6 ms·

Another beneficial change would be repealing proposition 13. Because proposition 13 essentially bans property tax increases for property owners, it creates a pe

Another beneficial change would be repealing proposition 13. Because proposition 13 essentially bans property tax increases for property owners, it creates a perverse incentive to drive property values as high as possible with restrictive zoning. Without proposition 13, property taxes would rise along with the land's economic value, creating an additional incentive for property owners to let the market naturally shift land use to higher-density housing.

RangerScience 7y ago
There's good reasons to keep part of it. I figure: You get to have the Prop 13 effect on one property - notionally, your home, but since it's difficult / gameable to determine which place is "your home", fuggedaboutit, and just say "pick one". Because yeah, it'd suck to lose your home that you're supposed to own because your neighborhood got pricey.
- davidw 7y ago
  I think your point is an important one to consider and mitigate if property tax reform ever comes to the west coast (Oregon has a similar system). However: giving people an incentive to make sure their neighborhood doesn't get too pricey (build more!) is probably not bad, either.
- Obi_Juan_Kenobi 7y ago
  There are reasonable ways to protect people from property-tax shocks. Prop 13 is about as dumb a mechanism you could design.
  - 6gvONxR4sf7o 7y ago
    >There are reasonable ways to protect people from property-tax shocks. Such as?
    - rcpt 7y ago
      This is the best summary I know https://taxfoundation.org/property-tax-limitation-regimes-primer/ https://taxfoundation.org/property-tax-limitation-regimes-pr...
- myvoiceismypass 7y ago
  How does one “lose their home” if the value (to resell to others) goes down, but they aren’t moving & still living there?
  - panopticon 7y ago
    > it'd suck to lose your home that you're supposed to own because your neighborhood got pricey This would imply that the value goes up (location, location, location). That would cause property taxes to increase and may drive people out that can't afford to stay.
  - mlyle 7y ago
    They're saying that if the value goes up you can have to pay increased property taxes that you now can't afford.
    - rcpt 7y ago
      It's really not a bad problem to have.
      - mlyle 7y ago
        As a purely economic position, sure, it's not awful... But if you're going to chase retirees out of communities they've lived their entire life that's kinda unfortunate.
        rcpt 7y ago
        Meh. We chase old renters out all the time and they don't get hundreds of thousands of dollars in windfall profits along the way.
- mlyle 7y ago
  Lots of states have regimes where you can defer (often interest-free) the amount of property tax increase above a certain limit to time of sale. This may be a better way to handle it than what California does. That is, if your property tax was $10,000 last year when you bought, and would increase to $12,000 this year, the state would give you an indefinite, interest free loan for $1500 or whatever secured by the property.
  - RangerScience 7y ago
    Hmm. I like the sentiment, but I'd be worried about the implementation (sounds like complex tax math) and with potential downsides (make less money when selling could lead to selling less; I can imagine a housing bubble popping and you end up under water due to owed taxes when the property was worth more). Although, if other states do it, should be data to talk to those predictions...
    - mlyle 7y ago
      > Hmm. I like the sentiment, but I'd be worried about the implementation (sounds like complex tax math) You already need to keep track of two assessed values for prop 13, along with history for catch-up basis increase. All you need to keep track of here is original tax rate (to know the maximum for this year) and deferred amount. > I can imagine a housing bubble popping and you end up under water due to owed taxes when the property was worth more No one's guaranteed to make money on every asset.
      - RangerScience 7y ago
