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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

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.
  - mlyle 7y ago
    > 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? Takes a long time to get to these situations without crazy valuation swings (+900%, then -94%?) and under 2%-ish tax rates. That would be a net loss of $130, too. > ...or is there something I'm getting really, really wrong? Pretty much. In most property tax regimes, it's the parcel itself that has the tax owed, and the assessor doesn't/can't go after past owners. Most mortgages are recourse-free, too-- it may be bad for your credit to not pay, but they take the property and don't come after your other assets. There's a societal benefit, here, too, BTW. If you have a property that's worth $10M to others, but you employ it for a use that's worth $100k to you... accruing tax on the $10M encourages you to make a transaction that will leave the property better employed.

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.
- mlyle 7y ago
  > 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? Takes a long time to get to these situations without crazy valuation swings (+900%, then -94%?) and under 2%-ish tax rates. That would be a net loss of $130, too. > ...or is there something I'm getting really, really wrong? Pretty much. In most property tax regimes, it's the parcel itself that has the tax owed, and the assessor doesn't/can't go after past owners. Most mortgages are recourse-free, too-- it may be bad for your credit to not pay, but they take the property and don't come after your other assets. There's a societal benefit, here, too, BTW. If you have a property that's worth $10M to others, but you employ it for a use that's worth $100k to you... accruing tax on the $10M encourages you to make a transaction that will leave the property better employed.