/2019/05/30/728122642/contract-buying-robbed-black-families-in-chicago-of-billions https://www.npr.org/local/309/2019/05/30/728122642/contract-...
- bluejekyll 7y ago
  I believe the tax can only be passed on to children. Not “relatives” in general. It’s still worthy of debate if this should be the case, but it’s not as broad as giving it to your nieces or nephews.
  - spamizbad 7y ago
    Adult adoption is legal and IIRC fairly permissive in California. Plus isn't there that whole LLC loophole?
    - dartdartdart 7y ago
      Can you elaborate on the loophole? Like create a 1 person LLC, and then buy the property as a business expense?
  - redis_mlc 7y ago
    > I believe the tax can only be passed on to children. Not “relatives” in general. I know a nephew who got it. And of course, corporations. The horrors of an elderly Google being taxed out of their home in old age! And don't forget the farmstead discount, which Apple executives love using for their mansions.
sabujp 7y ago
Repeal prop 13 so everyone pays a fair share, get rid of single unit detached homes in metros with high population density and build lots of high density housing condos and town houses, e.g. say a 3 bedroom that a family making at least 140k can afford on a 30 year. Get rid of stupid expensive HOAs. One can dream.
- crdoconnor 7y ago
  It's funny how the "NIMBYs" are apparently very unpopular around here but the tax incentives that create the NIMBYs are very popular.
briandear 7y ago
According to the article, tax receipts would double if property taxes reflected their current value. So we could repeal 13 and cut property taxes in half and still have the same tax receipts we do now. As far as keeping “grandma” in her home, if she is sitting on $2 million in equity, why should she get to pay lower taxes than someone who first buys a $2 million house with minimal equity? Neighbors paying vastly different tax rates for similar properties is unjust. Their consumption of public services isn’t different but grandma pays less than the young family just getting started. That’s ridiculous. Not to mention grandma is probably living in a 5 bedroom house alone with her five cats — which is an underutilization of scarce housing resources. Taxation should be absolutely equal. I, for example, have kids in private schools, but I still have to pay property taxes to support the local public schools and get no deduction for that tuition despite me not consuming those resources. I’m ok with that because public schools are important, but when grandma next door pays a fraction of what I pay, it’s extremely unfair that I have to subsidize grandma. She isn’t my grandma.
- jrmg 7y ago
  Neighbors paying vastly different tax rates for similar properties is unjust. Their consumption of public services isn’t different... Couldn’t you make the same argument about any form of progressive taxation? (Perhaps you would?)
bluejekyll 7y ago
Why should we care about single family property taxes set at the time of purchase? People move, and sell, or pass away and their families then acquire the property and must decide what to do. There’s a reasonable question to discuss about prop 13 passing from parents to children, but in general property turnover on single family homes in the US are 5-7 years. Focusing on this part of prop 13 is almost intended to cause people to fight each other rather than the real problem. Corporations don’t pass away. Even when they are acquired by other corporations, they try to block reassessment of property. I can’t at the moment find what happened with the taxes after all of the bank acquisitions in 2008, but I do remember them fighting any increases based on the fact that the property did not change hands. There are other corporate properties in CA that also have never increased their tax bill, such as Disneyland. So as we consider removing prop 13 protections from corporations in 2020, let’s remember that corporations don’t die, but people (sadly) on the other hand do. Any correction in the market of taxes on your home is setup almost exactly the way we want. People on a fixed income don’t need to worry about paying more, while people benefiting from the current economy can.
- minitoar 7y ago
  What are the property turn over rates like in Santa Clara county, though? Does your source have granular information like that?
  - bluejekyll 7y ago
    Every time I’ve looked at averages on this, CA is about the same as the rest of the US. As to that granular of data, I don’t know. I bet the realtors association in that area has those numbers though (as do Zillow and others).
  - gnopgnip 7y ago
    Even in santa clara, residential property changes hands more often, and residential property owners pay an outsized portion of the overall tax burden tham commercial property.
- gnopgnip 7y ago
jedberg 7y ago
Every time Prop 13 comes up, I like to tell the story of my own neighborhood. On my block are four almost identical houses. They are all about 1800sq ft. My neighbor, who is the original owner from 1962, pays $X in tax. My neighbor on the other side, who bought in the 90s, pays $10X. I pay $20X (bought in 2008), and the one who just moved into the last house pays $40X. We all get the same services from the city, but one person pays 40X the other. The new owners are basically subsidizing the neighbors, despite being the ones who have to spend more of their income to pay their mortgage. It's completely ridiculous.
- m463 7y ago
  A friend is in this situation. There are periodic add-ons voted in for "school funding". They are based on assessed property value and follow the same sorts of figures.
- deleted 7y ago
  [deleted]
- __david__ 7y ago
  I think it would need more ridiculous for your poor neighbor to be forced to move out just because a bunch of rich people paid a whole lot for neighboring houses and inflated the property values. Prop 13 at least gives you some comfort that the same thing will not happen to you—there is less uncertainty in your future with regard to your expenses (assuming your property tax is the 2nd largest bill after your mortgage).
  - jedberg 7y ago
    This is a red herring by the anti-tax zealots. Somehow in the 49 states without prop 13 this doesn’t happen. Worst case, the retiree can downsize their home and cash out their equity, freeing what is most likely an oversized property for a younger family, or they can take out a home equity line to pay the taxes. And luckily because of the rising property values it would be really easy to get that equity line since the LTV would be really low!
Ericson2314 7y ago
The simply fact (as articulated by CityLab article whose name I forget) is "housing cannot be both affordable and a good investment". Encouraging the desperation of capital through mass home ownership is a cruel joke. Even ignoring the fact that relatively few "homeowners" have paid off their morgage (https://fivethirtyeight.com/features/how-many-homeowners-have-paid-off-their-mortgages/ https://fivethirtyeight.com/features/how-many-homeowners-hav...), the value extracted is basically by rent seeking against other maybe future member of the same "middle class". People should own capital through a UBI (common ownership of a bit of everything) or actual productive enterprise (your immigrant small businesses), not price gouge each other.
deleted 7y ago
[deleted]

