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Comment by burlesona | Hacker News Reader

One reason this is less of a problem in Texas is the high property tax rates (about 3% per year vs. 1% here in California). Combine that with no prop 13 and you have homeowners with mixed incentives — yes, equity appreciation is nice, but ouch the tax bill! Thus you have a lot of home owners who support keeping costs down via supply growth.

In Texas, taxes are heavily leavied against _wealth_ and _lifestyle_: high property tax, high sales tax (but none on staple goods and tax holidays for back to school etc.), and no income tax.

Conversely in CA, the tax structure makes it easy to shelter wealth (low property taxes AND they never increase), with moderate sales tax and high, almost flat income taxes (the brackets ramp quickly to 9.5% at $45k then are flat to $1m/yr).

Not surprising so many people are moving to Texas in search of an easier ladder to climb.

Having made the opposite move for a big tech job, the headwinds here against upward mobility are really striking.

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Texas is in some ways the egalitarian sort of place California pretends to be. I was talking to a cab driver in Austin who had immigrated from Morocco. He and his friends bought houses in the suburbs with pools in good school districts, which they were able to pay off in 15 years with a cab drivers’ salary. What really strikes me visiting there compared to the coastal cities is relative prosperity among ordinary people, especially the kind of people (immigrants, etc.) that people in the coastal cities like to talk a lot about. Texas also does a better job educating students from disadvantaged groups than California, despite spending less money on education: https://www.forbes.com/sites/chuckdevore/2015/06/30/which-of.... For math and science, Texas has some of the highest NAEP scores in the country for black and Hispanic students, while California has some of the worst.

The Texas Public Policy Foundation is one of the worst organizations you could cite. They're infamous for being just a front for Rick Perry's ambitions and as such are one of the groups directly responsible for the decreasing quality of Texas's higher education system. (Higher education in Texas is much worse than that of California.)

There's no denying that California has a problem with K-12 education due to Prop 13. But I grew up and was educated in Texas, and I can say the government of Texas has always been significantly more dysfunctional than the government of California. The "Texas Miracle" thing during GWB's campaign was obviously an attempt to take credit for the fact that the oil industry attracted the kind of people who care about education, not because of anything related to the government. In fact, attempting to recreate the "Texas Miracle" nationwide led to the disastrous No Child Left Behind law.

I more-likely-than-not won't end up having kids, but if I did, I would want them educated here, not in Texas. The government of Texas plays games with education to score political points in a way that the government of California does not. Besides, I question how sustainable Texas education is going to be without an income tax, and income tax is the third rail of Texas politics.

The data underlying the article is NAEP scores, which are widely respected as an objective measure of student performance. And California does awful on NAEP, and has for a long time.

As to where I’d want my kids educated—I’m thinking from the perspective of having come to this country as an immigrant. We were solidly middle class and moved to a pretty nice neighborhood in Virginia with decent schools, but there is no way we could have afforded it today. If I were in my dad’s position, I’d definitely head to Houston or Dallas rather than San Francisco or LA. Heck, when I bought my house in the DC area, I was apalled at the school situation. I didn’t want my kids to grow up in a place where a million dollar house is the buy-in for a going to a good school district. We ended up moving to a different city and just putting up with a long commute.

My dad lives in the Highland Park area of Dallas. He says people move there and pay their 20 or 30k a year in property taxes to go to a great school district as it's cheaper than a private school tuition. It sounds like the same thing. Of course that's just one example.

How much are the houses to pay $30K-$40K in property taxes? The wealthiest city in GA is Johns Creek with top rated schools and just looking at Zillow, a home valued at $460K has property taxes around $5000.

Seem to be a couple million and up.

Texas schools are insanely well funded. The high schools here are better equipped than my college back in California. They get a lot of endowments from private sources. It has nothing to do with the kind of garbage "No Child Left Behind" created. It's all just having enough money to do the job.

My public high school in California's Inland Empire was a lot like a training camp for prison. Learning how to survive while crowded with the violent and insane. Riots happened almost every other week. Just too many kids in too small a place, and no funding to handle the problems from so many poor and broken families. You can't put 3000 kids in a school for 1000 with funding for maybe 1500 and expect anything else.

