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Comment by raldi | Hacker News Reader

I see your point, but when that person decides one day to sell their house, suddenly they're done pretending it never appreciated in value.

In other words, instead of the state foregoing that person's property tax adjustments, it should defer them until the time of sale, and at that point, recover them.

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>In other words, instead of the state foregoing that person's property tax adjustments, it should defer them until the time of sale, and at that point, recover them.

In other words a lien.

Exactly. If you'd have owed $11,000 this year without Prop 13, but because of it are just paying $1000, the other $10,000 should be applied as a lien against your house. Even 30 years of these liens will leave a sizable chunk of profit to you, considering you're capturing 30 years of appreciation.

There's an assumption here that property prices always go up. What if assessed value during the boom times of 2006-2008 was so high, that accumulated tax obligation exceed or are close to the current value of the property?

That's what I'm talking about here: https://news.ycombinator.com/item?id=7593235

My first impression is: That will add an even bigger chilling effect than we already have w/ Prop13. More people would stay put (or just avoid selling.)

Also it's not like values are an eternally increasing step function. Suppose I bought in '95, saw my paper net worth rise thru the boom, then I need to sell at a depressed price in 2001. Without this lien waiting for me, I can take comfort knowing that I'm selling at a depressed price but also buying again at a depressed price. But when you take tens of thousands off the table to pay back taxes, my down payment has eroded significantly, increasing my borrowing cost.

Of course outside of California most people are used to periodic reassessment. It's just part of life. But I think tinkering w/ Prop13 in the ways you describe are possibly worse than just eliminating it and replacing it with an expanded homestead exemption of some kind.

I agree, some accommodation should be made for bubbles. Perhaps the rule should be, not that you accumulate unpaid tax every year based on the difference between what you paid and the assessed value as of that year, but simply that the assessed value is retroactively considered to be the average of the purchase price and the sale price. This would penalize windfall profits, where the market takes a sudden leap and then you sell, but would provide some protection against bubbles.

I'm the guy from up the thread, and I endorse this plan.

There's already a capital gains tax to penalize excess profits when selling.

I addressed this here: https://news.ycombinator.com/item?id=7594651

Or a capital gains tax. Which avoids the problem with building up the debt during a boom and being underwater on it if selling during a bust.

I addressed that here: https://news.ycombinator.com/item?id=7594651

Which it will, in the form of transfer taxes and capital gains taxes.

In California, married couples pay no capital gains on the first $500,000.

http://www.nolo.com/legal-encyclopedia/avoid-capital-gains-t...

And the transfer tax doesn't hold a candle to the lost property tax revenues on, say, 30 years of ownership.

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