7 ms·

Maybe then there'll be enough popular support for repealing Prop 13. People mention the heavy dependence on state income tax. Well, why is that? Compare that t

by jmyeet 4y ago

Maybe then there'll be enough popular support for repealing Prop 13. People mention the heavy dependence on state income tax. Well, why is that? Compare that to states like Texas that obviously has no state income tax but just has high property taxxes. I actually think this is a way healthier situation. But in the 70s, voters voted themselves a massive permanent tax break that's even bigger for corporations. When an individual buy a property the tax basis gets reset and recalculated. Not if the property is held in an LLC. So Disney's property tax rates have essentially been frozen since the 1960s. The standard counterargument is "what about the old people getting kicked out of their homes?" It's an appeal to emotion that doesn't make any sense. First, why are we giving Disney a amssive tax break so some old person on a fixed income doesn't have to downsize from the family home they raised their children in? Second, if we really want to protect those people (and I'm in the camp who thinks we shouldn't) we have the technology to provide needs-based property tax relief in the form of a lower rate or (my preferred option) simply deferring the taxes interest-free until the home is sold or the owner dies.

onlyrealcuzzo 4y ago
If 50% of voters are ever non-homeowners, prop 13 will probably get repealed. I'm not sure if that will ever happen.
eganist 4y ago
> But in the 70s, voters voted themselves a massive permanent tax break that's even bigger for corporations. When an individual buy a property the tax basis gets reset and recalculated. Not if the property is held in an LLC. So Disney's property tax rates have essentially been frozen since the 1960s. Are people essentially selling the LLCs then, rather than the properties themselves?
- saurik 4y ago
  Yes. The LLCs are even often simply named after the street address, so stuff like 6243 Abrego LLC. The idea is then just whether you are making enough money off the asset to justify the minimum LLC tax vs. the property tax increase on an expected sale (which might be a good trade-off for everyone, but is certainly a good trade-off for people renting their property out).
  - gaadd33 4y ago
    How does that work with the provision that if there is a change of control in the llc changes hands they need to reappraise? Do you just encapsulate the llc inside another one?
    - epistasis 4y ago
      It's a gradual change of possession over time, and each individual change of ownership is small to not trigger reassessment.
- jmyeet 4y ago
  Yes [1]. [1]: https://journal.firsttuesday.us/change-the-law-close-prop-13s-corporate-loophole/65104/#:~:text=Our%20proposal%3A%20Amend%20Proposition%2013,equitable%20share%20of%20local%20taxes https://journal.firsttuesday.us/change-the-law-close-prop-13....
  - koolba 4y ago
    Wouldn’t a change in control of the LLC trickle down to a change in ownership of the property and thus trigger a reassessment?
    - mattnewton 4y ago
      In a sane system yes
    - labcomputer 4y ago
      It would in any sane system… which is to say, not in California. Here’s something to really blow your mind: After Prop 13 was passed, some subsequent Propositions made property tax rate inheritable. That’s right, your kids and grandkids can inherit your below-market property tax rate. We have come full circle and returned to the system of landed nobility (with special tax privileges) that a war was fought to leave.
      - secabeen 4y ago
        There's been some movement to repeal those provisions, and let me tell you, the Nextdoor Karens are very very unhappy that their kids aren't going to be able to live in their childhood home because they won't be able to afford the taxes.
        epistasis 4y ago
        The funny thing is that they can keep the low tax rates if they live in the home!! The just can't rent it out and continue the low tax rates.
gedy 4y ago