Anecdotally, having talked to several ex-Texas-teachers, Texas sounds extremely hostile to primary education. Texas was a pioneer of the intense focus on high-stakes standardized tests and elimination of teacher autonomy.

Chuck DeVore is a partisan hack.

It’s hard to credit their anecdotal opinions over hard data. There is also quite a bit of tension between what students need, and what teachers want.

California is a particularly egregious example. It has some of the highest teacher pay in the country while having some of the lowest per-student spending in the country. That math balances on the backs of students. So teachers are happy with pay, and old homeowners are happy with their property taxes, and the students get the short end of the stick. It’s California in a microcosm.

I can second it, having gone through the Texas public education system. The standardized testing regime in Texas is completely counterproductive, and my teachers all hated it. Texas' silly education funding system that tied funding to (among other things) student attendance caused the schools to overtly encourage sick kids to show up and spread disease. The attempt by the Bush administration attempt to deploy Texas standards nationwide in the form of No Child Left Behind was a miserable failure. The legislature is constantly playing games with the schools (e.g. putting ambiguous language in the teaching standards to appease creationists [1]).

Texas has decent K-12 education in spite of everything the government does, not because of it.

[1]: https://www.statesman.com/NEWS/20170202/Texas-education-boar...

For anyone reading this site, the standardized testing regime in Texas is going to be a bureaucratic formality for the teachers and an afterthought for the students, where kids spend 2-4 days per year wasting time taking an easy test about stuff they already know, then dozing off for the rest of the time.

The sad reality is that Texas-style standardized tests measure basic material that students anywhere should be expected to know (take a look at the tests if you're not sure: this is not even the SAT we're dealing with). The primary purpose of them is to identify and remediate the many dysfunctional schools. If a school can't teach their kids this material and have 50% of them pass the test, they have a serious problem.

Thanks for sharing that, very interesting, not what I would have expected. What do you attribute the better outcomes in Texas to? The state has some education challenges I'm aware of, but I do't know about their successes. Texas seems to be pretty successful up to high school, but why don't they succeed for higher ed as well?

I'm always reading about attempts to put extreme conservatives on the state school board and restrict discussion of evolution and also avoid discussing uncomfortable issues around slavery and the founding of the country - that must not have had much impact. For housing, I kind of understand why Texas is much less expensive to live in, partly because they have those endless cities across the plains.

One thing is TX has the “Robin Hood” rule, which essentially is that rich school districts have to transfer money to the poor ones.

I think another thing is that there’s a lot of natural lived diversity. What I mean is, for example, my parents middle middle class neighborhood street looks like: black family, white family, Indian family, Hispanic family, European first generation family, just all in a row. And that’s pretty common. I think in part getting back to the housing thing, it’s within reach of most people.

As for the “extreme conservatives,” I don’t know. I think it’s one of those things that the media likes to pounce on and blows out of proportion. Yeah sometimes they do dumb stuff but generally speaking radically conservative proposals get floated by fringe political folks in red states just like radically liberal proposals get floated in blue states, then never goes anywhere. I think it’s more fodder for the news-tainment industry than actual policy making.

Texas for better or worse is extremely prideful that education is baked into their state constitution from very early on so I feel there is just more state identity tied to education at many levels compared to some of the surrounding states (article 7). While I agree with others that the current outcome is not really desirable and all of the other issues going on it is a top level part of the conversation where I feel like in surrounding states it easily become a B or C priority in discussions.

I agree with your point overall, but you say Texas has "high sales tax" and California has "moderate sales tax", but Texas' sales tax rate is 6.25% and California is 7.25%. Comparing rates with local additions, Los Angeles is 9.5%, San Francisco is 8.5%, Dallas/Houston/Auston is 8.25%,

I thought the base state tax in CA was 6%, but actually you’re right anyway. The total rates are pretty similar. Mental error on my part.

Ref: https://www.avalara.com/taxrates/en/state-rates/california/c...

San Jose is 9.25%.

"Having made the opposite move for a big tech job, the headwinds here against upward mobility are really striking."

CA (at least the Bay Area) incentivizes a very different sort of upward mobility: striking it rich through owning equity in a business doing fundamental innovation in its area.

