And don’t forget prop 13, there’s negative incentive for property to change hands and develop.
Or do we think that property taxes would go up while other taxes stay put?
This feels like the argument at play when people criticize Prop 13. Not saying it’s good but California hasn’t ever cut taxes meaningfully and I’m not convinced raising property taxes would solve anything. California would still be expensive to live in.
The housing market would become more liquid because people would move out of homes if their values rose too much and they could no longer afford the taxes. This would be a shock initially, but over time it would just be seen as part of life like it is in other areas: mostly, empty nesters would downsize to a cheaper, smaller house with lower taxes. Gentrification might be more problematic though.
In practice, probably some phased rebalancing would have to happen to avoid the sudden economic shock, but, politics notwithstanding, it’s not crazy to suggest it could be done and that the end state might be overall ‘better’ for most people. The end state would be how property taxes work almost everywhere else.
That's what I'm saying _won't_ happen. The high property taxes as-is will stay high and previously protected properties will have their taxes shoot up. That is my prediction and nothing about the state of California, or the US broadly, suggests otherwise to me.
People would move more instead of being locked in to a low effective property tax.
The tax burden would be much fairer: instead of the police and schools being funded by newcomers, everyone would be contributing their fair share to fund the city, instead of the longest tenure residents mooching off the rest of us.
Unproductive use of land would be discouraged. If a tract became highly desirable, it would be expensive to let it sit in an unproductive form
Cities could raise taxes as high as their residents wanted them to be, instead of being limited by the opinions of non-residents. Some people want to have better funded police and schools, and local government would actually be allowed to deliver that. Citizens who didnt want to live in expensive cities could vote with their feet to cheaper towns.
https://www.ocassessor.gov/tax-saving-programs/savings-senio...
The bad part about prop 13, is that it never should have applied to anything other than primary residences of people. Having it apply to rental & commercial properties is what warps the market.
Cities should be cutting their police budgets - most small towns have nearly 50% of the budgets tied up in police. All while there has been a multi-decade decrease in crime.
My money is on the latter. Nobody is getting a tax cut if Prop 13 is repealed. Everybody's taxes will just continue to go up.
On a 1.5M house, that's starting at 17K a year and each year it goes up 2%, so it compounds.
That's 17k a year Just to stay in your own home.
People who don't pay property taxes here in ca, act like prop 13 means zero property taxes
You can argue against property taxes entirely, but Prop 13 definitely means that families, businesses, and all property owners work very hard to never sell, never reassess, and never change their tax rate.
This would eliminate the tax break for commercial property, prevent it from being abused for second homes, and avoid the property trust shenanigans that have allowed some properties to change hands without a reset in the taxes paid.
The main selling point of prop13 was a real problem: rapidly increasing values were driving up taxes so fast that long time residents (of modest means) were being forced out.
I don’t think it’s entirely unreasonable to have some policy that attempts to protect people living in their primary residence from rapid tax increases they can’t afford.
And the state did slash spending in the years following. In particular funding for the university system was hit very hard.
As it turns out, even your new goal posts fail the test of facts. In the years immediately following prop 13, the GDP grew at an APR < 15% [1] while the budget grew and an APR > 15% [2]. The per capita spending did slump briefly in the early 1980s (as shown in the graph on this article[3]) but that was more of a reversion-to-the-trend (which continued upwards thereafter.
While there may be some remaining tortured reading of the data under which you could claim they "slashed spending" it would be manifestly disingenuous to do so. At best the rate of increase slowed briefly.
[1] https://files.ceqanet.lci.ca.gov/276991-2/attachment/cSe45La...
[2] https://sbud.senate.ca.gov/sites/sbud.senate.ca.gov/files/Ca...
[3] https://www.mercurynews.com/2023/12/24/whats-behind-californ...
Let people defer increases until their house is sold. This what many states do.
It’s seems insane that we “protect” people whose property taxes are going up because their home is getting so valuable
The point of Prop 13 is to let people have their cake and eat it too: you get to keep the equity you gain from increased housing prices, but not pay the property tax that comes with them.
The approach in Washington works well. There is a senior property tax exemption based on age and disposable income. To qualify in King County (where Seattle is) in 2027 you need to be 61+ and have a household disposable income under $101k.
That gets you (1) a freeze on the assessed value for taxes equal to the current assessed value, and (2) an exemption from the statewide school tax and from "excess levies" (basically city and county levies that are voted on).
If income is under between $76k and $89k they also exclude from tax 45% of your assessed value or $70k, whichever is larger, but not more than $200k.
If income is below $76k they exclude 80% of your assessed value or $80k, which is larger.
The income levels are based on median county household income so vary from county to county.
Disposable income is basically everything that goes into AGI plus a list of other things (like any Social Security that is not already in AGI). There are also a bunch of deductions, mostly medical including Medicare premiums, with a $7500 deduction you can elect to take instead of taking any of those specific deduction. Income includes all adults living in the house.
In my county the levies that are not "excess levies" are county roads, sheriff, conservation, mental health, veterans relief, fire district stuff, public utility district stuff, and regional library. The "excess levies" are a couple of school district levies. Overall the excess levies are about 28% of the property taxes in my county. The statewide school levy that is exempt is another 10%, so the bottom line is that the property tax rate for seniors under the income limit is about 60% of the non-senior rate.
Your property tax goes up by 2% of your , guessing (relatively recent?) purchase price, and theirs goes up 2% of a much smaller base due to prop 13.
They have no incentive to move, downgrade. And they often use trusts to pass this tax base down to their kids. It’s feels like icky European feudalism.
Again i’m emphasizing that this goes for both residential and commercial buildings.
Pairs nicely with the permitting processes that basically boil down to "thou shalt pay the guild"
Yes and yes.
And I pay 10K less a year than my neighbor for the same value house. And I pay 10K more a year than my other neighbor.
I get a huge advantage from Prop 13, but I still think it needs to get replaced with a much fairer system.
It's pretty clear that this kind of tax policy is going to totally mess up the housing market. It's not the only factor, but it's a big one.