30 points by 80mph 7y ago

I was in the second grade when prop 13 passed, but I still remember a palpable change in the morale of teachers the day this passed. I think the split roll thing makes sense, but I made the mistake of getting involved in some facebook discussion about this -- some folks are so in love with prop 13, you would think it was the second amendment.

JMTQp8lwXL 7y ago

Prop 13 is rent control by another name. I would love to hear economists speak as damningly about Prop 13 as they regularly do about rent control.

abtinf 7y ago
Rent control is using the power of the state to coerce individuals. Limiting tax increases reduces the power of the state to coerce individuals. The two have nothing in common.
- crdoconnor 7y ago
  Land owners neither made the land they own nor do they make it valuable, yet the state protects their "right" WITH violence to exercise full control over it and exclude others from it. Those taxes should be orders of magnitude higher. If you didn't make the land, you're renting it.
  - mc32 7y ago
    What about landfill areas[1] like the Marina, Embarkadero, SoMa and much of the bay side of SF as well as Treasure Island? Would they get special treatment? Also, land in and of itself isn't desirable if the economy of the area isn't right (lots of rural places around the world are depopulating as cities attract their countrysides). [1]https://qph.fs.quoracdn.net/main-qimg-d7f66b45593b76f812792ee55203e577 https://qph.fs.quoracdn.net/main-qimg-d7f66b45593b76f812792e...
- JMTQp8lwXL 7y ago
  A reminder that Hacker News has an "assume the strongest interpretation of one's argument" idea. (In case it's not clear, expanding with my thoughts below). What is the primary effect of rent control? Everyone renting before the enactment pays proportionally less in rent than those after enactment. What is the primary effect of Prop 13? Owners who purchased before 1978 pay proportionally less in property taxes than those who purchased after 1978. These are huge, (in my view) obvious parallels between the two. Both policies encourage the market to become sticky: renters won't leave, for fear of giving up their cheap rent as time goes own; for landowners, they are discouraged to sell, knowing an identical property would raise their annual property tax expenses. As property values go up, it further encourages landowners to hold, becoming a negative feedback loop on the housing supply.
  - jedberg 7y ago
    > Owners who purchased before 1978 pay proportionally less in property taxes than those who purchased after 1978. It's even worse than that, since prop 13 isn't a one time thing. Just like rent control, you lock in whenever you purchase. My neighbor pays double what I do for effectively the same house. It's totally unfair to them.
    - JMTQp8lwXL 7y ago
      I'd imagine it's very unfair for people who bought in 2006 vs 2008 vs 2010. One time, I asked an older coworker about this, and he told me that getting a reassessment was popular for those who purchased in the bubble after it popped.
  - Ericson2314 7y ago
    I would say the original motivation for both is the same, but the outcome is definitely worse with Prop 13.
deleted 7y ago
[deleted]
Ericson2314 7y ago
Yes rent control also unfairly discriminates on basis of how long one lived in a place. But rent control doesn't rob the state of revenue---You could argue it lowers it indirectly by reducing the value of landlords' properties, but it also cuts costs by allowing government employees to live closer to where their work. And it also doesn't point to low density (especially if rent control is transferable if a landlord wants to evict everyone and build a higher-density apartment). In short prop 13 causes a triple whammy of sprawl, poor social services, and unfair taxes, whereas rent control merely causes unfair rents. LVT and prevalent and intermingled[1] public housing is far better, but sadly we're very far from being able to do those. [1]: To avoid low-effort prejudice and anesthetization, along with actual class-based neighbor isolation. Making the "zip code -> P(isPublic)" function as incompressible as possible is key.
- ac29 7y ago
  > But rent control doesn't rob the state of revenue Sure it does, rental income is taxed like any other income (less allowed expenses).
  - Ericson2314 7y ago
    I mentioned how it also cuts costs, so the revenue loss is compensated.

