Hacker News Reader

Comment by eganist | Hacker News Reader

> 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?

View on HN

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).

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?

It's a gradual change of possession over time, and each individual change of ownership is small to not trigger reassessment.

Yes [1].

[1]: https://journal.firsttuesday.us/change-the-law-close-prop-13....

Wouldn’t a change in control of the LLC trickle down to a change in ownership of the property and thus trigger a reassessment?

In a sane system yes

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.

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.

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.

It’s primary home to primary home only and only $1m worth is prevented from being reassessed. $2m homes (majority in the Bay Area) will end up with new $1m assessed and pay $12.5k / year. Median taxes across the US are more like $5k / year.

I'm not sure of the exact value of the median home in CA, but I think it may still be less than $1M (hopefully).

Whereas rent for that Bay Area home is how many thousands per year? Probably $60k-100k, and not subject to a 2% annual increase? $12.5k is an absolute steal.

Makes me think that we should have greater estate taxes. Maybe limit inheritance to 5x the median annual income in the area or something like that. Capitalism does not function well when wealth becomes a caste system.

> Here’s something to really blow your mind: After Prop 13 was passed, some subsequent Propositions made property tax rate inheritable.

This was mostly repealed a few years ago.

Reply on news.ycombinator.com