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California Must Be Doing Something Right Despite Trump hating it so much
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ivwshane
Lifer
He must be one of those people who support Texas seceding from the union.
Triloby
Senior member
Ah, yes. The same minority group of dipshits and retards that scream and moan about secession if a Democrat wins a presidential re-election, or if a Democrat ended up winning in 2016. Notice the recurring theme? 😛
glenn1
Lifer
Yep, the side with the most to fear from a tyranny of the majority has made sure to keep their firearms as the ultimate check and balance on the ballot box.
Prop 13: It’s Time To Stop Being Railroaded by the Third Rail
March 21, 2012
By: Christopher Thornberg, PhD
But there are enough people making broad claims. Instead let’s look at the issues one at a time.
What did Prop 13 do? The bill had many provisions, but the major ones include capping the property tax rate at slightly over 1%, capping the rate that current property owners would see their property taxes rise per year at 2% (this, of course, does not apply to newly purchased properties), centralizing the property tax system with the state, and requiring a two-thirds majority in both legislative houses to raise future taxes.
98% Regressive
Let’s focus first on the 2% rule for current owners. Basically this provision limits the annual increase in assessed valuation for existing property owners to 2% or the CPI, whichever is smaller (it has always been 2% with the exception of the last two years). This means that two neighbors who own homes with the exact same market value, who receive the same level of public benefits (roads, fire, police, etc,) may end up paying vastly different property tax bills.
M: They may wind up paying vastly different income tax bills also.
To put this in perspective, if your neighbor bought his/her home 25 years ago, and you bought your house last year, your neighbor will be paying slightly less than half of the annual tax payments that you are obligated to pay. And, by the way, this calculation is only because of price declines in recent years. Near the peak of California’s housing bubble, your neighbor would have been paying less than one-third (yes, one-third) the rate that you, as a new owner, would have to pony up.
M: Yes, and all of those poor struggling families that move into the higher taxed property are paying hugely inflated prices for it, with a tax rate that is proportional to the one the poor struggling family was able to pay when they bought in the past. People who can buy high priced California property can pay the higher taxes also or they can't buy. Nothing has changed but the fact that today's buyers are buy because they can afford both the price of the home and the taxes, if barely, just as was true when of the older owner who could afford to buy, if barely, in the past. What 13 does is keep the tax rate for people who could just barely afford to buy in the past from reaching levels comparable with today's home prices, prices that people who bought long ago could never afford today. What is being argued here is that people who can't afford today's high cost of housing have no right to live in one they bought when it was affordable.
To understand why this is so regressive, lets add some numbers. Imagine that you bought your home for $600,000—roughly average for single-family residences in central Los Angeles. You would be paying $7,500 per year in property taxes. Also note that as a new buyer, you are liable to be younger and would have paid full price for your property—so you’d be carrying a very large mortgage payment on top of everything else.
M: Yup and you are likely only in the market because you have a massive down-payment, a massive income, or both. You are only less fortunate than your neighbor because he or she bought before you did and other wealthy people will outbid you to live there.
Your neighbor, in contrast, paid roughly $200,000 for their house back in 1987 and is likely to have paid off a large portion of the mortgage—so their debt overhead is much smaller. They have also, by virtue of having bought early, enjoyed nearly $400,000 in capital gains on their property over the course of 25 years. Your neighbor, richer and with fewer financial obligations, will only have to pay approximately $3,700 year in property taxes. Quite a perk.
M: As intended.
One of the most repeated “wisdoms” I hear from supporters of Prop 13 is that it has been a godsend for homeowners. Really? I guess that’s true for those homeowners who have been lucky to live in the state for a long time. But for newer buyers, young families who represent the future of this state, residents who have not been privy to hundreds of thousands of dollars in capital gains, would hardly characterize Prop 13 as something heaven sent. Quite the opposite, they are being saddled with the largest portion of California’s property tax bill.
M: Because they chose to buy and can afford to. They will also pay more income tax. They can eliminate both burdens by working for low wages.
In truth, it is difficult to find a tax in the United States much more regressive than this one: Tax those with the greatest wealth the least, and those with the least wealth the most. Californians who feel they are entitled to pay less than their neighbors for the same public services they receive are not brave, anti-tax warriors—they are legalized tax cheats.
M: I thought envy was a sin. Or is this moral outrage? How do we tell? And besides, not everybody who benefits from 13 thinks of him or herself as anti-tax warrior, that is just rhetoric, emotionally laden appeal, unbecoming of a PhD. I voted against 13.
And there is another underbelly to the 2% protection – residential vs. commercial property. Those involved with commercial property, particularly large investment properties that have many owners, have learned over the years how to shift ownership around in ways that avoid the tax reassessment attached to complete changes in ownership.