dartdartdart 7y ago

The benefactors who currently own these homes are passing them down to relatives without passing down the new higher property tax. What's more is that homes that people who were 'lucky' to buy in the past, such as Palo Alto properties, benefited from white-only clauses: "No person not wholly of the white Caucasian race shall use or occupy such property unless such person or persons are employed as servants of the occupants." - https://www.paloaltoonline.com/news/2019/03/29/housings-troubled-history-of-discrimination https://www.paloaltoonline.com/news/2019/03/29/housings-trou... It's historically unfair, and nothing to my knowledge has been done to undo the damage from discriminatory housing policies. If you want to read more, here's a recent 2019 study review on the economic damage from unfair housing policies in Chicago: https://www.npr.org/local/309/2019/05/30/728122642/contract-buying-robbed-black-families-in-chicago-of-billions https://www.npr.org/local/309/2019/05/30/728122642/contract-...

bluejekyll 7y ago
I believe the tax can only be passed on to children. Not “relatives” in general. It’s still worthy of debate if this should be the case, but it’s not as broad as giving it to your nieces or nephews.
- spamizbad 7y ago
  Adult adoption is legal and IIRC fairly permissive in California. Plus isn't there that whole LLC loophole?
  - dartdartdart 7y ago
    Can you elaborate on the loophole? Like create a 1 person LLC, and then buy the property as a business expense?
- redis_mlc 7y ago
  > I believe the tax can only be passed on to children. Not “relatives” in general. I know a nephew who got it. And of course, corporations. The horrors of an elderly Google being taxed out of their home in old age! And don't forget the farmstead discount, which Apple executives love using for their mansions.

sabujp 7y ago

Repeal prop 13 so everyone pays a fair share, get rid of single unit detached homes in metros with high population density and build lots of high density housing condos and town houses, e.g. say a 3 bedroom that a family making at least 140k can afford on a 30 year. Get rid of stupid expensive HOAs. One can dream.

crdoconnor 7y ago
It's funny how the "NIMBYs" are apparently very unpopular around here but the tax incentives that create the NIMBYs are very popular.

briandear 7y ago

According to the article, tax receipts would double if property taxes reflected their current value. So we could repeal 13 and cut property taxes in half and still have the same tax receipts we do now. As far as keeping “grandma” in her home, if she is sitting on $2 million in equity, why should she get to pay lower taxes than someone who first buys a $2 million house with minimal equity? Neighbors paying vastly different tax rates for similar properties is unjust. Their consumption of public services isn’t different but grandma pays less than the young family just getting started. That’s ridiculous. Not to mention grandma is probably living in a 5 bedroom house alone with her five cats — which is an underutilization of scarce housing resources. Taxation should be absolutely equal. I, for example, have kids in private schools, but I still have to pay property taxes to support the local public schools and get no deduction for that tuition despite me not consuming those resources. I’m ok with that because public schools are important, but when grandma next door pays a fraction of what I pay, it’s extremely unfair that I have to subsidize grandma. She isn’t my grandma.

