Some people are very poor at remote. If too many are thus, it may end.
If taxes are as high as you claim, it would be more rational to argue that the high prices are indirectly caused by that tax, rather than prices being held down by taxes.
Several causes seems more likely for a change in inventory, or pricing.
An extremely high cost of housing and the consequently smaller than average living spaces, which people are spending more time in due to covid has probably led some people to re-evaluate their priorities. It has in less heated markets.
Increased possibilities of remote work even in tech companies traditionally against it, and as tech drives SF, this is going to affect a majority of people living there.
Expectations of recession due to one of 1) covid 2) some of the giants getting pushback from an administration that is fickle at best 3) new competition from non US companies in driving markets, eg TikTok 4) ... and more.
There are plenty of somewhat plausible reasons to get out of the highest priced housing market in the US, especially if you can't handle a significant downturn in prices.
You could argue taxes too, if the market prices were average, or below average, but in the current situation any economic sensitivity is caused by an overheated housing market, nothing else can even touch the force of a market as hot as the SF one.
However, if a market with 1/4 the inventory of NY increase its inventory, even when it's with about 100%, one really can't tell anything. It's the hottest of the hot markets that's cooled down a little, and it doesn't really tell anything yet, except that the market has changed somehow.
Source: moved to Austin in June.
Cities take note and start rolling our fiber as fast as you can.
So, yeah, i can't really imagine being angry that you're being asked to contribute back to the society. Especially when you make 250k.
Marginal rate for high earners includes: 37% federal. 13.3% state, plus FICA, social security, local taxes, etc. not to mention employer payroll tax and insurance premiums that are essentially passed on to employees but baked into tax in Europe).
Taxes are significantly higher in California than Europe for high earners (like the people leaving SF). There seems to be a major misconception about this even among Americans. Take France for example. Uses a simliar marginal rate system but caps out at 48%. https://taxsummaries.pwc.com/france/individual/taxes-on-pers...
- 37% federal requires $510k income (after $12k personal exemption and probably $20k retirement savings)
- 13.3% state in California requires $1M income
- Social security is included in FICA and does not count towards the marginal rate for high earners (you pay no social security tax on income above $137k)
- Local taxes?
- 37% federal requires $510k income (after $12k personal exemption and probably $20k retirement savings). YES BUT ITS 35% ABOVE $207k
- 13.3% state in California requires $1M income. YES BUT IT'S 9.3% ABOVE $57k, and 10.3% ABOVE $295k
- Social security is included in FICA and does not count towards the marginal rate for high earners (you pay no social security tax on income above $137k). THERE IS NO CAP ON THE EMPLOYEE PORTION MEDICARE TAX. PLUS NOT ALL OF THEM ARE IN FICA. THERE ARE BOTH FEDERAL (IN FICA) AND STATE INSURANCE TAXES IN CALIFORNIA FOR EXAMPLE.
- Local taxes? SF HAS A PAYROLL TAX OF 1.5% FOR EXAMPLE.
California effective tax rate: 36% France effective tax rate: 48%
Using a different calculator with $19000 into 401k and the California effective tax drops to 32%
https://us.icalculator.info/salary-calculator/california.htm... https://www.icalculator.info/france.html
401k is not tax free, it's tax deferred. You still pay tax, just when you cash out.
Personally, by far my largest tax is income tax (which is far lower in CA than France for my level of income). Everything else is basically meaningless in comparison.
"Healthcare" also isn't a particularly strong case for the scenario you're proposing. If you're making $250k, you've probably got pretty good employer sponsored health insurance. Personally I pay nothing for a fairly good plan with low deductibles and copays. Health insurance in the US sucks for the unemployed and for low-income workers, but it's not at all bad for high earners.
401k taxation is also much more nuanced than you're making it out to be: it's taxed on withdrawal, at the rate you're withdrawing it. If you're retired — which is when you'd withdraw — your other income is probably zero, so your 401k is taxed in a very low bracket since it's your only income, and you're only withdrawing as much as you need to spend — as opposed to income earlier in life, where you're trying to make much more than you spend in order to build up savings. So while it's not exactly tax-free, it's extremely low tax generally. Presumably any other money you're relying on at that point you'd structure as long-term capital gains, which are also taxed at a low rate.
The average home price in The Bay is $1.3M. Because of prop 13, most owners aren't paying tax on that much, but most renters are paying pretty close (most units are relatively new stock). This comes out to $23,400 a year in taxes per house/condo. SF median salary is $96k.
Obviously the average person making $96k ($67k after income taxes) isn't paying $23k in property tax, but I think it helps give an idea at how big of an expense this is to most renters...
The other difference is that as individual you almost get nothing for your taxes. Childcare, college education, health care, pensions, everything is private and something you or your employer has to pay.
In Europe paying taxes feels better since in many countries you actually lot of this stuff for free in an exchange from the taxes you pay.
"asked to contribute back to the society" is a generalization. how much should people be asked to give back? Similarly, even if a rate was fair, isn't it understandable that someone might prefer to pay less in taxes? We aren't talking about tax evasion, rather considering regional differences in taxation as part of the cost benefit analysis of moving. I imagine many in california share your beliefs and feel they are giving back a fair share of their labor. but it feels you are advocating for avoiding the conversation, or perhaps too quick to dismiss them as selfish, which seems to be less productive than understanding why others behave differently.
The point is that your basic needs are well being exceeded at even like 80k, at which point you’re already in the top 5-10%. It’s obnoxious and greedy to be concerned about such low amounts of money when you’re making $250k, in the top 1% and have so many more opportunities than other people.
It's obnoxious and a greedy for you to feel like you have some right to say what somebody else should do with their hard-earned money.