I've never understood the objection to prop 13 - your property taxes can and do go up every year by a reasonable amount (2%?). The only thing they don't track is the insane bubble prices that happen every decade or so but who cares? If people sell then, they either are taxed or buy inflated property prices as replacement. When prices crash, the gov't shouldn't depend on bubble prices for revenue.
- epistasis 4y ago
  2% is not a reasonable amount when housing prices are regularly going up by 3x-5x that percentage. There has never been a bubble crash that brought housing prices anywhere down to the Prop 13 valuations, so it's pretty strong evidence that it's not a bubble. I think that we need to start charging a huge capital gains tax on local property transaction, assessed by the local government, not the federal government. Maybe 25%-50% of the capital gains. Or maybe 2% per year if ownership, with a max of X%. Long time property holders have been exploiting the economy of California, taking in unearned profits, and taking that money out of poorer, more productive, people.
  - treeman79 4y ago
    Please don’t. This will drive millions out of California to more sane states.
    - epistasis 4y ago
      In case you haven't been paying attention, millions have already been leaving California, due meret to being priced out. It's the lower income folks, not the rich folks.
      - treeman79 4y ago
        It was a tongue in check comment. And prices in my area have skyrocketed due to all the transplants.
        4y ago
mavelikara 4y ago
> The standard counterargument is "what about the old people getting kicked out of their homes?" Deferring the taxes, as you mention later in your comment, would be most equitable way of handling this.
bingohbangoh 4y ago
The heavy income tax is not disappearing if Prop 13 is repealed. They'll just raise the property taxes and distribute that money for themselves.
- crooked-v 4y ago
  Who is "themselves"?
  - bingohbangoh 4y ago
    Bureaucrats who run California.
vmception 4y ago
are there enough of us that are not beneficiaries of Prop 13 to repeal Prop 13? are there comprehensive stats of which properties are under that system and how many residents that applies to? I don't care about the LLC part, its stupid for types of property (house, cars) to have separate transfer tariffs on them to begin with, so therefore it would be stupid for me to care that an LLC gets around them I'm just wondering about the numbers of people, helps me determine if this is a useful area to spend energy at the moment
- inferiorhuman 4y ago
  are there enough of us that are not beneficiaries of Prop 13 to repeal Prop 13? No. Repealing Prop 13 is a third rail, ask our last republican governor. A common suggestion is to implement a so-called "split roll" system where non-residential property gets no Prop 13 protections and residential (ideally only the primary residence) maintains the limits. Unfortunately I doubt that'll ever pass within my lifetime.
  - eigen 4y ago
    2020 Proposition 15 was to require commercial and industrial properties, except those zoned as commercial agriculture, to be taxed based on their market value, rather than their purchase price. it failed 52 / 48.
  - vmception 4y ago
    > is a third rail, ask our last republican governor what does that mean? and propositions are citizen initiated amendments that citizens vote on
    - jmyeet 4y ago
      It's a train metaphor. Electric trains, like any other trains, have 2 rails the wheels go on. But there's a 3rd rail from which the train draws power. Touching it is death. It was a common metaphor to describe Social Security reform years ago as people realized the system was headed for "bankruptcy". At least that's what they called it. In reality it was just that outgoings would exceed receipts by the 2030s, which means funding it from general revenue or reducing benefits. But anyone who suggested "reforming" Social Security, such as private retirement accounts replacing it, tended to die a horrible political death and thus the third rail. The other third rail I can think of is eliminating free street parking in NYC.
Justin_K 4y ago
