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I'm still absolutely furious that SF managed the boom times by handing over massive amounts of cash to landlords and property owners, by restricting construction, that came directly out of the pockets of workers and has resulted in massive displacement.

Sure, the tax revenue looked great, but it happened in a way that caused great human suffering by making occupancy in the city zero sum, and awarding it to only those who had the most money to pay. That's not how it had to be, and choosing a zero-sum economic system rather than positive sum was foolish, and only meant to appease those with conservative views on construction. And by basing tax revenues on the business cycle, SF is now at such great risk, with huge social spending needed to repair the damage it inflicted with this unnecessary zero-sum system.

Sadly, those who will be hurt the most by a potential downturn are not those who benefited by setting up a bad system. A downturn will help nearly no one, and cause great suffering. I feel a little sick in my stomach when I hear some hoping for a downturn, either as a chance for them to finally buy real estate, or as a chance for S.F. to be made great again by returning to some imagined past. Both of these are very unlikely, especially the second.

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Genuine question: How much of this caused Prop 13?

We bought a home in the Bay Area a few years ago. We considered the pros/cons of moving out of state and one pro of staying here was Prop 13 in California. We plan to retire in this home and figured Prop 13 will help make our post-retirement living expenses negligible.

I only recently had the realization that Prop 13 could cause some serious problems like cities being incentivized to encourage resident "turnover" because new residents would be subject to current level property taxes.

Another issue is cities having to rely more on sales taxes which discourages building residential housing and encourages building of commercial properties. Also when a recession hits then the cities are hit even harder because they aren't able to collect those sales taxes.

We found that Bay Area schools are begging for money constantly and theorized that very low property tax income is a big part of that too.

I mean... I like paying less but something about it feels wrong. Property taxes are a big source of income are they not?

Prop 13 is one of the legs of the stool of most dysfunction in California.

Some of these are gonna spark controversy but term limits, the recall and ease of passing propositions are some of the other ones.

The legislature is no longer professional enough to govern, so the people do it at the ballot box, at the behest of whom ever has the most money to spend. The fact that California is a single party state because of realignment and radicalization on the right makes all of this worse.

Per-student spending in most California counties is comparable to that of Alabama and Mississippi: https://flowingdata.com/2016/04/21/school-district-spending-...

Money can't fix everything but spending 33% below the median probably is a sign of underinvestment.

Particularly in a state where the cost of living is far above other states. I recently visited Wisconsin and felt about 2x as wealthy.

Whenever I go back to the Midwest to visit family, I always feel very wealthy given just how much cheaper everything is. Leave the coffee shop literally spending half as much and it’s like “holy cow this is great!”

Obviously, a person living in the area is usually making less so it’s all relative.

Less, yes - not that much less. You'll make 40% less in areas with a 50% lower COL

> Prop 13 is one of the legs of the stool of most dysfunction in California.

Are Prop 13 benefits for businesses still in place ?

That would be a good start - if the company is sold all its underlying California holdings get re- appraised

REIT's are a huge work around for Prop 13, the REIT can change hands dozens of times, but the underlying property is never sold.

Thats what I mean for companies too - the value of the land is part of the company or funds valuation

REITs are traded on the value of the underlying asset - unlike a homeowner that does not extract value from their property

Properties packaged in tradable shares should be re-appraised annually at least

Terms limits are a red herring. They punish good and bad candidates, and don't actually help the problems with the elected class: campaign funding and competitive districts/gerrymandering.

Wanna know what its a "single party state"? Because one of the major parties, up until Pete Wilson, acted like a real party, then became a caricature (the GOP had 40+ percent of the state and registrants for ages, which is how guys like Nixon, Reagan, Deukmajian, Schwartzenegger etc all got elected) but now comprise less than 25% of the state registered voters (although many are now independents with a center-right lean) and the GOP leadership in the state are utterly oblivious clowns who live in rural bubbles like the Northern areas that want to start a neo-fascist Confederate Idiocracy with Eastern Oregon and Southern Idaho, or urban derp-bubbles like West Orange County and Torrey Pines, who just want brown people to tend to their golf courses and think Ayn Rand is one hot bitch. The Democrats in California, a party with near zero internal coherence, and no real stability at all, win because the Koch-knobs and Trumpkins that "lead" the opposition are as inane and insane as they are.

