This subject always makes me a little mad because property tax is about the most progressive form of taxation, and it’s the one that’s always under attack. Granny is going to get thrown out of her little cottage, you see, and pay no attention to the man behind the curtain!
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Property taxes and estate taxes are the main reasons America doesn’t have a permanent ruling class. Watching those things get gradually dismantled is kind of like watching Downton Abbey in reverse.
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There is an inverse relationship between taxes and value. Low taxes inflate values since a buyer usually buys to the max of their ongoing ability to pay the combined mortgage and tax. Raise the tax and they can afford less mortgage, hence lowering the market price.
Having new owners paying many times the tax of longtime owners of similarly priced property is reprehensible. Taxes like this are a mess across the country, since they’re often controlled at a very local level. In my fast gentrifying city it’s been 28 years since the last revaluation, leading to the most gentrified neighborhoods paying 1/3 or less the effective tax rate of the poorer areas. And the Mayor tried to defend this!
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Property tax is nice because it’s hard to hide property or ship it overseas or come up with other tricks to avoid paying tax. Taxing immaterial wealth is a lot harder.
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Having new owners paying many times the tax of longtime owners of similarly priced property is reprehensible.
Your mistake is thinking the properties are similarly priced. Prop 13 was supposed to protect people from paying taxes on paper gains that have not been realized. So speaking from the standpoint of a homeowner, I’d flip your statement around: Forcing long-time (residential) owners to pay tax based on the perceived future sale value of a property is reprehensible. It’s not much different than saying: “Hey new graduate, you have an advanced college degree. We’ve calculated that you will be able to earn $150K a year in a high tech job, therefore we are going to tax you as though you had that much income.” Meanwhile, you’re working at a McJob because you can’t find a decent paying job in your field of expertise.
I don’t know what the correct “answer” to this is. Perhaps separating commercially zoned property from residential for purposes of tax on assessed value?
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i am almost sure that 1978 and prop. 13 convinced my father to become a reagan supporter after being a lower middle class white collar worker all his life. i am almost sure that people warned of this problem as well but the idea that tax cuts somehow improve our standard of living was starting to take hold. i am certain that there were objections that prop. 13 hurt new home buyers when there property was assessed at a higher value than the previous owner’s. that same preference for people who had longstanding ownership at low assessed values even though property values had risen substantially also aided commercial property owners who kept their properties more long term than average home owners. regardless, the rich rigged the system again for their selfish interests while passing the costs to the rest of us.
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I don’t see why someone who owns a million dollar house they bought for $100k should not pay the correct tax on it and still be able to cash out when they move. Gains are gains, and I’m sure they’d not trade those gains for low tax. The tax is rarely more than the yearly appreciation on the house in many areas of CA, or in NJ where I am, we’re not talking about taking people’s homes, there’s plenty of ways of extracting equity to pay taxes.
Why should the the tax burden be only on the newest owners and the newest construction? What that does is make the tax on the newer residents far higher than they;d be if it were shared properly. A friend called this policy “Welcome neighbor, you’re fucked”.
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This was addressing a real problem that was costing people their homes. Property values had been going up and people with modest houses that they had live in for ages were getting tax bills so high they were forced to sell them. In Santa Clara County at least, cities would re-zone residential or agricultural areas to something commercial, then tax on the rate that the property would be worth if it had a shopping mall or corporate building on it. That happened to more than one family I knew. It was suburban renewal forced through using the tax bill as a weapon. Prop 13 isn’t a good solution, but it was what they hit on at the time.
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You can say that again, it’s simply longtime residents picking the pockets of the newer ones. Picture 2 houses side by side, each worth $1m. But one owner is paying $1000 in tax and the other 10,000. In a honest system they’d both be paying $5500. Now expand that citywide, or statewide, and you’ve got some serious organized crime. It also locks people into their homes like rent control does. You can’t move because it’s not a an open market and you’ll never get that deal again.
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My opinion:
The passing of Proposition 13 marks when the USA stopped building and began consuming itself.
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There’s an interesting generational thing going on due to the insanity of property prices. There are people of relatively modest means living in Palo Alto, for instance, because they bought their property 40 years ago. Meanwhile a couple consisting of an attorney and software engineer can’t afford to live there if they’re just now buying or renting a house.* My parents in the Bay Area bought a wreck of a house 40-odd years ago, spent 30 years investing their own labor renovating it, and the value has increased probably more than a 100-fold in the last 40 years. I’m not sure my mother could afford to live there if property taxes had kept up with the value. My parents certainly couldn’t have afforded the property at current values back then, even in its sad state.
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All she would need to do is take out a reverse mortgage for her taxes, and she’d get to stay in her home AND keep that astounding windfall. There’s no way it doesn’t appreciate each year by far more than the taxes. This argument is going to be a HUGE battle in my city as we do the 1st reval in 28 years. Many people who made a fortune on their property are going to whine that they don’t want to pay their fair tax and all those poorer people should keep subsidizing them. And since NJ does not re-assess on sale like some places, the people I feel sorry for are the ones buying now thinking “what a deal, such low taxes!” who are going to see them double. Neither their realtors nor attorneys feel any compulsion to warn them.
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I think that any tax law or policy has to acknowledge that houses that people use as their primary homes are different from J. Random Real Estate. It doesn’t do anyone any good to tax the real estate so heavily that the home is lost.
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This is incorrect and leads to the gross unfairness between some primary homeowners and others I described upthread. Equivalently valued property should be taxed equivalently. Anything else is a scam against future buyers who weren’t there to vote against it… There’s no reason someone equity rich and cashflow poor should “lose their home”. I get extremely annoyed at people who choose to cash out their winnings describing themselves as “losing their home”.
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The only thing needed to fix prop 13 is a means test. and an exclusion for commercial properties.
As long as that means includes the methods of extracting equity. No should get to have their cake and eat it too, as in cry poverty while living in a pile of money they would rather not part with. Standard reverse mortgages are available to anyone over 62. They got a bit of a bad rep when they were abused while every mortgage was being abused, lump sum reverse mortgages should not be legal IMO.
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The price of land goes up because of the demand. Higher priced land utilizes more city services (larger roads, more frequent maintenance, higher priority snow removal) You’re now paying an artificially low tax rate but utilizing more services even if you didn’t sell and see a profit. That burden gets shifted onto new home owners.
The previous situation did suck. Own land for 30 years and get priced out because of taxes.
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I really hate to say it, but I think Lenin was right.
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Frankly I don’t care one bit what Warren is paying in taxes. I moved to NYC/Long Island and I was shocked to hear the property tax bill here. And who is most vulnerable? Retirees. That you could be forced to leave the home you’ve lived in for many years because there is no regulation on property taxes makes me sick.
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