Yea, let's repeal Prop 13, our state needs to collect more money. As if they high gas prices and income taxes aren't enough... let's get the taxpayers once more, through their property. Does anybody actually think raising property taxes will make homes more accessible? It will create a further divide and will get passed through to renters anyways.
- treeman79 4y ago
  There is no limit to the amount they will spend. Could be 100% still wouldn’t be enough.
- jaredklewis 4y ago
  Different methods of taxation create different incentives and have different side effects. For example taxing income is basically a tax on giving people jobs or being economically productive , two things we probably don't want to discourage, so I rate income taxes pretty poorly. Taxing gasoline discourages people from using gasoline, which might have the side effect of encouraging adoption of other methods of creating and storing energy. So that's not all bad. Property taxes have the wonderful side effect of making it more expensive to own property, which discourages speculation and other non-productive use of land. I'm sympathetic that the tax burden in CA is already too high, but we can repeal prop 13 and maintain (or even reduce) total tax revenue by simultaneously reducing income taxes. IMHO, replacing some or all income taxes with more property taxes would be a massive improvement. Many proponents of repealing prop 13 openly support cutting other taxes or would be open to such a compromise.
hintymad 4y ago
I remember there was a huge discussion on HN years ago on Prop 13, and someone mentioned that Prop 13 was proposed because the democratic party then double taxed people. Somehow I couldn't find the reference anymore. As for the Prop 13, it makes sense to me to keep it for the primary residence, as an ordinary person shouldn't be forced to give up their house just because the property appreciates. Prop 13 for non-primary and commercial property should be repealed. That said, I don't think Prop 13 will fundamentally solve California's problem before we fix our government. For instance, why would it cost more than 100K to house a homeless? How many people can earn that much, post tax, in the nation? Or why couldn't Bay Area schools afford even school bus or better school buildings or more teachers (CUSD teachers ask parents to grade students' homework)?
- masonic 4y ago
  >Prop 13 for non-primary and commercial property should be repealed. Agreed. The Democrat legislature could do anytime without a single Republican vote. All it takes then is a simple majority of voters in the next statewide election. Ask yourself why that has never even been attempted.
  - reducesuffering 4y ago
    It has been attempted and failed as of 2020[0]. Voters are mostly uninformed. CA voters voted against commercial properties at market rate but further increased family home reassessments. https://ballotpedia.org/California_Proposition_15,_Tax_on_Commercial_and_Industrial_Properties_for_Education_and_Local_Government_Funding_Initiative_(2020) https://ballotpedia.org/California_Proposition_15,_Tax_on_Co...
    - masonic 4y ago
      No, that was an Initiative, not a Legislative, measure. Again, the Legislature could do so anytime without the burden of seeking ballot signatures or encountering any other such friction.
masonic 4y ago
The Democrats would have put a Prop 13 repeal -or- a split-roll property tax system on the ballot almost anytime in the past two decades without a single Republican vote. All it takes then is a simple majority of voters in the next statewide election. Ask yourself why that has never even been attempted.
jjav 4y ago
> The standard counterargument is "what about the old people getting kicked out of their homes?" It's an appeal to emotion that doesn't make any sense. It makes sense as it was a very real problem for lots of older people who had built the neighborhood just to be displaced by rich newcomers. What didn't and doesn't make any sense is applying the same protection to corporate-owned properties. Prop13 protection should only apply to a property owned by a named individual who lives in the property. Not corporations, not investment properties.