        > No one's guaranteed to make money on every asset. There's a difference between "I have lost money on this thing" and "I owe more because I sold this thing". By a house (debt-free) for $100, and, say, tax of $1. Something happens for a decade, so it's worth $1000, tax of $10 per year for 10 years; $90 is deferred. Later, thing un-happens and more, now house is worth $60, with $90 in deferred tax, so if you sell it... you end up owing $30, for a net loss of $70, instead of the $50 in loss on the asset? ...or is there something I'm getting really, really wrong? Seems simpler (and safer) to say property tax doesn't change (instead of accumulating interest-free debt), and profit from selling is capital gains, but I know jack shit about this stuff and am willing to be wrong.
- deleted 7y ago
  [deleted]
bluGill 7y ago
Prop 13 also has the perverse incentive that once you are in you should vote for tax increases and high spend policies - you won't have to pay for them. I'm surprised Republicans have not latch onto this as a reason to repeal it - they already like to point out it is easy to spend other people's money as an argument against socialism.
- prewett 7y ago
  Republicans are also against more taxes, so increasing property taxes isn't very appealing. Plus, the Republican area of northern California (the "State of Jefferson" area) isn't very wealthy, so I think people fear they won't be able to afford paying any more money.
- tathougies 7y ago
  There are no republicans in california. Like, the CA republican party is completely defunct at this point, and I am a (former) California republican; now a republican in another liberal state.
  - fortran77 7y ago
    I am a registered republican, and I live in 94087
    - tathougies 7y ago
      I'm not saying individual republicans dont exist (I was one), but the party organization is non existent. In many local races theres not even a republican candidate or if there is, they're off their rocker (in marin, one had a whole section on the dangers of radio waves).
    - masonic 7y ago
      So you're the one!
      - fortran77 7y ago
danans 7y ago
There is an upcoming ballot initiative to repeal the commercial side of prop 13: https://edsource.org/2019/school-groups-explore-15-billion-tax-for-california-schools-in-2020/616860 https://edsource.org/2019/school-groups-explore-15-billion-t...
- deleted 7y ago
  [deleted]
- bcrosby95 7y ago
  Yeah, but I feel like any removal or reduction of prop 13 should be used to help reduce California income taxes, which is abnormally high due to prop 13, not spend more money on stuff.
  - danans 7y ago
    This repeal effort is specifically motivated by the desire to increase education funding, not to reduce income taxes. It may also have the Georgist side effect of pushing more expensive commercial property into productive uses vs idling as financial instruments. I'm not saying you have to agree with that cause, but if lowering state income taxes is your goal, then there are plenty of groups in CA advocating for that whose cause you can join. However, I'd guess that due to political realities, most of them also oppose repeal of proposition 13 also, so you might have some challenges building a movement around that.
    - bcrosby95 7y ago
      My goal is for California to have a more stable revenue story so the state doesn't enter crisis mode every 10 years. California revenue is volatile because of the heavy reliance on income taxes, which are volatile due to the stock market. Property taxes are a much more stable source of revenue to rely upon. Backing out prop 13 to fund certain ventures is just going to create even more problems down the road. Revenue will still be volatile. Then in the next downturn education will get screwed again, like what happened in the last recession. And you won't have prop 13 to back out anymore. It will be permanently fucked. Maybe the state will bump income taxes even more to fund things. So more volatile revenue for the state to rely on. More fun times ahead!
jimmaswell 7y ago
So the existing homeowners on retirement income/stuck in a job that pays a certain rate who can't afford the raised tax rates get kicked out to the street?

