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It’s odd they don’t mention the sky high taxes in California as a driving force for the exodus and the fact the Gavin Newsom wants to raise them even more to co

It’s odd they don’t mention the sky high taxes in California as a driving force for the exodus and the fact the Gavin Newsom wants to raise them even more to cover Covid shortages. There’s only so much you can squeeze out of people before they’ll pack up an go.

danhak 6y ago
Property taxes in California are among the lowest in the nation.
- bluedevil2k 6y ago
  And the income tax is by far the highest, currently at 13.3% compared to 2nd place Hawaii’s 11%. Sales tax averages to 8.5%, good for 9th highest in the country.
  - danhak 6y ago
    > And the income tax is by far the highest, currently at 13.3% If you’re earning over $1,000,000 per year, yes. SF median income is below 100K.
    - blisterpeanuts 6y ago
      SF also charges a city income tax of 1.5% (flat rate).
      - dmode 6y ago
        SF has no income tax. This is incorrect
        brandur 6y ago
        Your parent's comment is out of date, but what you said isn't a fair representation either. The 1.5% tax they're talking was the 1.5% payroll tax that SF had in place until 2012 [1]. Payroll tax isn't quite the same as an income tax because the onus isn't on the employee to figure it out like state and federal, but it still did cost most businesses in SF an extra 1.5% on every employee's salary to be there. Prop E shifted most of this to a gross receipts tax instead (although there's still a 0.38% payroll expense tax in place [2]). Again, the numbers your parent is talking about are out of date, but the spirit of it is right in that it does just fundamentally cost a company quite a bit more to have an employee in SF. --- [1] https://sftreasurer.org/business/taxes-fees/gross-receipts-tax-gr https://sftreasurer.org/business/taxes-fees/gross-receipts-t... [2] https://sftreasurer.org/business/taxes-fees/payroll-expense-tax-py https://sftreasurer.org/business/taxes-fees/payroll-expense-...
  - mindslight 6y ago
    At $160k the marginal income tax rate in California is 33.3%, whereas the marginal income tax rate in Nevada or Washington is still 24%. As your income goes up, this ratio goes down. Focusing on the comparatively small state portions of income tax is a red herring, given that money going to the state at least has a better chance of paying for services you value.
- jurassic 6y ago
  Property taxes are not that relevant for the masses who can't afford to buy property.
  - danhak 6y ago
    But...that’s who this article is discussing: homeowners who are listing their properties for sale in higher numbers.
  - x87678r 6y ago
    It is because a big chunk of your rent goes to property taxes. Where I am property taxes are $1k a month for a $3k/mo apartment.
    - jeffbee 6y ago
      Property tax is not an input to setting the market rate of rental housing, though. Changing the tax does not change the rent. Ask yourself if your rent would decrease if they decreased the taxes. Rent is a simple supply/demand system.
      - bluedevil2k 6y ago
        Totally false. Changing the tax rate will definitely change the rent. A property tax increase will increase the floor that tenants (edit: meant landlords) would be willing to rent their places out across the entire city as they look to protect their profit margins. You don't think that a landlord will see a property tax increase and think "oh well, I guess I'm going to make less money from now on". Rent is definitely not a simple supply/demand situation as there are many hands in on the equation (taxes, rent control, zoning).
        jeffbee 6y ago
        Nope, you're wrong. Your argument rests on the idea that landlords (I assume you meant landlords where you said "tenants") have the ability to raise prices. If they did, they would have already raised them. Landlords who are not subject to rent controls charge whatever the market will bear, and no less. Therefore property tax has no bearing on rent.
