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I disagree with that article (which repeats the ITEP WhoPays report). It incorrectly assumes that the incidence of the property tax is on the renters that occup

by yonran 5y ago

I disagree with that article (which repeats the ITEP WhoPays report). It incorrectly assumes that the incidence of the property tax is on the renters that occupy a house rather than the landowner. If you think that property taxes are more regressive in Texas than California you would predict that poor people pay more for rent in Texas than California, when the truth is the reverse. And if you think that property taxes are regressive, you would predict that low property taxes reduce inequality, but the truth is that California’s low property taxes only enrich landowners at the expense of the poor and are the biggest source of inequality. The property tax is a rather progressive tax insofar as its incidence is on those who gain from excluding others, while it allows taxes on labor to be low.

kelnos 5y ago
Rents in CA (bay area in particular) are a function of demand more than landlords' cost. When rents in CA go up by 40%, I guarantee you that's not because a landlord's taxes went up by 40%, but because demand has shot up and landlords can extract more profit from their renters. The big pandemic rent cuts in SF give a glimpse of what reasonable rents could look like here, if supply met demand (though even the lowest pandemic rents are still higher than they should be here). I agree that CA's housing situation does often enrich landowners at the expense of lower-income folks, but my take on that is that's more caused by NIMBYism and an unwillingness to build enough housing to meet demand. The Prop-13-fueled property tax distortion certainly plays a role, but I don't think it's the dominating factor. CA's property taxes are lower (by percentage of home value) than the national average, but not by all that much, on the order of a tenth of a percent or so. Property tax is absolutely not a progressive tax, by definition: everyone pays the same rate based on the value of their home, not based on their income or means.
- yonran 5y ago
  > Rents in CA (bay area in particular) are a function of demand more than landlords' cost Exactly. In other words, especially where supply is constrained, the property tax is incident on the landowner rather than the tenant. > my take on that is that's more caused by NIMBYism and an unwillingness to build enough housing to meet demand Yes, the difference in land use is bigger than the difference in tax rates. However, when property taxes are higher, there is more incentive for cities and households to allow more housing. And even if you believe that property taxes are regressive, it should give you pause to realize that it is more than made up for by California’s bad land use restrictions. > Property tax is absolutely not a progressive tax, by definition: everyone pays the same rate based on the value of their home, not based on their income or means. No, that’s just who writes the check. You had it right the first time. The tax incidence is who bears the burden of the tax. Since property taxes are capitalized into the price and the supply is not very elastic, an increase in projected tax payments (due to an increasing rate or increasing property value) are largely borne by the landowner (in the form of a lower sales price or a sales price that grows more slowly) rather than the young worker who buys/rents it.
  - kelnos 5y ago
    Take a look again at the graphs in the article the GP posted[0]. Texas's tax scheme is about as regressive as it gets. Sales and property taxes are regressive. Income tax with marginal tax brackets is progressive. This is a pretty simple concept. > However, when property taxes are higher, there is more incentive for cities and households to allow more housing. True, and what tends to happen in CA is that cities will approve commercial development over residential, since they can get much more tax revenue out of commercial property. But I don't think CA's property taxes are too low; from a little searching it seems like CA's average property tax rate is only slightly below the national average. Meanwhile, Texas' clocks in at several multiples of the national average. I'm not really sure what you're getting on about with the rest of your post, though. Property taxes, as implemented pretty much everywhere in the US, are regressive. Full stop. It doesn't matter "who writes the check". Landlords will pass on the cost of property taxes to renters. I don't really see evidence that home prices are so much lower in Texas due to the high property tax. Lower, certainly, but I would still much rather buy a house in the bay area with its inflated prices over a house in Austin. And I expect as demand goes up in Austin, home prices will go up (if slower), and tax rates will just help make homes even more unaffordable there for lower income folks. I expect it's easier to build in Austin, but it still takes time, and likely any new demand for housing in Austin isn't primarily in the outskirts of town where things are cheaper. [0] https://www.motherjones.com/kevin-drum/2019/11/taxes-are-surprisingly-similar-in-texas-and-california/ https://www.motherjones.com/kevin-drum/2019/11/taxes-are-sur...
    - yonran 5y ago
      > Sales and property taxes are regressive. Income tax with marginal tax brackets is progressive. This is a pretty simple concept. Not true. Income taxes (as implemented in the US) have enormous blind spots that favor homeowners at the expense of renters: untaxed imputed rent and the capital gains tax exclusion for your main home. These undermine the claim that the income tax is more progressive than the property tax. > Landlords will pass on the cost of property taxes to renters. Not for the most part. The question is, when the property tax increases, how much of it is eaten by the landlord (in lower post-tax rent), and how much is a burden on the tenant (in higher gross rent due to reduced housing supply)? In California where supply is inelastic, I would argue that the low property tax is almost all a windfall to the landowner rather than the tenant.

