We're talking about millionaires, not vulnerable victims.
Millions of them are also retired or on SS and if they had to pay market value property taxes they would be not be able to. Take a huge profit and leave, for where? You've lived somewhere most of your life and should be kicked to Stockton?
For some reason I hear Tom Selleck's voice talking about reverse mortgages. There's a winner for public policy.
1. Move
2. Take out a loan
3. Take in a boarder
4. Refuse to pay and know they will not be evicted for their lien (this could be codified statewide if this were the real problem)
I don't know why anyone would think that poorer, less-established people should be paying for these millionaires to stay there.
I don’t know why anyone would think that they are.
I guess they can all move to trailer parks in the Mojave and make way for the real millionaires.
She will die soon enough. You can wait.
Better yet, you can do what she did many decades ago. Get a house built on undesirable land, then be part of a community that makes the value go up. The home you now covet is only valuable because of people like her. Nothing stops you from doing likewise. Pick some crummy land out in Mississippi or West Virginia and create a community.
We can roll-back prop 13 going forward for properties purchased some buffer of time after the new law goes into effect, without harming your grandma.
Why don’t you go somewhere where prices are cheaper and make a nice community there?
If her property taxes aren't artificially constrained by prop 13, she'll see her taxes go up over time, and decide how much she values staying in the house and paying the increasing taxes, versus retiring sooner or investing her resources in other areas of her life. The market at work.
Also, ideally we wouldn't simply remove prop 13, but replace it with a better, progressive-not-regressive tax code, eg. allowing homeowners of limited means to defer portions of their property taxes until the sale of their property. This would make it easy for grandma to stay put, and be vastly more fair and healthy for society than the status quo.
> Why don’t you go somewhere where prices are cheaper and make a nice community there?
Would you rephrase this in a kinder way please?
Incentivize usually means offering something to someone to make something attractive.
That is not what you are proposing. You are proposing to take away her money by force until she can’t afford to live there.
> If her property taxes aren't artificially constrained by prop 13
Taxes that rise based on a tax inspector estimating the value of an unsold property are at least as artificial as taxing based on transactions. There is nothing ‘natural’ about property taxes. It’s a system constructed and imposed by the local government.
> she'll see her taxes go up over time
Yes, through no fault of her own, if and only if other people continue to drive up prices.
> and decide how much she values staying in the house and paying the increasing taxes
Agreed. If other people drive up the price, they’ll be able to force her out of her home.
> Society benefits from incentivizing her to move, so that more humans can occupy the space she is currently occupying, which will improve regional productivity, reduce highway and transit overcrowding, reduce greenhouse gas emissions, all sorts of good stuff.
A kinder way would be - why force grandma to move, when not doing so would bring all of these benefits to areas which need them more, and frankly, have better incentives in the form of currently lower costs?
I don't see why (2) or (4) would affect her lifestyle much.
> Better yet, you can do what she did many decades ago. Get a house built on undesirable land, then be part of a community that makes the value go up. The home you now covet is only valuable because of people like her. Nothing stops you from doing likewise. Pick some crummy land out in Mississippi or West Virginia and create a community.
I don't follow any of this. I don't understand why this viewpoint would mean it makes sense that people who have made tons of money should contribute less of it to their societies.
Winning by taking from others ain't the goal. When new people arrive, they should be getting the same deal from the government you are, not getting hosed because they're less established.
(Obviously your prescience is rewarded: you made tons of money on your house.)
But that’s just it - they do get the same deal.
Everyone pays the same percentage of what their house cost when they buy it.
Grandma got the same deal you do.
If you buy a house now, it too will be worth more if you wait 30 years.
You just have to wait as long as grandma did. That is literally the same deal.
> If you buy a house now, it too will be worth more if you wait 30 years.
It might be. Or I might have bought it in Redding or Vicksburg and pay tax on the market value, same as my neighbors who buy today. Prop 13 only kicks in meaningfully for people who basically won the lottery, in proportion to their gains.
To do that, it distorts the market, adding friction to what is already a market with unhealthily-high friction.
Grandma already paid her taxes and now you want to force her out of her home.
Have properties in Redding or Vicksburg not appreciated in the last 30 years?
> Prop 13 only kicks in meaningfully for people who basically won the lottery
You keep saying ‘won the lottery’, when what you mean is they bought a property in a place where properties appreciated in value.
That just sounds like a good investment decision.
Basically, for residential properties, keep the existing Prop 13 tax increase logic, but apply the difference in taxes between the Prop 13 rate and the real rate as a lien against the property, to be paid when it changes hands.
That preserves the (utterly unfounded) objection of "throwing out grandma on the street", while still recouping unpaid tax. There are some complexities with the lien happening for a very long time, like that happens when the lien matches the property value, but as long the lien is strictly called in, they should be minor.
As it is today, young families are the ones buying in far out places like Tracy, Stockton, etc., and they still might pay higher property taxes than a retiree in the heart of the Bay Area. It seems backwards to me to have an incentive structure that keeps the labor force farther from work than retirees.
That is a problem that we don’t have to solve by destroying communities through eviction.
We can build workplaces where property is affordable, and those communities can develop into attractive places to live, and their property prices will rise too.
It seems like a weird non-goal to try to create a society where there are only a few places where there is work and amenities.
The natural response to one place becoming too expensive is to invest in making more places where people can live and work.
Trying to tax people out of homes because someone else wants them just means underinvestment in other communities.
There are multiple ways to destroy a community. Apparently, one way is to artificially cap tax on long-time residents until only old people are left.
