Taxes are fair under Prop 13. What's fair about making people pay more tax just because the market value of their house has increased? They will pay taxes on those gains (over a certain limit) when they sell.
> What's fair about making people pay more tax just because the market value of their house has increased?
If you believe that, then why ratchet them up just because the property is sold? If you're going to detach property taxes from the value of the property, then do it for new homeowners too.
If we are scaling property taxes with the property's value, we might as well do it for everyone and not treat people special just because they were living there longer. Other costs people deal with scale at least by local cost of living. Groceries, electricity, water service, etc. all increase year after year. Do we let people pay 1960s costs for everything else just because they happened to move to the area in 1960?
Prop 13 as it currently stands, is a wealth transfer from young, new homeowners to elderly, established homeowners.
> If you believe that, then why ratchet them up just because the property is sold?
An argument here is that it's about budgeting and predictability.
If I choose to buy a $1M property today, I need to consider and budget for the $10K+/yr in taxes on it because I know full well that's what I'll have to pay. If that doesn't work for me, I don't have to buy it.
But someone who bought a $50K property and responsibly budgeted for the $500 in taxes on it will be severely punished through no fault of their own if that $500 becomes $10K.
They did not "make a leveraged bet". They bought a home to live in and watch their child grow in it.
Not everyone looks at real estate as a investment vehicle to maximize profits. It's just a home. It's not healthy for society to view homes merely as if they were shares of stock to be traded for maximum value. If you want to make leveraged bets, better to play the options market.
Find a city and neighborhood you like and are interested in setting roots there for the long haul. Find a house that you love that can be a forever home for your preferences.
Don't think of it as an investment to flip. Think of it as home. After the purchase, no need to ever look at the property value estimates again. Just live it.
Somehow you left out the whole part about actually buying the house.
Maybe your feel good spiel would make sense if price-to-rent ratios weren't the highest but that's not the case. Most of what you pay for here is a bet that values will go up. If it weren't for stupid laws like Prop 13 that only help land speculation this wouldn't be the case.
It doesn't even need to be someone who moved to the area who's grandfathered in to the cheap taxes: Families can share ownership of a property and retain it forever.
Property values go up over time. I initially paid $8k a year and now its $14K, which is actually about right for the market. I am protected from wild increases so that I don't have to move my kids out of a neighborhood and school they've grown up in.
I agree that scaling property taxes with their values is bad. Not sure why government expenses magically double when housing value do.
Look into land value tax. The goal of property tax is not just to fund collective expenses, but also to encourage the most valuable use of the land for the collective benefit (eg. let's not waste valuable inner Bay Area land on single family homes, but instead with more dense uses like four plexes).
Yes but there are places in the world where the house you buy when you're 30 isn't the one with your deathbed.
Ideally living people will move out and make room for the next generation when they no longer have use for 4 bedrooms in a good school district close to jobs.
Great. So to get that rolling, split roll obviously was a great first step, that unfortunately failed. But we should try again.
Beyond split roll, do you have ideas to 1) protect people that would be harmed by an immediate rollback of 13 and 2) build the political coalition to get it done?
1) these people hit a huge jackpot I don't care to "protect" them at all. We already have the CA tax postponment program for low income seniors anyway.
2) no. As long as California is a direct democracy the law will stay. Even Prop 15 failed so any chance of reform through the existing process is doomed. Justice Stevens echos this point here: https://www.law.cornell.edu/supct/html/90-1912.ZD.html I suppose that maybe with billions of lobbying and ad spend we could Prop 22 a repeal through but even then I doubt it.
The only way I see it happening is if the courts strike it down as unconstitutional. Equal protection is applied stronger on issues of race and Nordlinger v Hahn didn't address that. We now can see real data that Prop 13 systemically hurts minorities and I believe another challenge is warranted.
Edit: actually should have talked about "disparate impact" instead in that last part.
How is it fair that two houses built side by side in the same year with the same floorplan might have one pay literally 10x the property tax than the other, merely because it changed hands? What's worse, the 10x house actually realized those capital gains, so the state also got that cash.
Theoretically the house that changed hands, the new owners knew what they were signing up for and could verify their budget could handle the higher taxes. Whereas the original owners, whose home value has shot up significantly since purchase way back when, may not be able to pay for the new higher taxes if they were applied in full.
Simple, the people in the houses moved in at a different time. A house isn't just a thing you buy and sell. You live in the house, raise a family, become part of a community. My neighbor across the street bought her house 30 years ago. She's an artist and doesn't make much money. She is well known in the community. Should she be forced out of her house so that some rich tech worker can move in?
If want to cry unfair, then it would be better to aim at commercial real estate. That's a pure money business. Why should they get protection under prop 13? Make no sense at all.
So you feel the right solution is to give millionaires massive tax breaks and have middle class folks who can barely afford a house pick up the slack?
It is absurd and an anomaly. Let them stay, but when the reap a $1M+ profit on the house when they sell or die, they can pony up the tax, just like everyone else.
> So you feel the right solution is to give millionaires massive tax breaks and have middle class folks who can barely afford a house pick up the slack?
I did not say that so I don't mean that.
If a low/middle class person buy the house they can afford to pay and live in it, they don't become millionaires just because other people around them bought houses more expensively later. They're most likely still in the same career earning that same low/middle class income. They don't have any additional money to pay much higher property taxes, they are certainly not millionaires.
Tax them after sale, sure, if the property value is still high when they sell (it might not be).
Which is why you let people defer them, rather than just getting rid of them.
If they budgeted for a 200k house, that turned into a 2M house, they should be ecstatic when they sell it, the government takes the property taxes and they still get to keep more than 200k.
Don't you dare touch the holy commercial real estate that is luring in all those stupid techies who are driving up the value of my house. Oh god I hate techies, I made this neighborhood good for them, they are taking advantage of my hard work and now they dare to come here and settle down? Preposterous. Look at all the landlords kissing their asses by building expensive luxury apartments so they have a place to live in and driving up the price of housing. I bought this neighborhood without the techies and they should stay outside.
A tax on the market value of a house should go up when the market value increases.
This is double true when the value went up without any change to the structure. Structures depreciate, and become less valuable over time. When property values go up in California, it's almost entire land value that goes up. The value increase isn't from the labor of the land owner, it's just simple rentierism.
Land gets more valuable because of what one can access close to it: jobs, relationships, people, universities. All this value is socially created. This sort of wealth hoarding is hugely damaging to the economy, and all sorts of thinkers revered by people in the US have nothing but the worst possible words for it, from Adam Smith to Thomas Paine.
It is quite strange for the wealthiest members of a community to depend upon the less wealthy to fund a community, but that's what Prop 13 is all about. This situation, where the wealthy could buy their way out of taxation, is a lot of what led to the French Revolution.
You're right. Early adopters bought their way out of taxation, house appreciation made them wealthy. It's not that you start out wealthy, you get wealthy in the process and once you are wealthy you don't get taxed more. That's the effect he was describing.
I wouldn't phrase it that way because it's not what they did, even if decades down the road it turned out that way (it could well have gone the other way like it did for homeowners in Detroit years ago).
What they did was buy a home they could afford, based on monthly mortgage + taxes payments, which is the entirely reasonable and responsible thing to do.
Having the property tax balloon out of control and out of any conceivable affordable range due to actions of other people in the area, is hardly fair.