- unpolloloco 6y ago
  On a percentage basis. 1% of $1m is still way more than 4% of $150k
  - TheOtherHobbes 6y ago
    That's a difference of $10k vs $6k - which is way less than the percentage difference in the relative value of the homes.
  - brandur 6y ago
    It's also worth calling out that when people make claims about lowest in the nation, they're almost certainly calculating that based off average price paid across all homes in the state. Thanks to Prop 13, many homeowners do pay quite tiny property taxes. But this turns out to be extremely nefarious because along with removing a fair tax base and liquidity from the market, it also means that the disproportionate burden for paying California property tax is placed on new home buyers, who are often younger people/young families. New entrants are often paying incredible levels of property tax (as it's a percentage of the already highly inflated prices), and because they're disproportionately more likely to be working, they're also the ones paying state and federal tax, along with the miscellaneous municipal taxes which can also be quite high in cities like San Francisco. Meanwhile, legacy owners make off like bandits. I looked up the property I rent in once, owned by a large real estate holder that's decades old, and it was assessed at a few hundred thousand — for a 5 unit building in central SF. I don't know what the actual value would be, but it'd be closer to a ballpark of $3 to $6M. A differential of ~20x, and this isn't uncommon. It's this framework that gets you to "lowest in the nation". I tend to think about it as _both_ the highest and the lowest in the nation, largely determined based on when your family moved here.
- vondur 6y ago
  Yeah, but if your property is worth a lot, it still can be expensive.
- novok 6y ago
  Only if you've owned a house for decades. If you bought recently, then your property taxes can effectively be %1.5 with all the extras they add to bills.
allsystemsgo 6y ago
That would run against the narrative. Completely agree.
luma 6y ago
Wouldn't this then also be true of LA or San Jose, both mentioned in the article? It feels like you have a politcal axe to grind and came here to the comments before reading the article.
- steev 6y ago
  I am not sure I follow. It seems plausible that the sky-high taxes are a major motivator for people wanting to leave CA but a recent change in SF made it possible for people to move to a different state (e.g., Twitter and FB allowing permanent remote work and Google working remotely into 2021).
  - luma 6y ago
    Poster was suggesting high state taxes were to blame, but if that was true, one would also expect that trend to extend to other cities in the same state. If it’s due to remote workers as you suggest, then it should also apply to cities with a high population of tech workers and headquarters like San Jose. According to the article, it doesn’t. This makes the state tax argument hard to defend.
    - jessaustin 6y ago
      You're right, if people don't like the tax situation they should just move away.
  - bbarnett 6y ago
    One thing, Yahoo and IBM had remote, then one day that perm remote became a nope. Some people are very poor at remote. If too many are thus, it may end.
- deleted 6y ago
  [deleted]
lostmyoldone 6y ago
San Fransisco has one of the highest, and in some cases - highest - housing and rental prices in the US. If taxes are as high as you claim, it would be more rational to argue that the high prices are indirectly caused by that tax, rather than prices being held down by taxes. Several causes seems more likely for a change in inventory, or pricing. An extremely high cost of housing and the consequently smaller than average living spaces, which people are spending more time in due to covid has probably led some people to re-evaluate their priorities. It has in less heated markets. Increased possibilities of remote work even in tech companies traditionally against it, and as tech drives SF, this is going to