4 ms·

>We already see standard property tax forcing the elderly out of their homes in many areas. This was exactly the narrative that led to Prop 13, and what it has

by RC_ITR 5y ago

>We already see standard property tax forcing the elderly out of their homes in many areas. This was exactly the narrative that led to Prop 13, and what it has led to is the most inflated property market in the entire world because there is nearly no carrying costs for a first (LA), second (Palm Springs), third (Atherton), or fourth (Tahoe) home! Sure, a random subset of boomers can die in their empty 6 bedroom houses now, but countless people are moving to places like Texas where land value/property taxes have keep real estate prices relatively low (due to huge carrying costs). I love CA, but the income vs. wealth/property tax split is what will kill it (at least in its current form).

rnk 5y ago
Proposition 13 needs to end. An obvious reason is that property can be owned by a corporation or LLC somehow and you can sell that to someone, effectively selling the house and avoid the proposition 13 tax reset. Proposition 13 has become just yet another way for wealthy people to avoid paying their fair share of taxes.
- dragonwriter 5y ago
  > Proposition 13 has become just yet another way for wealthy people to avoid paying their fair share of taxes. “Has become” implies that was ever not that.
  - rnk 5y ago
    The thing I was getting at is in other states, maybe all states, they calculate the estimated value and you pay property taxes for land based on that. But with california's special prop 13 system, you don't have to pay more as a property increases in value. Thus the tremendous value of these systems that transfer ownership but avoid that 'tax re-value'. In other places, you can't avoid paying higher taxes as places increase in value, generally.
jjav 5y ago
> nearly no carrying costs for a first (LA), second (Palm Springs), third (Atherton), or fourth (Tahoe) home! You're still paying property tax on all those homes, and that propery tax goes up 2% every year. So "nearly no carrying costs" is not true.
- RC_ITR 5y ago
  Just to clarify some points: Yes, ofc You are still paying property tax, just way less than you would in nearly any other jurisdiction. It’s capped at 1% of total assessed value and that value can only go up 2% a year (i.e. way less than market). That was the meaning of the word “nearly.” EDIT: Just to contextualize this a bit, let’s assume those four houses were bought ten years ago for a total of $4m at the time. They are now worth $10m, but the owner pays $50k a year in tax to carry that “investment” that has gained on average $600k a year. Not exactly a meaningful carrying cost.
  - jjav 5y ago
    A few data points: > It’s capped at 1% of total assessed value Sort of. The California property tax bill has many line items, one of which is "General tax rate". That's the one everyone talks about and it is 1% of the assessed value. However, all applicable jurisdictions can (and thus, will) add all kinds of add-on percentage fees to the property taxes and those are not subject to any limitations. My property tax bill (California) which I just paid two weeks ago, was actually 1.4% of the assessed value. > that value can only go up 2% a year (i.e. way less than market) True on average over long term. Good to keep in mind though that it goes up 2% every year regardless of market. So when the market is up double percentages like 2020-2021, it only goes up 2%. But when the housing market crashes, it also goes up 2%. Which is fine, it's basically a damping function so that instead of having the taxes swing wildly up and down year to year, they just go steadily up. Also be aware that the 2% increase is on the "general tax rate". The additional fees which are included in the property taxes, those have no cap on increase rates. There have been many years when my property taxes have gone up quite a bit more than 2%. I feel that because the housing market has been on such a long bull run, people have either forgotten, or are too young to have experienced, that housing markets can also crash hard. Having an increased zestimate value of your home is not actual wealth unless you sell it, and the valuation on paper can evaporate any moment when the next housing crash comes. I've been through three market crashes in my current house, two of which left me underwater for a few years.

by RC_ITR 5y ago

rnk 5y ago

Proposition 13 needs to end. An obvious reason is that property can be owned by a corporation or LLC somehow and you can sell that to someone, effectively selling the house and avoid the proposition 13 tax reset. Proposition 13 has become just yet another way for wealthy people to avoid paying their fair share of taxes.

dragonwriter 5y ago
> Proposition 13 has become just yet another way for wealthy people to avoid paying their fair share of taxes. “Has become” implies that was ever not that.
- rnk 5y ago
  The thing I was getting at is in other states, maybe all states, they calculate the estimated value and you pay property taxes for land based on that. But with california's special prop 13 system, you don't have to pay more as a property increases in value. Thus the tremendous value of these systems that transfer ownership but avoid that 'tax re-value'. In other places, you can't avoid paying higher taxes as places increase in value, generally.

jjav 5y ago

> nearly no carrying costs for a first (LA), second (Palm Springs), third (Atherton), or fourth (Tahoe) home! You're still paying property tax on all those homes, and that propery tax goes up 2% every year. So "nearly no carrying costs" is not true.

RC_ITR 5y ago
Just to clarify some points: Yes, ofc You are still paying property tax, just way less than you would in nearly any other jurisdiction. It’s capped at 1% of total assessed value and that value can only go up 2% a year (i.e. way less than market). That was the meaning of the word “nearly.” EDIT: Just to contextualize this a bit, let’s assume those four houses were bought ten years ago for a total of $4m at the time. They are now worth $10m, but the owner pays $50k a year in tax to carry that “investment” that has gained on average $600k a year. Not exactly a meaningful carrying cost.
- jjav 5y ago
  A few data points: > It’s capped at 1% of total assessed value Sort of. The California property tax bill has many line items, one of which is "General tax rate". That's the one everyone talks about and it is 1% of the assessed value. However, all applicable jurisdictions can (and thus, will) add all kinds of add-on percentage fees to the property taxes and those are not subject to any limitations. My property tax bill (California) which I just paid two weeks ago, was actually 1.4% of the assessed value. > that value can only go up 2% a year (i.e. way less than market) True on average over long term. Good to keep in mind though that it goes up 2% every year regardless of market. So when the market is up double percentages like 2020-2021, it only goes up 2%. But when the housing market crashes, it also goes up 2%. Which is fine, it's basically a damping function so that instead of having the taxes swing wildly up and down year to year, they just go steadily up. Also be aware that the 2% increase is on the "general tax rate". The additional fees which are included in the property taxes, those have no cap on increase rates. There have been many years when my property taxes have gone up quite a bit more than 2%. I feel that because the housing market has been on such a long bull run, people have either forgotten, or are too young to have experienced, that housing markets can also crash hard. Having an increased zestimate value of your home is not actual wealth unless you sell it, and the valuation on paper can evaporate any moment when the next housing crash comes. I've been through three market crashes in my current house, two of which left me underwater for a few years.