RangerScience 7y ago

There's good reasons to keep part of it. I figure: You get to have the Prop 13 effect on one property - notionally, your home, but since it's difficult / gameable to determine which place is "your home", fuggedaboutit, and just say "pick one". Because yeah, it'd suck to lose your home that you're supposed to own because your neighborhood got pricey.

davidw 7y ago
I think your point is an important one to consider and mitigate if property tax reform ever comes to the west coast (Oregon has a similar system). However: giving people an incentive to make sure their neighborhood doesn't get too pricey (build more!) is probably not bad, either.
Obi_Juan_Kenobi 7y ago
There are reasonable ways to protect people from property-tax shocks. Prop 13 is about as dumb a mechanism you could design.
- 6gvONxR4sf7o 7y ago
  >There are reasonable ways to protect people from property-tax shocks. Such as?
  - rcpt 7y ago
    This is the best summary I know https://taxfoundation.org/property-tax-limitation-regimes-primer/ https://taxfoundation.org/property-tax-limitation-regimes-pr...
myvoiceismypass 7y ago
How does one “lose their home” if the value (to resell to others) goes down, but they aren’t moving & still living there?
- panopticon 7y ago
  > it'd suck to lose your home that you're supposed to own because your neighborhood got pricey This would imply that the value goes up (location, location, location). That would cause property taxes to increase and may drive people out that can't afford to stay.
- mlyle 7y ago
  They're saying that if the value goes up you can have to pay increased property taxes that you now can't afford.
  - rcpt 7y ago
    It's really not a bad problem to have.
    - mlyle 7y ago
      As a purely economic position, sure, it's not awful... But if you're going to chase retirees out of communities they've lived their entire life that's kinda unfortunate.
      - rcpt 7y ago
        Meh. We chase old renters out all the time and they don't get hundreds of thousands of dollars in windfall profits along the way.
mlyle 7y ago
Lots of states have regimes where you can defer (often interest-free) the amount of property tax increase above a certain limit to time of sale. This may be a better way to handle it than what California does. That is, if your property tax was $10,000 last year when you bought, and would increase to $12,000 this year, the state would give you an indefinite, interest free loan for $1500 or whatever secured by the property.
- RangerScience 7y ago
  Hmm. I like the sentiment, but I'd be worried about the implementation (sounds like complex tax math) and with potential downsides (make less money when selling could lead to selling less; I can imagine a housing bubble popping and you end up under water due to owed taxes when the property was worth more). Although, if other states do it, should be data to talk to those predictions...
  - mlyle 7y ago
    > Hmm. I like the sentiment, but I'd be worried about the implementation (sounds like complex tax math) You already need to keep track of two assessed values for prop 13, along with history for catch-up basis increase. All you need to keep track of here is original tax rate (to know the maximum for this year) and deferred amount. > I can imagine a housing bubble popping and you end up under water due to owed taxes when the property was worth more No one's guaranteed to make money on every asset.
    - RangerScience 7y ago
      > No one's guaranteed to make money on every asset. There's a difference between "I have lost money on this thing" and "I owe more because I sold this thing". By a house (debt-free) for $100, and, say, tax of $1. Something happens for a decade, so it's worth $1000, tax of $10 per year for 10 years; $90 is deferred. Later, thing un-happens and more, now house is worth $60, with $90 in deferred tax, so if you sell it... you end up owing $30, for a net loss of $70, instead of the $50 in loss on the asset? ...or is there something I'm getting really, really wrong? Seems simpler (and safer) to say property tax doesn't change (instead of accumulating interest-free debt), and profit from selling is capital gains, but I know jack shit about this stuff and am willing to be wrong.
deleted 7y ago
[deleted]

bluGill 7y ago

Prop 13 also has the perverse incentive that once you are in you should vote for tax increases and high spend policies - you won't have to pay for them. I'm surprised Republicans have not latch onto this as a reason to repeal it - they already like to point out it is easy to spend other people's money as an argument against socialism.

prewett 7y ago
Republicans are also against more taxes, so increasing property taxes isn't very appealing. Plus, the Republican area of northern California (the "State of Jefferson" area) isn't very wealthy, so I think people fear they won't be able to afford paying any more money.
tathougies 7y ago
There are no republicans in california. Like, the CA republican party is completely defunct at this point, and I am a (former) California republican; now a republican in another liberal state.
- fortran77 7y ago
  I am a registered republican, and I live in 94087
  - tathougies 7y ago
    I'm not saying individual republicans dont exist (I was one), but the party organization is non existent. In many local races theres not even a republican candidate or if there is, they're off their rocker (in marin, one had a whole section on the dangers of radio waves).
  - masonic 7y ago
    So you're the one!
    - fortran77 7y ago

danans 7y ago

There is an upcoming ballot initiative to repeal the commercial side of prop 13: https://edsource.org/2019/school-groups-explore-15-billion-tax-for-california-schools-in-2020/616860 https://edsource.org/2019/school-groups-explore-15-billion-t...

deleted 7y ago
[deleted]
bcrosby95 7y ago
Yeah, but I feel like any removal or reduction of prop 13 should be used to help reduce California income taxes, which is abnormally high due to prop 13, not spend more money on stuff.
- danans 7y ago
  This repeal effort is specifically motivated by the desire to increase education funding, not to reduce income taxes. It may also have the Georgist side effect of pushing more expensive commercial property into productive uses vs idling as financial instruments. I'm not saying you have to agree with that cause, but if lowering state income taxes is your goal, then there are plenty of groups in CA advocating for that whose cause you can join. However, I'd guess that due to political realities, most of them also oppose repeal of proposition 13 also, so you might have some challenges building a movement around that.
  - bcrosby95 7y ago
    My goal is for California to have a more stable revenue story so the state doesn't enter crisis mode every 10 years. California revenue is volatile because of the heavy reliance on income taxes, which are volatile due to the stock market. Property taxes are a much more stable source of revenue to rely upon. Backing out prop 13 to fund certain ventures is just going to create even more problems down the road. Revenue will still be volatile. Then in the next downturn education will get screwed again, like what happened in the last recession. And you won't have prop 13 to back out anymore. It will be permanently fucked. Maybe the state will bump income taxes even more to fund things. So more volatile revenue for the state to rely on. More fun times ahead!

jimmaswell 7y ago

So the existing homeowners on retirement income/stuck in a job that pays a certain rate who can't afford the raised tax rates get kicked out to the street?