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This is a good illustration of bad tax policy, specifically Prop 13. Zoom in on a residential street, particularly in the Bay Area, and you will see a row of h

This is a good illustration of bad tax policy, specifically Prop 13. Zoom in on a residential street, particularly in the Bay Area, and you will see a row of houses which are roughly equivalent in value. Some homeowners pay several times as much annual property tax as their neighbors, because they bought their homes more recently and paid more for them. That's kind of insane, and nobody would design the property tax system that way if they were starting from scratch.

nathanvanfleet 6y ago
America is so setup for people who already have theirs. It's mind boggling
- babesh 6y ago
  Do you know who voted it in? It’s not an officeholder. The voters of California voted for it. You want it changed? Go get a proposition to repeal it into the ballot and get it approved by the voters. It’s as simple as that. It wasn’t designed this way. There was a complaint that elderly were being driven from their homes by high property taxes.
  - lambdaops 6y ago
    Whenever you hear someone bring up the "elderly being priced out" issue, please point out the property tax postponement program: https://sco.ca.gov/ardtax_prop_tax_postponement.html https://sco.ca.gov/ardtax_prop_tax_postponement.html
seiferteric 6y ago
Counterpoint: Why should your property taxes go up just because the market around you skyrockets, when this is completely outside of your control? The bay area is a prime example of this.
- deleted 6y ago
  [deleted]
- SamReidHughes 6y ago
  Because everybody else's does. If ownership transfer didn't reset the rates, it would be a slightly different story. Edit: In that, it'd still be something that makes an economist cringe, and it'd still be "unfair" but in fewer ways.
- twblalock 6y ago
  Maybe the solution is to stop making property tax the main way that cities are funded. Among other things, this method of taxation tightly couples school funding to local home values. Areas with expensive homes have the best schools. (And areas with cheap homes have bad schools, which is not really what you want if you are trying to do something about inter-generational poverty.) This is self-reinforcing because now parents compete with each other to buy homes that are located in the best school districts, which drives up prices even more. When home values drop, such as they did in 2008, property tax revenue drops too (Prop 13 is not a one-way ratchet, you can get re-appraised and lower your taxes, and 2008-2009 was a pretty convenient time to do that). It doesn't seem like a good idea to base city revenue on something that is so undependable, especially something that is so often treated as a speculative investment. What I would rather do is come up with a system where a simple tax is paid per parcel, perhaps a flat tax or one based on the size of the parcel, and which is not based on the market value of the parcel. The rest of city funding can be covered by income tax -- unlike the current system, at least that has a chance of being progressive. No old people will be priced out of their homes by tax increases, and school funding would be distributed somewhat more evenly because not all high earners live in the most expensive areas. And if you are worried about an influx of high earners flooding into your area and driving up the prices, a local income tax would certainly discourage them.
  - bradlys 6y ago
    > It doesn't seem like a good idea to base city revenue on something that is so undependable, especially something that is so often treated as a speculative investment. Isn't property tax a pretty reliable source of income?? I thought the income tax was an unreliable source of income because people can't always be relied on to generate income... but they do tend to pay their property tax.
deleted 6y ago
[deleted]
toast0 6y ago
It's kind of insane. But it's also kind of insane that when the housing prices double or triple, you can expect your property tax to go up quite a bit as well, which makes it hard to plan for the future. I think if the value increase cap was raised (gradually) to something like 4-5% per year, you would still have assessed values trailing market values, but not by nearly as much. People could still make worst case projections of taxes to see if they could afford things. Washington state has a different system, where the total property tax of each taxing jurisdiction can only increase by 1% each year (subject to exceptions and what not), and then that amount is apportioned to each property based on the assessed value. This provides a limit on government spending as CA prop 13 does, but it doesn't limit changes in tax on any individual homeowner; if your property becomes more relatively valuable than others in your taxing districts, your bill goes up and theirs goes down. Which I'm sure causes assessments to be a lot more contenious.
- cameldrv 6y ago
  The solution is to let people run a tab with the government. Make the minimum payment the Prop 13 rate, but if there's a change in ownership, you have to pay back the difference plus a fair rate of interest. This ensures that no one has to move because their home appreciated, but it also ensures that no one gets to pay taxes like their home never appreciated, but then pocket appreciation at sale time.
  - danhak 6y ago
    This seems like it might introduce a different perverse incentive for people to remain in their homes indefinitely even if they’d prefer to downsize / move. Might further exacerbate supply / demand issues.
    - deepakhj 6y ago
      You can allow people to carry it with them if they purchase another home. They should not be able to pass it to their children. It should also only apply to a primary residence. No investment properties or 2nd homes+.
ladberg 6y ago
I found a few places in Beverly Hills where people were paying over 100x less than their neighbors, which is insane. I wonder if posting screenshots of this map up in various neighborhoods showing nearby inequality would be enough combat the "poor old grandma getting kicked out of her house" counterpoint that's pretty much entirely fictional.
- lambdaops 6y ago
  Note: seniors can use the property tax postponement program https://sco.ca.gov/ardtax_prop_tax_postponement.html https://sco.ca.gov/ardtax_prop_tax_postponement.html
nullc 6y ago
Many, ... most? states have some kind of homesteading tax relief. For example, in Florida property tax increases are capped to the lesser of 3% or CPI. 25k of value is also exempted from property taxes and 50k is exempted from non-school property taxes. But only for a single primary residential property. Where CA13 is different is that it applies to everything: commercial property, industrial property, rental property, second homes, third homes, etc. I think there is a pretty good case to be made that there is a massive public interest in keeping people from being pushed out of their homes by taxes. Capping tax increases is also necessary to make it possible to financially plan for them (e.g. I can invest enough so that my investments will pay the taxes w/ increases for the rest of my life, and just add that to the 'cost' of the home-- given historical market returns this requires investment of 25x your annual property taxes, so long as they can't grow faster than inflation). One could also make the case for a public interest in not letting some businesses get pushed out (primarily small, single location businesses). But prop 13 goes far beyond that-- applying to all property and with extremely expansive portability-- and as a result creates a massive windfall for existing property owners at the expense of new property owners. I'd like to see at least a rule that for rented properties that assessments should be allowed to increase as much as rents have. There is little to no prevent-displacement justification for not tracking rents.
- twblalock 6y ago
  > But prop 13 goes far beyond that-- applying to all property and with extremely expansive portability-- and as a result creates a massive windfall for existing property owners at the expense of new property owners. It's even worse than that -- it creates a massive incentive not to sell homes. People who have owned homes for more than just 10 years would see their property taxes double if they sold their homes today and bought another home for the same price elsewhere in the state. The longer you have owned your home, the worse the tax increase becomes. It's kind of crazy that the people who bought their homes a long time ago, and therefore have realized the most return on investment, pay the least taxes. Meanwhile, people who bought their homes this year, and have made little to no investment return, pay the most taxes of anyone.