jrmg 7y ago
Neighbors paying vastly different tax rates for similar properties is unjust. Their consumption of public services isn’t different... Couldn’t you make the same argument about any form of progressive taxation? (Perhaps you would?)

bluejekyll 7y ago

Why should we care about single family property taxes set at the time of purchase? People move, and sell, or pass away and their families then acquire the property and must decide what to do. There’s a reasonable question to discuss about prop 13 passing from parents to children, but in general property turnover on single family homes in the US are 5-7 years. Focusing on this part of prop 13 is almost intended to cause people to fight each other rather than the real problem. Corporations don’t pass away. Even when they are acquired by other corporations, they try to block reassessment of property. I can’t at the moment find what happened with the taxes after all of the bank acquisitions in 2008, but I do remember them fighting any increases based on the fact that the property did not change hands. There are other corporate properties in CA that also have never increased their tax bill, such as Disneyland. So as we consider removing prop 13 protections from corporations in 2020, let’s remember that corporations don’t die, but people (sadly) on the other hand do. Any correction in the market of taxes on your home is setup almost exactly the way we want. People on a fixed income don’t need to worry about paying more, while people benefiting from the current economy can.

minitoar 7y ago
What are the property turn over rates like in Santa Clara county, though? Does your source have granular information like that?
- bluejekyll 7y ago
  Every time I’ve looked at averages on this, CA is about the same as the rest of the US. As to that granular of data, I don’t know. I bet the realtors association in that area has those numbers though (as do Zillow and others).
- gnopgnip 7y ago
  Even in santa clara, residential property changes hands more often, and residential property owners pay an outsized portion of the overall tax burden tham commercial property.
gnopgnip 7y ago

jedberg 7y ago

Every time Prop 13 comes up, I like to tell the story of my own neighborhood. On my block are four almost identical houses. They are all about 1800sq ft. My neighbor, who is the original owner from 1962, pays $X in tax. My neighbor on the other side, who bought in the 90s, pays $10X. I pay $20X (bought in 2008), and the one who just moved into the last house pays $40X. We all get the same services from the city, but one person pays 40X the other. The new owners are basically subsidizing the neighbors, despite being the ones who have to spend more of their income to pay their mortgage. It's completely ridiculous.

m463 7y ago
A friend is in this situation. There are periodic add-ons voted in for "school funding". They are based on assessed property value and follow the same sorts of figures.
deleted 7y ago
[deleted]
__david__ 7y ago
I think it would need more ridiculous for your poor neighbor to be forced to move out just because a bunch of rich people paid a whole lot for neighboring houses and inflated the property values. Prop 13 at least gives you some comfort that the same thing will not happen to you—there is less uncertainty in your future with regard to your expenses (assuming your property tax is the 2nd largest bill after your mortgage).
- jedberg 7y ago
  This is a red herring by the anti-tax zealots. Somehow in the 49 states without prop 13 this doesn’t happen. Worst case, the retiree can downsize their home and cash out their equity, freeing what is most likely an oversized property for a younger family, or they can take out a home equity line to pay the taxes. And luckily because of the rising property values it would be really easy to get that equity line since the LTV would be really low!

Ericson2314 7y ago

The simply fact (as articulated by CityLab article whose name I forget) is "housing cannot be both affordable and a good investment". Encouraging the desperation of capital through mass home ownership is a cruel joke. Even ignoring the fact that relatively few "homeowners" have paid off their morgage (https://fivethirtyeight.com/features/how-many-homeowners-have-paid-off-their-mortgages/ https://fivethirtyeight.com/features/how-many-homeowners-hav...), the value extracted is basically by rent seeking against other maybe future member of the same "middle class". People should own capital through a UBI (common ownership of a bit of everything) or actual productive enterprise (your immigrant small businesses), not price gouge each other.

deleted 7y ago

[deleted]