M: The commercial side of 13 is not what I seek to protect. Also laws that are abused are often better fixed to close loopholes than repealed. Not saying that's the case here.
As a result, commercial property has enjoyed much greater protection under the 2% rule than has residential property, where turnover is more common. It used to be that commercial properties paid a much larger share of the state’s property tax, but over time, the commercial share of California’s tax receipts have become smaller and smaller. Moreover, large properties have been protected more than small properties—again, a regressive tax that favors large investors over small business owners and businesses over residents.
M: I don't object to arguments on the commercial side. I object to them offered as a way to eliminate the protections offered on the residential side.
Does it really surprise anyone that it turns out that Howard Jarvis was a commercial real estate investor? He was personally one of the lucky ones – those who would gain the most from Prop 13 while shifting the burden of supporting the state to others. Hero? Absolutely not. Howard Jarvis was a special interest fighting to increase his own personal wealth at the expense of others and, worst of all, doing so under the guise of helping the greater good.
M: A pointless argument. The motivations of Jarvis have nothing to do with the damage eliminating 13 would have on people not being forced to sell their homes if taxed at what new buyers would pay.
The 1% mess
Another major provision of Prop 13 is that it caps property taxes even for newly purchased units at 1% (the rate is often slightly higher, but typically runs about 1.25%). The Howard Jarvis Taxpayers Association views this as one of their crowning achievements, bragging that this limitation has saved California taxpayers close to one-half of one trillion dollars in taxes since Prop 13’s inception.
Governments need to raise funds to run public services – and/or to waste on special interests (depending on your political bent). If one source of revenue is capped or eliminated, that government will simply go to other places to raise money. In this case, the reduction of property tax rates to levels that are far below average rates across the United States has simply meant that Californians now pay higher income and sales taxes. Howard Jarvis and his ilk haven’t saved state taxpayers a dime—they have only shifted the source of the state government’s funding. To claim otherwise is something between spin and total fantasy.
M: Who believes or cares whether prop 13 saves a dime in state expenditures. To claim it doesn't doesn't mean it doesn't save many 13 beneficiaries from being forced out of their homes.
Moreover, it is those very changes in funding sources that are largely responsible for California’s business unfriendly reputation. When looking at the state’s tax receipts as a share of the economy, they aren’t particularly high. California typically falls right into the middle of the other U.S. states in terms of taxes paid as a share of the state’s total economy. But Prop 13’s limitation has given us what are now considered to be ‘friendly’ property taxes in California and shifted the burden to business unfriendly corporate and income taxes.
M: Mixing commercial with residential again.
Texas is often cited as a business friendly location, particularly because they don’t have a personal income tax at all. But, as it turns out, if we took Texas’ revenue system and applied it to California, taxes paid would fall by less than $2 billion (that’s about 2% of our overall general fund revenues, and slightly over 1% of overall state and local revenues – big whoop). This is because Texas relies far more heavily on property taxes – the average property tax rate paid in Texas is well over twice what is paid in California.
M: In California prop 13 pretends that property is worthless. In Texas they don't have to pretend. I would gladly pay twice the taxes on property that is worthless than half on property that is.
Not only is California’s over-reliance on personal income taxes business unfriendly, it also leads to hyper cyclical revenue conditions – when times are good, the cash flow is ample, but when the economy slows, the deficits are devastating. And along the way, the state over-commits to expanding various public programs and hands out ever more generous perks to employees. When the economy turns sour, it creates terrible conditions as programs are dismantled and funding for anything even remotely discretionary gets pushed to the back burner.
M: More on the commercial side
We have watched this cycle run its course twice over the past 15 years, and the state’s educational system and infrastructure have both suffered enormously because of it. Want to know why the University of Texas at Austin is prospering while the world famous University of California campuses continue to diminish in quality? Thank Howard Jarvis and his proposition.
M: The Egyptians solved this 5000 years ago.
Centralization Crisis
Another highly regrettable legacy of Prop 13 is the over-centralization of funding in the state—where too much public money flows directly though Sacramento, preventing local government from setting local priorities. Blame for this shift away from local government can be placed directly on the shoulders of Prop 13.
The centralizing of funds has had another subtle but pervasive effect. Because property taxes are limited and diminish over time, cities have taken on a distinct anti-housing slant in their development strategies. They promote industrial and retail development, because it generates far more generous local revenues in the long term. Residential cities, where there is little commerce or industry, and who bear the burden of educating children, find themselves starved for cash, while specialty cities like Vernon, Santa Monica, or Industry have so much excess cash, they don’t know what to do with it.
M: Don't need to throw people out of their homes to fix this.
California has developed a serious housing shortage over the past 20 years – one of the reasons for the state’s low housing affordability. Not all, but much of the problem can be traced back to Prop 13’s perversion of local incentives. Want to reduce property taxes? The easiest way would be to incentivize the construction of new homes, driving property prices down. This would lower everyone’s tax rate.