nathanvanfleet 6y ago

America is so setup for people who already have theirs. It's mind boggling

babesh 6y ago
Do you know who voted it in? It’s not an officeholder. The voters of California voted for it. You want it changed? Go get a proposition to repeal it into the ballot and get it approved by the voters. It’s as simple as that. It wasn’t designed this way. There was a complaint that elderly were being driven from their homes by high property taxes.
- lambdaops 6y ago
  Whenever you hear someone bring up the "elderly being priced out" issue, please point out the property tax postponement program: https://sco.ca.gov/ardtax_prop_tax_postponement.html https://sco.ca.gov/ardtax_prop_tax_postponement.html

seiferteric 6y ago

Counterpoint: Why should your property taxes go up just because the market around you skyrockets, when this is completely outside of your control? The bay area is a prime example of this.

deleted 6y ago
[deleted]
SamReidHughes 6y ago
Because everybody else's does. If ownership transfer didn't reset the rates, it would be a slightly different story. Edit: In that, it'd still be something that makes an economist cringe, and it'd still be "unfair" but in fewer ways.
twblalock 6y ago
Maybe the solution is to stop making property tax the main way that cities are funded. Among other things, this method of taxation tightly couples school funding to local home values. Areas with expensive homes have the best schools. (And areas with cheap homes have bad schools, which is not really what you want if you are trying to do something about inter-generational poverty.) This is self-reinforcing because now parents compete with each other to buy homes that are located in the best school districts, which drives up prices even more. When home values drop, such as they did in 2008, property tax revenue drops too (Prop 13 is not a one-way ratchet, you can get re-appraised and lower your taxes, and 2008-2009 was a pretty convenient time to do that). It doesn't seem like a good idea to base city revenue on something that is so undependable, especially something that is so often treated as a speculative investment. What I would rather do is come up with a system where a simple tax is paid per parcel, perhaps a flat tax or one based on the size of the parcel, and which is not based on the market value of the parcel. The rest of city funding can be covered by income tax -- unlike the current system, at least that has a chance of being progressive. No old people will be priced out of their homes by tax increases, and school funding would be distributed somewhat more evenly because not all high earners live in the most expensive areas. And if you are worried about an influx of high earners flooding into your area and driving up the prices, a local income tax would certainly discourage them.
- bradlys 6y ago
  > It doesn't seem like a good idea to base city revenue on something that is so undependable, especially something that is so often treated as a speculative investment. Isn't property tax a pretty reliable source of income?? I thought the income tax was an unreliable source of income because people can't always be relied on to generate income... but they do tend to pay their property tax.