affect a majority of people living there. Expectations of recession due to one of 1) covid 2) some of the giants getting pushback from an administration that is fickle at best 3) new competition from non US companies in driving markets, eg TikTok 4) ... and more. There are plenty of somewhat plausible reasons to get out of the highest priced housing market in the US, especially if you can't handle a significant downturn in prices. You could argue taxes too, if the market prices were average, or below average, but in the current situation any economic sensitivity is caused by an overheated housing market, nothing else can even touch the force of a market as hot as the SF one. However, if a market with 1/4 the inventory of NY increase its inventory, even when it's with about 100%, one really can't tell anything. It's the hottest of the hot markets that's cooled down a little, and it doesn't really tell anything yet, except that the market has changed somehow.
- justchilly 6y ago
  If you make $250k in SF (sounds high, but about average for the people I know that are leaving SF), state income tax alone is $19,996. If you make that in Texas, state income tax is $0. That $20k/year is for many people a bigger deal than the cost of living. Most people I know leaving were home owners or rent controlled. Source: moved to Austin in June.
  - twalla 6y ago
    Property taxes in TX are generally higher but the lower average home price sort of negates that. Regardless, I'm looking forward to competing with even _more_ cash offers over listing price within 24 hours of a listing going up.
nemothekid 6y ago
I doubt anyone that chose to live in SF will all the sudden care about the taxes in the income equation. The rental prices alone are high enough where if anyone was doing the math, Austin made a much better choice.
inerte 6y ago
Taxes have always been high in California, didn't they? It's not like it changed dramatically in the last 5 months compared to the last 5 decades, compared to the rest of the nation. And still, California kept growing.
- ed25519FUUU 6y ago
  What changed is the last 5 months is that people have an option not to pay them (by moving and working remote). I expect California to try some sort of remote worker tax soon to try and stop the bleeding. Best of luck to everyone out in search of greener pastures. Remember not to enact the same city policies that turned California into what it is today.
opportune 6y ago
When going remote you don't get to avoid the California state taxes for the year, will never avoid it for current granted-but-unvested RSUs, and won't avoid them in the future unless you get your employer to actually change your employment to the new state (not exactly sure what the process is here, but I know my 'desk' is in CA so I have to pay taxes there). So this doesn't apply to the many people in the technology industry leaving CA to take advantage of temporary remote work
- nemo44x 6y ago
  This is about to get interesting. Similar story to NYC in that they go after people that move to NJ or CN, work from home and choose to pay taxes to the state they live and work in. NY claims they are choosing convenience and because their office is in NYC they need to pay taxes there. So states like NJ miss out on a lot of revenue. There are local politicians in NJ now talking about this. With so many commuters possibly not going back to an office there’s potentially a few billion in tax revenues at stake. Most states have reciprocal deals with neighboring states so that you pay taxes where you live even if you work in the adjacent state. NY does not and for obvious reasons. California either and I’ve heard California will claim your owe taxes even if you move far away but the company only has an office in CA. As reports of these states chasing down money that is arguably not theirs gets around it will be interesting to see if congress acts. Especially if CA’s wealth tax happens which they claim will tax any wealth over a threshold even after you’ve been out of state for years.