> Terms limits are a red herring.

Yes and: Disempowering legislators empowers administrators and lobbyists. Power is zero sum.

I supported term limits until I saw first hand how agency heads run circles around legislators.

Now, I advocate making legislators more powerful, more independent, and therefore less dependent on lobbyists, contributors, and agencies.

Make legislating a real, full time job. More resources for staff, to help mitigate infoglut and provide real constituent services. Etc, etc.

> campaign funding and competitive districts/gerrymandering.

Absolutely. I advocate pretty much all the good government reforms. Public financing of campaigns, approval voting for executive positions, proportional representation for assemblies, restoring fairness doctrine, open government as default (eg something like data.gov for most everything). Etc, etc.

PS-

Lawrence Krubner's blog Demodexio is really good. Dives into nonobvious, nonsexy, common sense fundamental structural reforms for democracy, elections, and policy work.

So far, Krubner's advocacy matches my own experiences and observations. Here's just one great example:

Should the votes from voters combine on a per-issue basis, rather than a per-party or a per-candidate basis? [2022/05/13] Why did Kenneth Arrow think that Approval Voting would do a better job of bringing to the surface the real concerns of voters?

https://demodexio.substack.com/p/should-the-votes-from-voter...

> the GOP had 40+ percent of the state and registrants for ages, which is how guys like Nixon, Reagan, Deukmajian, Schwartzenegger etc all got elected

The last is really not true; Schwarzenegger was elected well after the California Republican Party had durably stopped trying to appeal to California voters in a way that could win statewide elections or legislative majorities and instead committed itself to appealing to the most extreme of the national Republican donor class. That's why they (and particularly Darryl Issa, who hoped to used it as a vehicle for his own election) funded the recall drive, aiming for an opportunity where they wouldn't actually need to get more votes than retention to win.

But once the recall was set, Schwarzenegger, who had basically no connection to the institutional Republican Party, swept in and blew away the establishment Republicans (leading to Darryl Issa’s literally tearful exit from the race that he has spent $1.7 million out of his own pocket to make happen).

> The Democrats in California, a party with near zero internal coherence, and no real stability at all, win because

Largely of the lack of internal ideological coherence and stability, making them able to run at least one candidate that fits the moment and district in any given election.

"Schwarzenegger was elected well after the California Republican Party had durably stopped trying to appeal to California voters"

No, but his tenure helped to foment their internal confusion about where to go. Arnold himself refused to play a party line game, and that in turn led to ever larger fissures between the national RNC and the State leadership.

Compare the quality of legislation passed before term limits to after (the last real structural reforms to state government were before term limits), I remember the difference. The current system encourages "make a name for yourself than move on to bigger and better things" and prevents the legislature acting as a base of political power - that gets in the way of long term thinking.

To the rest of your comment - I think big tent parties are good, but not ones that require ideological fealty the way current parties do, you can't build a durable majority with left social issues, a weird mashup or left wing and right wing economics and "progressive" requirement that everyone hew to proper "optics".

That's a recipe for never fixing any of the actual problems, with the added benefit of giving your base and activists plenty of ideological wars that can never be won.

> Compare the quality of legislation passed before term limits to after

After is generally better, at least than in an equal time period before, though I don't attribute it to term limits, which were a bad idea.

> the last real structural reforms to state government were before term limits

The last major structural reform to state government was when it was finally made modestly governable by the repeal of the supermajority budget requirement in 2010, 14 years after term limits applied to the Assembly (a little over two full turnovers forced by term limits), 12 years after they applied to the Senate (one full turnover and halfway through the next.)

The last major structural reforms of government administration (which may be more what you are thinking of, though of less practical effect) were a series under Schwarzenegger in 2005 (or so, not sure they all happened that year), still well after term limits.

What did Schwarzenegger reform?