by jmyeet 4y ago

onlyrealcuzzo 4y ago

If 50% of voters are ever non-homeowners, prop 13 will probably get repealed. I'm not sure if that will ever happen.

eganist 4y ago

> But in the 70s, voters voted themselves a massive permanent tax break that's even bigger for corporations. When an individual buy a property the tax basis gets reset and recalculated. Not if the property is held in an LLC. So Disney's property tax rates have essentially been frozen since the 1960s. Are people essentially selling the LLCs then, rather than the properties themselves?

saurik 4y ago
Yes. The LLCs are even often simply named after the street address, so stuff like 6243 Abrego LLC. The idea is then just whether you are making enough money off the asset to justify the minimum LLC tax vs. the property tax increase on an expected sale (which might be a good trade-off for everyone, but is certainly a good trade-off for people renting their property out).
- gaadd33 4y ago
  How does that work with the provision that if there is a change of control in the llc changes hands they need to reappraise? Do you just encapsulate the llc inside another one?
  - epistasis 4y ago
    It's a gradual change of possession over time, and each individual change of ownership is small to not trigger reassessment.
jmyeet 4y ago
Yes [1]. [1]: https://journal.firsttuesday.us/change-the-law-close-prop-13s-corporate-loophole/65104/#:~:text=Our%20proposal%3A%20Amend%20Proposition%2013,equitable%20share%20of%20local%20taxes https://journal.firsttuesday.us/change-the-law-close-prop-13....
- koolba 4y ago
  Wouldn’t a change in control of the LLC trickle down to a change in ownership of the property and thus trigger a reassessment?
  - mattnewton 4y ago
    In a sane system yes
  - labcomputer 4y ago
    It would in any sane system… which is to say, not in California. Here’s something to really blow your mind: After Prop 13 was passed, some subsequent Propositions made property tax rate inheritable. That’s right, your kids and grandkids can inherit your below-market property tax rate. We have come full circle and returned to the system of landed nobility (with special tax privileges) that a war was fought to leave.
    - secabeen 4y ago
      There's been some movement to repeal those provisions, and let me tell you, the Nextdoor Karens are very very unhappy that their kids aren't going to be able to live in their childhood home because they won't be able to afford the taxes.
      - epistasis 4y ago
        The funny thing is that they can keep the low tax rates if they live in the home!! The just can't rent it out and continue the low tax rates.

gedy 4y ago

I've never understood the objection to prop 13 - your property taxes can and do go up every year by a reasonable amount (2%?). The only thing they don't track is the insane bubble prices that happen every decade or so but who cares? If people sell then, they either are taxed or buy inflated property prices as replacement. When prices crash, the gov't shouldn't depend on bubble prices for revenue.

epistasis 4y ago
2% is not a reasonable amount when housing prices are regularly going up by 3x-5x that percentage. There has never been a bubble crash that brought housing prices anywhere down to the Prop 13 valuations, so it's pretty strong evidence that it's not a bubble. I think that we need to start charging a huge capital gains tax on local property transaction, assessed by the local government, not the federal government. Maybe 25%-50% of the capital gains. Or maybe 2% per year if ownership, with a max of X%. Long time property holders have been exploiting the economy of California, taking in unearned profits, and taking that money out of poorer, more productive, people.
- treeman79 4y ago
  Please don’t. This will drive millions out of California to more sane states.
  - epistasis 4y ago
    In case you haven't been paying attention, millions have already been leaving California, due meret to being priced out. It's the lower income folks, not the rich folks.
    - treeman79 4y ago
      It was a tongue in check comment. And prices in my area have skyrocketed due to all the transplants.
      - 4y ago

mavelikara 4y ago

> The standard counterargument is "what about the old people getting kicked out of their homes?" Deferring the taxes, as you mention later in your comment, would be most equitable way of handling this.

bingohbangoh 4y ago

The heavy income tax is not disappearing if Prop 13 is repealed. They'll just raise the property taxes and distribute that money for themselves.

crooked-v 4y ago
Who is "themselves"?
- bingohbangoh 4y ago
  Bureaucrats who run California.

vmception 4y ago

are there enough of us that are not beneficiaries of Prop 13 to repeal Prop 13? are there comprehensive stats of which properties are under that system and how many residents that applies to? I don't care about the LLC part, its stupid for types of property (house, cars) to have separate transfer tariffs on them to begin with, so therefore it would be stupid for me to care that an LLC gets around them I'm just wondering about the numbers of people, helps me determine if this is a useful area to spend energy at the moment

inferiorhuman 4y ago
are there enough of us that are not beneficiaries of Prop 13 to repeal Prop 13? No. Repealing Prop 13 is a third rail, ask our last republican governor. A common suggestion is to implement a so-called "split roll" system where non-residential property gets no Prop 13 protections and residential (ideally only the primary residence) maintains the limits. Unfortunately I doubt that'll ever pass within my lifetime.
- eigen 4y ago
  2020 Proposition 15 was to require commercial and industrial properties, except those zoned as commercial agriculture, to be taxed based on their market value, rather than their purchase price. it failed 52 / 48.
- vmception 4y ago
  > is a third rail, ask our last republican governor what does that mean? and propositions are citizen initiated amendments that citizens vote on
  - jmyeet 4y ago
    It's a train metaphor. Electric trains, like any other trains, have 2 rails the wheels go on. But there's a 3rd rail from which the train draws power. Touching it is death. It was a common metaphor to describe Social Security reform years ago as people realized the system was headed for "bankruptcy". At least that's what they called it. In reality it was just that outgoings would exceed receipts by the 2030s, which means funding it from general revenue or reducing benefits. But anyone who suggested "reforming" Social Security, such as private retirement accounts replacing it, tended to die a horrible political death and thus the third rail. The other third rail I can think of is eliminating free street parking in NYC.