danhak 6y ago

Property taxes in California are among the lowest in the nation.

bluedevil2k 6y ago
And the income tax is by far the highest, currently at 13.3% compared to 2nd place Hawaii’s 11%. Sales tax averages to 8.5%, good for 9th highest in the country.
- danhak 6y ago
  > And the income tax is by far the highest, currently at 13.3% If you’re earning over $1,000,000 per year, yes. SF median income is below 100K.
  - blisterpeanuts 6y ago
    SF also charges a city income tax of 1.5% (flat rate).
    - dmode 6y ago
      SF has no income tax. This is incorrect
      - brandur 6y ago
        Your parent's comment is out of date, but what you said isn't a fair representation either. The 1.5% tax they're talking was the 1.5% payroll tax that SF had in place until 2012 [1]. Payroll tax isn't quite the same as an income tax because the onus isn't on the employee to figure it out like state and federal, but it still did cost most businesses in SF an extra 1.5% on every employee's salary to be there. Prop E shifted most of this to a gross receipts tax instead (although there's still a 0.38% payroll expense tax in place [2]). Again, the numbers your parent is talking about are out of date, but the spirit of it is right in that it does just fundamentally cost a company quite a bit more to have an employee in SF. --- [1] https://sftreasurer.org/business/taxes-fees/gross-receipts-tax-gr https://sftreasurer.org/business/taxes-fees/gross-receipts-t... [2] https://sftreasurer.org/business/taxes-fees/payroll-expense-tax-py https://sftreasurer.org/business/taxes-fees/payroll-expense-...
- mindslight 6y ago
  At $160k the marginal income tax rate in California is 33.3%, whereas the marginal income tax rate in Nevada or Washington is still 24%. As your income goes up, this ratio goes down. Focusing on the comparatively small state portions of income tax is a red herring, given that money going to the state at least has a better chance of paying for services you value.
jurassic 6y ago
Property taxes are not that relevant for the masses who can't afford to buy property.
- danhak 6y ago
  But...that’s who this article is discussing: homeowners who are listing their properties for sale in higher numbers.
- x87678r 6y ago
  It is because a big chunk of your rent goes to property taxes. Where I am property taxes are $1k a month for a $3k/mo apartment.
  - jeffbee 6y ago
    Property tax is not an input to setting the market rate of rental housing, though. Changing the tax does not change the rent. Ask yourself if your rent would decrease if they decreased the taxes. Rent is a simple supply/demand system.
    - bluedevil2k 6y ago
      Totally false. Changing the tax rate will definitely change the rent. A property tax increase will increase the floor that tenants (edit: meant landlords) would be willing to rent their places out across the entire city as they look to protect their profit margins. You don't think that a landlord will see a property tax increase and think "oh well, I guess I'm going to make less money from now on". Rent is definitely not a simple supply/demand situation as there are many hands in on the equation (taxes, rent control, zoning).
      - jeffbee 6y ago
        Nope, you're wrong. Your argument rests on the idea that landlords (I assume you meant landlords where you said "tenants") have the ability to raise prices. If they did, they would have already raised them. Landlords who are not subject to rent controls charge whatever the market will bear, and no less. Therefore property tax has no bearing on rent.
unpolloloco 6y ago
On a percentage basis. 1% of $1m is still way more than 4% of $150k
- TheOtherHobbes 6y ago
  That's a difference of $10k vs $6k - which is way less than the percentage difference in the relative value of the homes.
- brandur 6y ago
  It's also worth calling out that when people make claims about lowest in the nation, they're almost certainly calculating that based off average price paid across all homes in the state. Thanks to Prop 13, many homeowners do pay quite tiny property taxes. But this turns out to be extremely nefarious because along with removing a fair tax base and liquidity from the market, it also means that the disproportionate burden for paying California property tax is placed on new home buyers, who are often younger people/young families. New entrants are often paying incredible levels of property tax (as it's a percentage of the already highly inflated prices), and because they're disproportionately more likely to be working, they're also the ones paying state and federal tax, along with the miscellaneous municipal taxes which can also be quite high in cities like San Francisco. Meanwhile, legacy owners make off like bandits. I looked up the property I rent in once, owned by a large real estate holder that's decades old, and it was assessed at a few hundred thousand — for a 5 unit building in central SF. I don't know what the actual value would be, but it'd be closer to a ballpark of $3 to $6M. A differential of ~20x, and this isn't uncommon. It's this framework that gets you to "lowest in the nation". I tend to think about it as _both_ the highest and the lowest in the nation, largely determined based on when your family moved here.
vondur 6y ago
Yeah, but if your property is worth a lot, it still can be expensive.
novok 6y ago
Only if you've owned a house for decades. If you bought recently, then your property taxes can effectively be %1.5 with all the extras they add to bills.

allsystemsgo 6y ago

That would run against the narrative. Completely agree.

luma 6y ago

Wouldn't this then also be true of LA or San Jose, both mentioned in the article? It feels like you have a politcal axe to grind and came here to the comments before reading the article.

steev 6y ago
I am not sure I follow. It seems plausible that the sky-high taxes are a major motivator for people wanting to leave CA but a recent change in SF made it possible for people to move to a different state (e.g., Twitter and FB allowing permanent remote work and Google working remotely into 2021).
- luma 6y ago
  Poster was suggesting high state taxes were to blame, but if that was true, one would also expect that trend to extend to other cities in the same state. If it’s due to remote workers as you suggest, then it should also apply to cities with a high population of tech workers and headquarters like San Jose. According to the article, it doesn’t. This makes the state tax argument hard to defend.
  - jessaustin 6y ago
    You're right, if people don't like the tax situation they should just move away.
- bbarnett 6y ago
  One thing, Yahoo and IBM had remote, then one day that perm remote became a nope. Some people are very poor at remote. If too many are thus, it may end.
deleted 6y ago
[deleted]