If you're hoping to steadily build wealth by working for a big tech company, staying in CA long-term, and saving your money, you're playing the wrong game. (And I say this as someone who came to CA to work at a big tech company, has been here a decade, and married a local.) There are three basic paths to wealth in Silicon Valley:

1. Found a company outside of the valley. Do all the initial work in a low-CoL area, get customers and traction there, and then move to Silicon Valley for fundraising and scaling. Enjoy your equity appreciation, and cash out a billionaire.

2. Move here in your 20s. Get on a rocketship - a company that is likely to go public in the next 5 years. Stick it out for 5-ish years, enjoy your equity appreciation, and cash out a millionaire. Move to some other low-CoL area to buy a house and retire.

3. Get a time machine. Buy a house 15 years ago. Enjoy your equity appreciation as successive waves of #1 and #2 bid up housing prices. Cash out now, and move to some other low-CoL area to retire.

If you're moving here hoping to work for one company the rest of your life, save up, and eventually own a home, you're in for a rude shock. Most of the housing stock is taken up by #3, and #1 and #2 will be able to bid up the rest far higher than any ordinary worker can afford without using a perilously high proportion of their salary. If there's a market downturn or shift in the tech industry, you get laid off, your employer's stock takes a hit, and you're screwed because many lenders count stock compensation as part of your income for deciding how much mortgage to give you. And housing prices in Silicon Valley are heavily correlated to the fortunes of the tech industry, so if there's ever a permanent downturn, this place will be the next Detroit.

> If you're hoping to steadily build wealth by working for a big tech company, staying in CA long-term, and saving your money, you're playing the wrong game.

Eh, I really thing big tech is a feasible means to building wealth. Just don't confuse 'publicly traded' for 'big tech.' I understand the source of emotional pessimism, but wages for big tech seem to start around 200k, and increase annually with RSU refreshers.

It is entirely feasible to save away 100k a year in that scenario. Invested prudently, that'll compound up well with a far lower risk than the startup equity lottery, and is far more liquid. You don't even have to invest in real estate, if you're happy renting, and the current tax situation makes home ownership marginally less appealing.

I know - I worked for Big Tech for 5.5 years. I was making a lot more than $200K/year at the end of it, and saving more than $100K/year.

The problem is that so is everyone else - or maybe not "everyone", but a significant enough fraction of the Bay Area to have a measurable impact on prices. So while I saved up a whole lot, most of it will get eaten up if we choose to buy a house in the area. The competition among homebuyers isn't your average middle-class professional, it's couples where both of them work at FAANG companies, making over half a million combined a year. When all buyers have the same means, prices rise to match, and you get inflation, you don't get wealth creation. The only way to get wealth creation is to build more wealth (in this case housing, but it also refers to other social services like childcare, healthcare, transportation infrastructure, etc.).

Right now, we're doing standard-of-living arbitrage: we live like people who don't (and didn't) work in tech, rent an apartment, and bank the rest, which gives me time to work on my startup idea (going for #1) and my wife a decent cushion to advance her career. That only works until what's left of the middle-class is entirely priced out of Silicon Valley, though. While immigrants and service workers can still find apartments, rents will remain priced at what they can afford, but if the housing crunch becomes severe enough that all of them move over the hill to Pleasanton or Davis (which is already happening to a lot of them), rents will jump to the maximum that a tech salary can afford.

California loves taxing HENRYs (High Earning Not Rich Yet)

One point for clarification: It's 1% at the state level, however, depending on which county you live in there's plenty of other local taxes (School districts etc.) that end up nudging it to ~1.8% (SF and Oakland). Add "Special Assessments" which aren't %-based and it's even more. So "1%" is a bit misleading.

Unincorporated areas end up being a little less at around 1.3%, in the Bay Area at least.

Add state income tax + sales tax (9.75% where I am!) and California is a hilariously expensive state to live in.

I just checked my tax bill. I live in Cupertino, one of the highest cost areas in the state, and even including all special assessments and fees, my bill is 1.34%. But here's the problem: It's 1.34% of my base rate. I've lived here for 10 years. Using Zillow as a guide, my real tax rate is 0.56% thanks to Prop 13.