Justin_K 4y ago

Yea, let's repeal Prop 13, our state needs to collect more money. As if they high gas prices and income taxes aren't enough... let's get the taxpayers once more, through their property. Does anybody actually think raising property taxes will make homes more accessible? It will create a further divide and will get passed through to renters anyways.

treeman79 4y ago
There is no limit to the amount they will spend. Could be 100% still wouldn’t be enough.
jaredklewis 4y ago
Different methods of taxation create different incentives and have different side effects. For example taxing income is basically a tax on giving people jobs or being economically productive , two things we probably don't want to discourage, so I rate income taxes pretty poorly. Taxing gasoline discourages people from using gasoline, which might have the side effect of encouraging adoption of other methods of creating and storing energy. So that's not all bad. Property taxes have the wonderful side effect of making it more expensive to own property, which discourages speculation and other non-productive use of land. I'm sympathetic that the tax burden in CA is already too high, but we can repeal prop 13 and maintain (or even reduce) total tax revenue by simultaneously reducing income taxes. IMHO, replacing some or all income taxes with more property taxes would be a massive improvement. Many proponents of repealing prop 13 openly support cutting other taxes or would be open to such a compromise.

hintymad 4y ago

I remember there was a huge discussion on HN years ago on Prop 13, and someone mentioned that Prop 13 was proposed because the democratic party then double taxed people. Somehow I couldn't find the reference anymore. As for the Prop 13, it makes sense to me to keep it for the primary residence, as an ordinary person shouldn't be forced to give up their house just because the property appreciates. Prop 13 for non-primary and commercial property should be repealed. That said, I don't think Prop 13 will fundamentally solve California's problem before we fix our government. For instance, why would it cost more than 100K to house a homeless? How many people can earn that much, post tax, in the nation? Or why couldn't Bay Area schools afford even school bus or better school buildings or more teachers (CUSD teachers ask parents to grade students' homework)?

masonic 4y ago
>Prop 13 for non-primary and commercial property should be repealed. Agreed. The Democrat legislature could do anytime without a single Republican vote. All it takes then is a simple majority of voters in the next statewide election. Ask yourself why that has never even been attempted.
- reducesuffering 4y ago
  It has been attempted and failed as of 2020[0]. Voters are mostly uninformed. CA voters voted against commercial properties at market rate but further increased family home reassessments. https://ballotpedia.org/California_Proposition_15,_Tax_on_Commercial_and_Industrial_Properties_for_Education_and_Local_Government_Funding_Initiative_(2020) https://ballotpedia.org/California_Proposition_15,_Tax_on_Co...
  - masonic 4y ago
    No, that was an Initiative, not a Legislative, measure. Again, the Legislature could do so anytime without the burden of seeking ballot signatures or encountering any other such friction.

masonic 4y ago

The Democrats would have put a Prop 13 repeal -or- a split-roll property tax system on the ballot almost anytime in the past two decades without a single Republican vote. All it takes then is a simple majority of voters in the next statewide election. Ask yourself why that has never even been attempted.

jjav 4y ago

> The standard counterargument is "what about the old people getting kicked out of their homes?" It's an appeal to emotion that doesn't make any sense. It makes sense as it was a very real problem for lots of older people who had built the neighborhood just to be displaced by rich newcomers. What didn't and doesn't make any sense is applying the same protection to corporate-owned properties. Prop13 protection should only apply to a property owned by a named individual who lives in the property. Not corporations, not investment properties.