lostmyoldone 6y ago

San Fransisco has one of the highest, and in some cases - highest - housing and rental prices in the US. If taxes are as high as you claim, it would be more rational to argue that the high prices are indirectly caused by that tax, rather than prices being held down by taxes. Several causes seems more likely for a change in inventory, or pricing. An extremely high cost of housing and the consequently smaller than average living spaces, which people are spending more time in due to covid has probably led some people to re-evaluate their priorities. It has in less heated markets. Increased possibilities of remote work even in tech companies traditionally against it, and as tech drives SF, this is going to affect a majority of people living there. Expectations of recession due to one of 1) covid 2) some of the giants getting pushback from an administration that is fickle at best 3) new competition from non US companies in driving markets, eg TikTok 4) ... and more. There are plenty of somewhat plausible reasons to get out of the highest priced housing market in the US, especially if you can't handle a significant downturn in prices. You could argue taxes too, if the market prices were average, or below average, but in the current situation any economic sensitivity is caused by an overheated housing market, nothing else can even touch the force of a market as hot as the SF one. However, if a market with 1/4 the inventory of NY increase its inventory, even when it's with about 100%, one really can't tell anything. It's the hottest of the hot markets that's cooled down a little, and it doesn't really tell anything yet, except that the market has changed somehow.

justchilly 6y ago
If you make $250k in SF (sounds high, but about average for the people I know that are leaving SF), state income tax alone is $19,996. If you make that in Texas, state income tax is $0. That $20k/year is for many people a bigger deal than the cost of living. Most people I know leaving were home owners or rent controlled. Source: moved to Austin in June.
- twalla 6y ago
  Property taxes in TX are generally higher but the lower average home price sort of negates that. Regardless, I'm looking forward to competing with even _more_ cash offers over listing price within 24 hours of a listing going up.

nemothekid 6y ago

I doubt anyone that chose to live in SF will all the sudden care about the taxes in the income equation. The rental prices alone are high enough where if anyone was doing the math, Austin made a much better choice.

inerte 6y ago

Taxes have always been high in California, didn't they? It's not like it changed dramatically in the last 5 months compared to the last 5 decades, compared to the rest of the nation. And still, California kept growing.

ed25519FUUU 6y ago
What changed is the last 5 months is that people have an option not to pay them (by moving and working remote). I expect California to try some sort of remote worker tax soon to try and stop the bleeding. Best of luck to everyone out in search of greener pastures. Remember not to enact the same city policies that turned California into what it is today.

opportune 6y ago

When going remote you don't get to avoid the California state taxes for the year, will never avoid it for current granted-but-unvested RSUs, and won't avoid them in the future unless you get your employer to actually change your employment to the new state (not exactly sure what the process is here, but I know my 'desk' is in CA so I have to pay taxes there). So this doesn't apply to the many people in the technology industry leaving CA to take advantage of temporary remote work

nemo44x 6y ago
This is about to get interesting. Similar story to NYC in that they go after people that move to NJ or CN, work from home and choose to pay taxes to the state they live and work in. NY claims they are choosing convenience and because their office is in NYC they need to pay taxes there. So states like NJ miss out on a lot of revenue. There are local politicians in NJ now talking about this. With so many commuters possibly not going back to an office there’s potentially a few billion in tax revenues at stake. Most states have reciprocal deals with neighboring states so that you pay taxes where you live even if you work in the adjacent state. NY does not and for obvious reasons. California either and I’ve heard California will claim your owe taxes even if you move far away but the company only has an office in CA. As reports of these states chasing down money that is arguably not theirs gets around it will be interesting to see if congress acts. Especially if CA’s wealth tax happens which they claim will tax any wealth over a threshold even after you’ve been out of state for years.