deleted 6y ago

[deleted]

toast0 6y ago

It's kind of insane. But it's also kind of insane that when the housing prices double or triple, you can expect your property tax to go up quite a bit as well, which makes it hard to plan for the future. I think if the value increase cap was raised (gradually) to something like 4-5% per year, you would still have assessed values trailing market values, but not by nearly as much. People could still make worst case projections of taxes to see if they could afford things. Washington state has a different system, where the total property tax of each taxing jurisdiction can only increase by 1% each year (subject to exceptions and what not), and then that amount is apportioned to each property based on the assessed value. This provides a limit on government spending as CA prop 13 does, but it doesn't limit changes in tax on any individual homeowner; if your property becomes more relatively valuable than others in your taxing districts, your bill goes up and theirs goes down. Which I'm sure causes assessments to be a lot more contenious.

cameldrv 6y ago
The solution is to let people run a tab with the government. Make the minimum payment the Prop 13 rate, but if there's a change in ownership, you have to pay back the difference plus a fair rate of interest. This ensures that no one has to move because their home appreciated, but it also ensures that no one gets to pay taxes like their home never appreciated, but then pocket appreciation at sale time.
- danhak 6y ago
  This seems like it might introduce a different perverse incentive for people to remain in their homes indefinitely even if they’d prefer to downsize / move. Might further exacerbate supply / demand issues.
  - deepakhj 6y ago
    You can allow people to carry it with them if they purchase another home. They should not be able to pass it to their children. It should also only apply to a primary residence. No investment properties or 2nd homes+.

ladberg 6y ago

I found a few places in Beverly Hills where people were paying over 100x less than their neighbors, which is insane. I wonder if posting screenshots of this map up in various neighborhoods showing nearby inequality would be enough combat the "poor old grandma getting kicked out of her house" counterpoint that's pretty much entirely fictional.

lambdaops 6y ago
Note: seniors can use the property tax postponement program https://sco.ca.gov/ardtax_prop_tax_postponement.html https://sco.ca.gov/ardtax_prop_tax_postponement.html

nullc 6y ago

Many, ... most? states have some kind of homesteading tax relief. For example, in Florida property tax increases are capped to the lesser of 3% or CPI. 25k of value is also exempted from property taxes and 50k is exempted from non-school property taxes. But only for a single primary residential property. Where CA13 is different is that it applies to everything: commercial property, industrial property, rental property, second homes, third homes, etc. I think there is a pretty good case to be made that there is a massive public interest in keeping people from being pushed out of their homes by taxes. Capping tax increases is also necessary to make it possible to financially plan for them (e.g. I can invest enough so that my investments will pay the taxes w/ increases for the rest of my life, and just add that to the 'cost' of the home-- given historical market returns this requires investment of 25x your annual property taxes, so long as they can't grow faster than inflation). One could also make the case for a public interest in not letting some businesses get pushed out (primarily small, single location businesses). But prop 13 goes far beyond that-- applying to all property and with extremely expansive portability-- and as a result creates a massive windfall for existing property owners at the expense of new property owners. I'd like to see at least a rule that for rented properties that assessments should be allowed to increase as much as rents have. There is little to no prevent-displacement justification for not tracking rents.

twblalock 6y ago
> But prop 13 goes far beyond that-- applying to all property and with extremely expansive portability-- and as a result creates a massive windfall for existing property owners at the expense of new property owners. It's even worse than that -- it creates a massive incentive not to sell homes. People who have owned homes for more than just 10 years would see their property taxes double if they sold their homes today and bought another home for the same price elsewhere in the state. The longer you have owned your home, the worse the tax increase becomes. It's kind of crazy that the people who bought their homes a long time ago, and therefore have realized the most return on investment, pay the least taxes. Meanwhile, people who bought their homes this year, and have made little to no investment return, pay the most taxes of anyone.