He himself did not reform too much, but not for lack of tying. In the end one could easily argue that he helped mainline numerous ideas that had been previously flat out obstructed by the GOP: redistricting guidelines/gerrymandering (wanting to tae the districting process out of party hands altogether), environmental efforts (Global Warming Solutions Act), proposed marijuana legalization, opposed Bush IIs border fence initiatives..in a way he's very California: very immigrant, very Hollywood, very macho but a little hippy, weirdly contrarian and unapologetic about it.

He was not the most effective governor, but he also was not a destructive or fundamentally divisive one (yes he had soe hot points but I can't think of a single governor of this state who hasn't) and he certainly performed better than I thought he would.

Yeah, that was more or less my point. He was a decent governor, but he didn't fix (or really attempt to fix) the structural issues in Sacramento, I do think reasonably highly about him. Though I voted to retain Davis, Davis lost his office because of how bad he is at retail politics.

Prop 13 ensures that once you’ve bought in you feel no more pain from the housing crisis, and thus most Californian voters would have to vote against their own individual self-interest to do anything positive on housing, which just won’t happen. By contrast, in Texas there is no income tax but high property tax, and as prices have shot up recently most homeowners have reason to be worried about it and to vote to take action to increase supply to meet demand. It’ll be interesting to see if that actually happens, now that the theory is being put to the test.

I stand to benefit from Prop 13; yet I would vote against Prop 13 without a second thought. It is causing enormous and unjust human suffering. People vote against their self interest all the time, if you convince them that it is for the greater good.

Would voting against Prop 13 result in you having to sell your home/condo? I've wondered this myself and if I'm perfectly honest... I'm not so sure.

Voting against my self interest when all it does is affect my bank balance? No problem. But if it forces my kid to change neighborhoods (and therefore schools) while giving up a home I plan to retire in... that's harder.

It's hard to imagine a situation where property values rise would kick me out of my home, were Prop 13 repealed. If the home is going up massive in value, a 1-2% tax on the value of the home is dwarfed by the increase in property value. Refi or whatever to take care of it. The tax portion of a mortgage isn't that big anyway.

And if property values are rising so quickly that I even notice an increase in the property tax, then every single renter is completely screwed by comparison.

The only way that property value increases could cause somebody to lose their house is if they are completely financially incompetent, as far as I can see.

A system that requires self sacrifice isn’t ideal, especially in a heterogeneous society like the US where cohesiveness is lower than say … Japan.

Crafting the message, targeting the various groups, etc. Yes, there are folks like you who may do it, but convincing the majority is an uphill battle.

Prop 13 also stabilizes property tax revenues.

When housing drops 10% in a year, my property tax bill, like most people who bought a few years go, goes up 2%.

Yes, my property tax bill also goes up 2% when property value jump 10%. But, the cost of govt services didn't jump 10% that year, so why should property tax go up that much?

> Prop 13 also stabilizes property tax revenues.

Not really; yes, it reduces total volatitlity in property tax revenues asymmetrically, since tax assessments fall without restriction in downturns irrespective of turnover, but rise with a sharp limit in upturns outside of a limited set of qualifying events.

But stabilizing property tax revenues, even to the extent it is true, is made less relevant by the way Prop 13 cuts property taxes so low that it shifts the burden to other, more volatile, revenue streams. (While the assessment increase is what most people focus on with Prop 13, it also capped nominal property tax rates in California at a low rate.)

> Not really; yes, it reduces total volatitlity in property tax revenues asymmetrically, since tax assessments fall without restriction in downturns irrespective of turnover

The only tax assessments that fall during downturns are the folks who are underwater, that is, the recent purchases. The folks who aren't underwater get a 2% increase.

That's why, as I wrote, when there's a 20% downturn, most people still have a 2% increase, which keeps tax revenues from falling significantly. In other words, stable.

I write "most" because one of the key arguments of the "prop-13 is bad" folks are that most properties are paying too little tax because of when they were bought.

You can't have it both ways. If you make that argument, the arithmetic shows that prop 13 stabilizes property tax revenues during a downturn.

Low income seniors are covered by the California Tax Postponement Program. Most states have something similar. Prop 13 is wholly unnecessary.