by yonran 5y ago

kelnos 5y ago

Rents in CA (bay area in particular) are a function of demand more than landlords' cost. When rents in CA go up by 40%, I guarantee you that's not because a landlord's taxes went up by 40%, but because demand has shot up and landlords can extract more profit from their renters. The big pandemic rent cuts in SF give a glimpse of what reasonable rents could look like here, if supply met demand (though even the lowest pandemic rents are still higher than they should be here). I agree that CA's housing situation does often enrich landowners at the expense of lower-income folks, but my take on that is that's more caused by NIMBYism and an unwillingness to build enough housing to meet demand. The Prop-13-fueled property tax distortion certainly plays a role, but I don't think it's the dominating factor. CA's property taxes are lower (by percentage of home value) than the national average, but not by all that much, on the order of a tenth of a percent or so. Property tax is absolutely not a progressive tax, by definition: everyone pays the same rate based on the value of their home, not based on their income or means.

yonran 5y ago
> Rents in CA (bay area in particular) are a function of demand more than landlords' cost Exactly. In other words, especially where supply is constrained, the property tax is incident on the landowner rather than the tenant. > my take on that is that's more caused by NIMBYism and an unwillingness to build enough housing to meet demand Yes, the difference in land use is bigger than the difference in tax rates. However, when property taxes are higher, there is more incentive for cities and households to allow more housing. And even if you believe that property taxes are regressive, it should give you pause to realize that it is more than made up for by California’s bad land use restrictions. > Property tax is absolutely not a progressive tax, by definition: everyone pays the same rate based on the value of their home, not based on their income or means. No, that’s just who writes the check. You had it right the first time. The tax incidence is who bears the burden of the tax. Since property taxes are capitalized into the price and the supply is not very elastic, an increase in projected tax payments (due to an increasing rate or increasing property value) are largely borne by the landowner (in the form of a lower sales price or a sales price that grows more slowly) rather than the young worker who buys/rents it.
- kelnos 5y ago
  Take a look again at the graphs in the article the GP posted[0]. Texas's tax scheme is about as regressive as it gets. Sales and property taxes are regressive. Income tax with marginal tax brackets is progressive. This is a pretty simple concept. > However, when property taxes are higher, there is more incentive for cities and households to allow more housing. True, and what tends to happen in CA is that cities will approve commercial development over residential, since they can get much more tax revenue out of commercial property. But I don't think CA's property taxes are too low; from a little searching it seems like CA's average property tax rate is only slightly below the national average. Meanwhile, Texas' clocks in at several multiples of the national average. I'm not really sure what you're getting on about with the rest of your post, though. Property taxes, as implemented pretty much everywhere in the US, are regressive. Full stop. It doesn't matter "who writes the check". Landlords will pass on the cost of property taxes to renters. I don't really see evidence that home prices are so much lower in Texas due to the high property tax. Lower, certainly, but I would still much rather buy a house in the bay area with its inflated prices over a house in Austin. And I expect as demand goes up in Austin, home prices will go up (if slower), and tax rates will just help make homes even more unaffordable there for lower income folks. I expect it's easier to build in Austin, but it still takes time, and likely any new demand for housing in Austin isn't primarily in the outskirts of town where things are cheaper. [0] https://www.motherjones.com/kevin-drum/2019/11/taxes-are-surprisingly-similar-in-texas-and-california/ https://www.motherjones.com/kevin-drum/2019/11/taxes-are-sur...
  - yonran 5y ago
    > Sales and property taxes are regressive. Income tax with marginal tax brackets is progressive. This is a pretty simple concept. Not true. Income taxes (as implemented in the US) have enormous blind spots that favor homeowners at the expense of renters: untaxed imputed rent and the capital gains tax exclusion for your main home. These undermine the claim that the income tax is more progressive than the property tax. > Landlords will pass on the cost of property taxes to renters. Not for the most part. The question is, when the property tax increases, how much of it is eaten by the landlord (in lower post-tax rent), and how much is a burden on the tenant (in higher gross rent due to reduced housing supply)? In California where supply is inelastic, I would argue that the low property tax is almost all a windfall to the landowner rather than the tenant.