My neighbor, who has owned their house for 35+ years, is paying 0.08% on a house worth just slightly less than mine. And more than 1/2 of that is special assessments.

That's the problem with California property tax. We are all totally disincentivized to move or the encourage a drop in our property values, since eventually we want to sell it for top dollar and retire out of state.

In Washington, no income tax, there are 12 billionaires. Of course, there are constant calls for a state income tax to squeeze them. But I bet Washington wouldn't be home to Amazon and Microsoft if there was a state income tax.

Sure they would. The microsoft founders (as in Bill Gates and Paul Allen) gave significant funding and public support towards the capital gains tax initiative here.

Allen isn't one of the 12. He has passed away. That leaves one out of 12. (BTW, in their efforts to pass a capital gains tax in Washington, the proponents argue it isn't an income tax. I don't agree with that, but there it is.)

Well I was thinking of the ones that mattered. Gates is still alive of course. Mickeysoft was really founded in New Mexico but moved to Seattle because they were both from here.

> (low property taxes AND they never increase)

Under Prop 13, property taxes go up 2% every year.

Sure, that doesn't quite keep up with appreciation in boom years, but not the same as "never increase".

I wish my tax burden was capped under inflation.

A 2% nominal increase every year is a decrease every year in real terms. Annual inflation has averaged above 2% every decade since the 30s, often far above 2%[1].

[1] https://inflationdata.com/Inflation/Inflation_Rate/Long_Term...

Washington also has no income tax, high sales tax, but lots property tax. How does that fit your argument?

Structurally WA has many of the same benefits. It’s not a perfect comparison though because Seattle is struggling with fierce nimbys against a tech boom, and also tax rates are around 1% like in CA.

Note that Austin has some of the same issues with housing prices surging due to nimbys. The biggest difference is that outside the city proper there’s a lot of land and a lot of suburbs that are thrilled to have Austin aggressively push the growth “out,” and also it was a much smaller city to begin with so this is the first ring of suburbs we’re taking about, not a second or third ring as you’ll find in bigger cities.

My main argument is just that property tax is a more effective wealth tax and lends itself towards a more progressive overall tax system.

Nah. The reason it's 1percent is the median home price is over .5million. not the same in Texas.

No, the property tax is not low in CA. What you pay is tax_rate*assesed_value. Because value is high what you actually pay is huge amount of money on what is considered a very modest house in other places

But if you bought your $2 million house for $200k a few decades ago, you're still paying taxes on it like it's $200k (plus some tiny increases that fall well below inflation). Thanks Prop 13!

yes, thanks to the prop 13 a teacher or retired couple are able to keep the house the’ve lived in for a huge part of their lives. And even with prop 13 the taxes are increasing every year (by~2% I think)

Texas also has a law about that for retired people. But they only defer the taxes until death.

Anyone who buys property now subsidizes (through higher property taxes) EVERYONE who bought properties in the past. Some of those previous owners might be teachers or retired couples. But many other are movie stars and tech millionaires or billionaires.

New home owners in California are subsidizing everyone else who bought property in the past. It creates a disincentive to sell as people want to be locked in to below market rates. It might help some people that we hope to help, but it also helps lots of people who should be paying their fair share that they're instead pushing off to new home buyers.

You're drawing a disproportionately weighted link between high property values and the low taxes of past property owners, it's just not there.

This is a problem in the especially desirable pockets of California, and people don't want to give up a good thing once they've got it, especially when it's increasingly scarce due to the low rates of residential development.

You wouldn't have fixed the housing shortage by raising taxes, you'd just have accelerated the concentration of wealth displacing people who luckily got to live out their lives in a place they could no longer really afford to compete in.

It would still be exorbitantly expensive IMHO.

It would be expensive but the tax burden would be fair if based on your property value. Now it’s more based on how long you’ve owned it, which is just the people who got there first stealing from those who happened to come later. Whatever happened to equal opportunity?

Prop 13 is essentially the old stealing from the young. It’s disgusting.

like social security and medicare?

prop 13 is worse. Social security and Medicare have gotten to where we have obvious structural problems we need to resolve long term, but they at least were founded in hopes of fairness. Prop 13 was theft generational theft from day 1.