I'm not following. Postponing those taxes doesn't mean they don't need to get paid. I quickly googled it and saw "The deferment of property taxes is secured by a lien against the property which must eventually be repaid."

Which sounds like a recipe for... grandpa dies, grandma can't pay property taxes so defers it for 10 years. Grandma dies and whoever inherits the home needs to be pay a massive deferment (unaffordable?) or give up the home.

Right. Seems reasonable no?

Not sure where this bizarre idea came about that people whose houses dramatically increase in value should:1) be able to avoid paying taxes on that value and 2) pass the house down, in whole, to their heirs without paying increased taxes.

The idea doesn't sound that bizarre to me. I'm not an expert or anything but as people grow older their earning potential slows down too. What if the neighborhood grows in value even though the retired homeowner hasn't made any changes to their home?

It sounds reasonable to me that a retiree with a conservative investment portfolio that is barely over/under inflation should be able to live out their remaining life in that home.

Yes that's the idea? They get to live out the rest of their years, and then their heirs pay the deferred taxes, selling the house if needed.

This is a bad situation if you want long-term neighborhood and cultural cohesion, though, because it encourages turnover (particularly among less affluent groups).

I mean if people can defer taxes until they die you’re not increasing turnover at all.

There's value to generational continuity, though--again, particularly for marginalized communities. One of the ways gentrification makes its way in is during these kinds of estate liquidations. I think it's reasonable to assert that there's value in not fracturing those communities any more than is necessary.

Marginalized communities that have seen home values skyrocket?

Honestly I have trouble summoning up much pity for people whose face a property tax burden because their homes have doubled or tripled in value.

> Marginalized communities that have seen home values skyrocket?

Illiquid property value isn't the same thing as having money, so...yes?

I mean, if you want every neighborhood in every urban area to be tech and finance bros, maybe this is a good idea, but most people would disagree with the premise you're pushing.

Property value isn’t illiquid.

It absolutely is illiquid if you do not want to destroy the composition of an area. It cannot be converted without doing damage to the community in which it exists.

When the market is tech and finance bros, all neighborhoods and all stock will become tech and finance bro'd. That's a bad thing for that community and--uh--society at large.

Yes, that's the point of postponing the taxes. The retiree can live out their remaining life in the home, and the taxes are due when their heirs inherit it.

Yea I guess that makes sense. Although inheritance is a change of ownership and the new owner would see the home re-assessed, no?

The other issue I see is that the deferment program is limited to very low income seniors (< $35k year or something like that). That's pretty low for a lot of places in the Bay Area which means not being able to go on road trips and do whatever it is seniors do in their twilight years.

https://en.wikipedia.org/wiki/1978_California_Proposition_13

"1986 Proposition 58

Proposition 58 allowed homeowners to transfer their principal residence to children without a property tax re-assessment, as well as the first $1 million (not indexed to inflation) in assessed value of other real property."

Of course if the homeowner has more than one child it could get messy

If someone buys my neighbor’s house for 2X what I paid for mine, why should I pay more in taxes ?

because property tax is based on the value of the property, and your property is worth more too?

a different way of phrasing the question: is it fair that your new neighbor pays twice as much as you to support city services, just because they bought their place more recently?

> is it fair that your new neighbor pays twice as much as you to support city services, just because they bought their place more recently?

My neighbor paying 2x what I paid has no effect on the cost of city services

Because your house is now more valuable and as a general rule progressive taxes are best where those with more money pay more tax.

My house going up or down in value doesn’t make me richer or poorer

I could see the point of your argument if I sell and make a profit - but before I do that my QOL within my house is not affected

Of course it means you’re richer.

Wealth = assets minus liabilities

Your house becoming more valuable doesn’t mean you have more money.

That's like saying "just because people buying TSLA shares at 2x what I paid for them doesn't mean I have more money."

Of course not, stock shares or real estate are not money. But they are wealth.

But note that when your wealth goes up because others have driven up the price of TSLA shares you are not taxed on that wealth gain. You are only taxed on the money you get when you sell the shares. If the price of TSLA shares goes to 2x and then later back to 1x before you sell the shares, and then you sell them, you have no gain and no tax.