[1] https://www.mercurynews.com/2020/09/14/cupertino-district-pl...
That is due to wage stagnation, not prop 13.
> Median household income (in 2019 dollars), 2015-2019
> Cupertino: $171,917 [1]
> USA: $62,843 [2]
[1] https://www.census.gov/quickfacts/fact/table/cupertinocityca...
[2] https://www.census.gov/quickfacts/fact/table/US/INC110219#IN...
It’s because wages haven’t grown in line with investment returns over time.
This is not controversial, and is nothing to do with Prop 13 or whether Cupertino has a higher average income than other US cities.
I am convinced that California is hell on earth. It's designed to maximize human suffering and when you tell Californians how to get rid of the heat they tell you that they like it this way and actually would like it even more if it was hotter.
"Beat it grandpa; young people want to live here now..."
Also, no, they wouldn't have to move to Stockton, they wouldn't have to leave their home town. Sell your house for $2M, buy two condos, for $1M million each, move into one of them, rent out the other, and you're set for life, and you will still have your original $2M to pass to your grandchildren after you die. Or you can invest your $2M in ETF, and live in the rented condo, cashing $100k of capital gains profits every year.
For someone with $2M (or 1.5M, or even 1M) net worth possibilities are endless and living off of taxpayers money shouldn't be one of them.
Does this apply to all people who have $2M regardless of whether it’s invested in a house?
> For someone with $2M (or 1.5M, or even 1M) net worth possibilities are endless and living off of taxpayers money shouldn't be one of them.
It isn’t one of them.
Just allow a homeowner to defer taxes until sale or death. When the house is eventually sold the city can get back their $800,000 in back taxes, with interest.
That’s what my Canadian province does.
And the govt already provides healthcare for retirees. It’s called Medicare.
And how can the govt afford to provide healthcare and such when people sitting on assets with million dollar appreciation don’t pay any tax on it?
Is supposed to be some joke? You know, if people knew they were going to get knocked out by property taxes they would have a strong incentive to prevent that from happening by simply building enough housing for themselves.
Like rent control, this is indiscriminate welfare. Qualified welfare reaches the people who need it the most.
It is not aimed at people who have made lots of money.
The people who are actually receiving the value of the benefit for prop 13 are those who have made lots of money on their house -- the more money they've made, the more benefit they get.
All property taxes are always a transfer from property owners to everyone else. Prop 13 or no Prop 13 this is true.
So then when we’re talking about Prop 13, we are talking about a putative transfer only between property owners - long-standing vs recent.
When I say that it’s also not a transfer, what I mean is that anyone who holds property will end up with the same relative gain over time.
This of course assumes that prices continue to rise.
If they don’t then these schemes to tax people on unrealized gains fail too.
Taking a loan against an inflated asset and using it to pay cash, is a good way to risk bankruptcy if prices go down.
Not to mention exposing them to leverage if rates rise.
That’s not how property taxes work. You pay them whether you make money on the house or not.
You only make money on a house when you sell it.
> We're talking about millionaires, not vulnerable victims.
This makes no sense.
Buying or owning a house doesn’t make you a millionaire. Most people take out large loans to do so, and generally their net worth goes down at the point when they do so because of the costs.
Purchase prices may go up, but they also go down when the economy weakens.
They're actually welcome to stay and have a lien on their house: if you're living there you aren't going to have it taken away for a property tax lien. (If they will where you are, they can fix that in the same bill that repeals property tax distortions.)
> Buying or owning a house doesn’t make you a millionaire.
I'm focusing on the millions of houses in California that have went up in value by huge amounts since the last market snapshot for the tax basis whose owners are millionaires.
I don't know if that is true for CA, but in some localities, you most certainly will, eventually, be evicted from your own property for a property tax lien. It will take quite some time for the court case to wind its way to completion, but eventually the Sheriff will show up one day with an eviction notice and forcibly remove you from the property.
Value is determined by what the market actually pays, not by someone’s model of what it would pay. That isn’t the value - that is an estimate of what someone would receive if and only if they sell at that moment. Contesting an estimate doesn’t change that.
Whenever prices fall, do you propose paying cash to homeowners to reimburse them for all of the overpaid taxes?
Forcing someone to take a loan on a volatile asset that they can’t sell without losing their home is a brutal policy.
> I'm focusing on the millions of houses in California that have went up in value by huge amounts since the last market snapshot for the tax basis whose owners are millionaires.
Ok - so you just don’t care how many other people get hurt or displaced as long as you get to take money from some millionaires?
> That’s not how property taxes work. You pay them whether you make money on the house or not.
> You only make money on a house when you sell it.
You are correct in that you do not (yet) have cash in hand from the value increase of the property. So if one defines "make money" as "have cash in hand", no money is made until one sells the property.
But, what one does have in this situation is an unrealized capital gain. And if one defines "make money" to include unrealized capital gains, then the homeowner has "made money" -- they just do not yet have cash in hand.
Unrealized is the operative word here. It means not achieved or created.
An unrealized capital gain can become an unrealized loss. That’s because it’s not a real gain.
Leveraging unrealized gains through loans is universally recognized as a risky investment strategy.
This policy would force people to take on this risk.
Which is exactly the point I’m making.
Homeowners shouldn’t be forced to take on risky financial instruments that are tied to the performance of local businesses.
That's not true. You have only made money on the house when you sell it. Should we force people to sell their own houses because other people have more money than them?
I don't think "if you have enough money you can push others out" is great policy.