Fascinating how the attitude shifts to/away from it being good to force out old residents depending on the emotions around the topic

That's completely disingenuous, and deceptive. What does Prop 13 have to do with keeping at-risk people in their homes?

That's not what Prop 13 is about, it treats golf courses and property speculation the same as people on disability or pensions. It treats vacation homes and investment property the same way.

If it was about keeping at-risk people in their homes, there would be some mention of that. If it were about that, Prop 13's effect would be mostly to keep at-risk people in their homes. But the majority of what Prop 13 does is reward the super wealthy and jack up the incentives for speculation on real estate. Compare the tax incentives handed out to the wealthy compared to those tax incentives given to those in need, is there any chance that Prop 13 is meant for those at need?

Be honest here, does a Howard Jarvis tax bill sound like something aiming at helping those in need, or is the "help" just a cover for a scheme to hugely increase wealth inequality, and force larger tax burdens away from the wealthy to the less wealthy?

So don't give us those false accusations that wanting to fix the horribleness of Prop 13 means wanting to kick people out of their homes, those two concepts are not connected.

It's not very bad to force old residents out and pay them hundreds of thousands of dollars for it.

Right. It's hard to argue that new home buyers should subsidize people who bought properties decades ago and have made hundreds of thousands of dollars on the appreciation.

Why should taxes be disproportionally higher for new buyers and housing options more limited for everyone else? Not everyone in the world can live in California, and I'm not convinced that living there decades ago entitles you to live there forever if you can't afford the current prices. As a society we've decided to allocate scarce resources by price. If someone bought property in California decades ago and can't afford to pay their fair share of taxes on that property now, they can sell it at a huge increase in price and can afford to buy a luxury property in most other areas of the country.

Does that loophole still exist where you can transfer the property to an LLC and then sell the LLC without triggering a tax assessment?

Can't think of any other way we'd still have golf courses in city centers

Yes, that loophole still exists.

And then we hear the sob story of how their own children can’t buy a house nearby and have to move far far away. Can’t have it both ways.

My theory is that this will remain the status quo in CA until the last of the baby boomers is finally eradicated. Only then can the political will to make real change be strong enough to succeed.

I hope so, but everyone I know who is under 40 and owns property also loves Prop 13.

IIRC from these conversations in the past, Texas solves this problem by allowing delinquent property taxes to accrue as a lien against the property rather than seizing/evicting the owner. Seniors and those on low incomes can continue to live in their houses without paying full property taxes, but they can’t sell it or leave it to their heirs without settling up first.

This seems like a better way to address the problem without creating the havoc that prop 13 has in the CA housing market.

Tax income instead of wealth so much, then you don't need such high property taxes.

No. That's still regressive.

You have to try hard to make a regressive income tax. And, by “try hard,” I mean literally impose higher rates on lower income earners. That would never fly politically anywhere.

Isn't that what has effectively happened given the massive cost of living increases in CA? 100-150k income only affords a middle class lifestyle in many areas, yet the tax brackets did not necessarily keep up with the times. If costs of living had instead gone down, you can bet that the state would have at least tried to make adjustments in their favor if they could get away with it (likely so given the long history of tax increases).

Exactly, sheltered wealth for the rich! :)

That is true is some cases, but not for everyone.

I’m not sure what about 1% being a third of 3% isn’t self-evident...

In Texas a “typical” house for about $350k would come with an annual tax bill of $10,500. And it goes up if housing gets more expensive.

Around me in SF an entry level home at $1M would have a tax bill of $10,000. But it’s locked forever.

The same bill for a property 3x more valuable... it makes an enormous difference in the monthly payment which also has a meaningful impact on the ability for prices to shoot up in the first place.

> Around me in SF an entry level home at $1M would have a tax bill of $10,000. But it’s locked forever.

Property tax in CA goes up 2% every year. So,

year 0: $10,000 year 1: $10,200 year 2: $10,404

And so on... maybe it doesn't go up as fast as you'd like (until you own a place) but it is by no means locked in.

That's less than inflation! It doesn't count as going up.

(It will peak over inflation in some years, but it's still effectively a freeze. Even a modest property appreciation like 50% will stay out of reach of an annual 2%-minus-inflation effectively forever.)

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