It is generally considered to not be a good idea in tax theory to tax things that don't involve either money or things that are very easily converted to money, unless perhaps the tax is relatively small. For purposes of this discussion "money" means whatever the government will accept as a tax payment.

That's partly because you ideally want taxes that are meant just to raise revenue (as opposed to for example so-called "sin" taxes) to not cause much change in the activity or thing being taxed.

Unlike land within our borders, TSLA isn't finite in supply and something we need to directly compete with each other for.

Try to repeal it, you'll find yourself drummed out of politics.

I think someone who spent enough money could repeal it, and it'd help.

New Jersey, a famously high residential property tax state, has the senior "tax freeze" statue in many towns.

Just did a little research out of curiosity and it looks like they've been trying to kill it.

Homeowners trying to kill property taxes is like a law of physics

Death Tax!

There isn’t a red state that doesn’t wish they had Prop 13.

All of the extremely wealthy people I know are in favor of maaaive death taxes, of pretty much all wealth. However, none of these people inherited their money, and came from humble backgrounds, so my anecdata may not represent many of the wealthy.

Not to accuse them of being dishonest, but it also costs them nothing to say that, loudly and often, in a political environment where they know it's not going to happen.

These are private and personal discussions, ranging over many areas of politics where we disagree and agree. I have no reason to doubt them. Even with a massive tax eliminating inheritance, their children will lead charmed lives. They are more afraid of a dysfunctional family than their children suffering from material wants.

> to appease those with conservative views on construction

More like "enlightened views on wealth preservation." You can follow the incentives on this one. It's not that complicated.

Generally, it isn’t preserving wealth though. Being able to build more densely increases my property’s value.

But not it's value in its current state, it's as much about preserving the status quo.

I agree, but want to note: Landlords only vote once. Short of being extremely patronizing and presuming that the residents of SF are easy to bamboozle when they are paying very high prices to live there, it has to be recognized that there is a broad appeal to those who live there, including those who rent, to not change the housing regulations - because they do not want the growth. It would seem the housing shortage is a feature not a bug for the majority of residents. That might be selfish (and I certainly don't promote it here), but I do think it has been a societal choice rather than one of a few elites.

Unfortunately the residents of SF have been far too easy to bamboozle by demonizing developers, both real estate (the villain of so many movies) and software (blamed for rising rents and inequality in SF despite the long-standing inequality for financial services, etc.).

One of SF's big problems is the prevalence of culture war, vibes, and being hipper than thou overriding the economic interests of residents with less wealth.

My observation was that the people buying into that demonization don't do it because they are dumb, but because it serves their purposes.

I agree with your last sentence, but this works because that last group is a minority (even if barely), so the larger society votes against them. it only takes a small amount of poorer people who don't want growth for nostalgic / quality of city life reasons, and you have a pretty sizable majority coalition against change.

The culture war issues largely forces some weird alignments, its a weird mashup of left social issues, an even weirder mix of left wing and right wing economics and "progressive" requirements that everyone hew to proper "optics". (My gripe with the progressives is that saying the right thing often appears to be more important than doing the right thing.)

In the end, its simply a recipe for never fixing any of the actual problems, with the added benefit of giving your base and activists plenty of ideological wars that can never be won.

Yup, like the Sangiacomo family, a bunch of slumlords who own more real estate in SF than anyone else, and have done nothing of note to earn that position other than hoovering up real estate and sitting on it while rents skyrocketed: https://www.sfgate.com/bayarea/article/Angelo-Sangiacomo-one...

However, SF and California is largely run by a small handful of families who are "kingmakers." The Buells, Fishers, Guggenhimes, Gettys, Marcuses, Pritzkers, Swigs, and Trainas.

https://www.latimes.com/politics/la-pol-ca-gavin-newsom-san-...

Pritzkers also run the transgender industry in the US: all that expensive medicine and such.

For the amount of hate the providers of wealth got during the boom time, it’s only fitting that SF finally sees a downturn. It was quite literally asked for in many ways by many people.

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