It's a simple problem of who has the strongest ability to contribute to pay for the things we all need to keep our society growing.
Bitching and moaning about having to pay $20k when you have 250k and are in the top 1% of wealth in society is unseemly.
Reread this comment and find why most of “regular” America hates the coasts and tech elites.
If you’re earning over $1,000,000 per year, yes.
SF median income is below 100K.
The 1.5% tax they're talking was the 1.5% payroll tax that SF had in place until 2012 [1]. Payroll tax isn't quite the same as an income tax because the onus isn't on the employee to figure it out like state and federal, but it still did cost most businesses in SF an extra 1.5% on every employee's salary to be there.
Prop E shifted most of this to a gross receipts tax instead (although there's still a 0.38% payroll expense tax in place [2]). Again, the numbers your parent is talking about are out of date, but the spirit of it is right in that it does just fundamentally cost a company quite a bit more to have an employee in SF.
---
[1] https://sftreasurer.org/business/taxes-fees/gross-receipts-t...
[2] https://sftreasurer.org/business/taxes-fees/payroll-expense-...
Lets say that property taxes were 1 million dollars a year, per apartment.
What do you think would happen? What I think would happen is that property owners would abandon their property/destroy it/remove it from the market, because they don't want to pay that 1 million dollars a year.
This would effect support of housing, meaning that price would go up.
Yes, rents are effected by supply and demand. And property taxes can have an effect on supply. This is clear, in our extreme example of 1 million dollars a year, per apartment.
On the other hand we do know what happens if the tax rate goes to zero, because there are many rental properties in San Francisco which are essentially untaxed. These properties have the same rents as any other, following the market price up and down. We can say with good empirical basis that halving and doubling the property tax rate has no effect on rents.
It helps us at least establish that property taxes effect supply.
If there is an additional cost for holding a certain supply, then this will discourage people from holding it.
For other examples, you can think about how it would discourage people from building new supply because that supply is less valuable, due to the additional costs of holding it.
> These properties have the same rents as any other
It is not about the effect on existing properties. Instead, this is about the effect that at tax has on the supply of housing.
Higher costs and higher taxes disincentives the ownership of, or creation of new supply.
> We can say with good empirical basis that halving and doubling the property tax rate has no effect on rents.
No. Because you are ignoring the effect that costs have on supply of housing. The higher that costs are, for both building housing, holding housing, or any other cost at all, means that owning that property is less valuable, and it means that less future housing is produced, due to higher costs.
But, in general, if there are not laws that put a maximum on housing supply in the area, THEN property taxes would effect supply, as the bottleneck to new housing is costs and profitability, and not laws.
The situation jeffbee is talking about sounds like one where property taxes constitute a small enough percentage of annual rental revenue that, even in cases where they're very high, they're not high enough to create a genuine squeeze on the landlord. Thus, demand sets the price.
In a hypothetical situation where property taxes rose high enough that the landlord was no longer making a profit, then yes, they would probably have to raise their rents. In such a situation, it is likely, but not certain, that property taxes would be rising by similar amounts for that landlord's competitors, so rents would simply go up (even more) across the board. If they didn't, and that landlord was just very unlucky, then they'd end up having to make some other kind of structural change to their real estate business or exit the market.
As a tenant would you pay 20% more for a similar property?
Caveat: the rental market isn’t optimized, there’s the application process, long rental terms, penalties, etc
Private capital will chase the best money making opportunities regardless. They will just avoid buying property if they don’t think they can make enough money on it. Property tax rates definitely play a role in that.
If you bought your house a decade ago it's going to be worth WAY more now than it is now. In a healthy market you might then either try to roll that extra equity into another place by either upsizing to get something that more fits your needs, or downsizing if that makes sense.
However, because of the property tax mechanisms if you move from a $1m house to another $1m house your property taxes will go up substantially even if it is a side grade. That means that you are less likely to move (in fact you may not be able to afford even a side grade depending on your circumstances).
This keeps housing inventory low, which keeps prices rising.
Thanks to Prop 13, many homeowners do pay quite tiny property taxes. But this turns out to be extremely nefarious because along with removing a fair tax base and liquidity from the market, it also means that the disproportionate burden for paying California property tax is placed on new home buyers, who are often younger people/young families.
New entrants are often paying incredible levels of property tax (as it's a percentage of the already highly inflated prices), and because they're disproportionately more likely to be working, they're also the ones paying state and federal tax, along with the miscellaneous municipal taxes which can also be quite high in cities like San Francisco.
Meanwhile, legacy owners make off like bandits. I looked up the property I rent in once, owned by a large real estate holder that's decades old, and it was assessed at a few hundred thousand — for a 5 unit building in central SF. I don't know what the actual value would be, but it'd be closer to a ballpark of $3 to $6M. A differential of ~20x, and this isn't uncommon.
It's this framework that gets you to "lowest in the nation". I tend to think about it as _both_ the highest and the lowest in the nation, largely determined based on when your family moved here.
I expect California to try some sort of remote worker tax soon to try and stop the bleeding. Best of luck to everyone out in search of greener pastures. Remember not to enact the same city policies that turned California into what it is today.
There are local politicians in NJ now talking about this. With so many commuters possibly not going back to an office there’s potentially a few billion in tax revenues at stake.
Most states have reciprocal deals with neighboring states so that you pay taxes where you live even if you work in the adjacent state. NY does not and for obvious reasons. California either and I’ve heard California will claim your owe taxes even if you move far away but the company only has an office in CA.
As reports of these states chasing down money that is arguably not theirs gets around it will be interesting to see if congress acts. Especially if CA’s wealth tax happens which they claim will tax any wealth over a threshold even after you’ve been out of state for years.