M: A fixable issue without throwing people out of their homes.
What About Grandma?
By this point, if you are a defender of Prop 13, you’re likely already lining me up as a hater of senior citizens, someone who wants to return to the time when fixed income elderly residents were being thrown out of their homes because of the crushing tax burden they were under. After all, this is why Prop 13 was passed in the first place, right?
Wrong. This story is historically untrue, logically incorrect, and has nothing to do with most of what Prop 13 does anyway.
M: Absurd! The reasons Prop 13 passed have nothing at all to do with what the actual effect they had. The subterfuge that protecting residential owners actually happened.
First, thinking logically, when people’s property taxes go up, it’s because the value of their property has increased. In other words, they are being asked to contribute more because they have more. Using current tax rates, your taxes would go up by $2,500 per year, if the value of the property you own and live in increased by $200,000. Fixed income? Your household just earned $200,000 because you happened to own a house at the right time. Financially speaking, this is a great deal—that $200,000 would cost a lot more annually if borrowed from a bank.
I’m not saying the elderly should pay more. I am only arguing that they can afford to pay as much as anyone else in the neighborhood.
M: He's arguing they can pay more. How nice.
When I pointed this out to one supporter, their reply was: “So what? Its paper money.” Really? I invest in some hedge funds. Annually, I receive a K-1 from the funds that I turn over to my accountant. And guess what? I have to pay taxes on my ‘paper money’ gains. That’s the way it works. No one likes to pay taxes, but we have to pitch in fairly. And even if on a fixed income, in today’s liquid mortgage market, reverse mortgages and home equity lines of credit are more than available and allow people to access that cash. Californians were more than willing to use this ‘paper money’ to fund all sorts of purchases over the last bubble.
M: You pay taxes on actual gains you receive in your pocket. You don't receive pocket money living in a house. You don't pay taxes on money you earn and invest up to specific amounts nor do you pay on a growing nest egg until you cash out,, usually when your income is taxed at a lower level. What sort of idiot would argue this is so unfair to people who don't invest. Their wealth gets to grow tax free. You know why the fuck that is? It's because the economy is powered by investments.
The reply to this is always that senior citizens don’t want to go into debt. True. Nor do I. Nor does the young family down the street, or the new small retail center owners struggling to turn their first profit. No one likes to go into debt, particularly to pay taxes. But sometimes, we have to.
M: Especially if you remove 13 which prevents this. Find other ways to help fewer struggle than adding to the pot. Tax investments as they grow and see how that will be received.
Perhaps the most honest comment I’ve heard in regard to the ‘elderly effect’ was from a gentleman in Orange County who became very heated over my views on Prop 13. He saw them as an attempt to kick his mother out of the house she had lived in for 30 years. Now mind you, his mother lived in a $1 million plus property with no mortgage in ritzy Newport Beach. Clearly this was someone who could afford to pay as much in property taxes as her younger and less equity enabled neighbors. After pointing out that her equity was very real wealth and could be accessed, his reply was, “Well she wants something to give to her children when she passes away.” The candid acknowledgement of his selfish motivation was actually refreshing. It’s always better to have someone else pay the check. But it is in no way a valid argument. I too would rather have other people pay more so my inheritance will be larger. But government should be in the business of making sure we all pay our fair share, not creating protected classes based on years of residence.
We create protected classes by having income brackets and no income tax below certain thresholds. There are all kinds of business and personal deductions, including the standard one.
Moreover, this debate misses a fundamental point. Prop 13 doesn’t just apply to seniors—it applies to everyone. If we are so worried about the elderly, why isn’t Prop 13 limited to those past retirement age? Other states do worry about fixed income seniors. Rightly or wrongly, in those states the tax rate drops sharply once the property owner reaches a certain age. California is the only state with a law like Prop 13. No one else has needed it. That alone is indicative of the emptiness of the various defenses for this awful tax system.
M: Are we talking about repealing 13 or not? I am arguing do not repeal if you are going to take the residential 13 part also.
Equivalently, if Prop 13 is about protecting seniors, why is commercial property included at all? Commercial property is a cash flow business and these cash flows are tied directly to the market value of the property. In other words, property taxes increase only when the value of the property goes up, which is typically (although not exclusively) when the operating profits on the property increase – making taxes easier to pay.
Back to commercial again/
And of course, empirically, there is no evidence that there ever was a massive wave of foreclosures – on the elderly or anyone else. Prop 13 came into effect in 1979. That year, the foreclosure rate was less than 4/10ths of 1%—for the next 25 years it was never lower. Far from preventing foreclosures, it seemed to coincide with an increase in them. As an economist, I don’t think there is any causality, but it certainly blows a hole in that theory that Prop 13 was about stopping a wave of defaults.
M: We are not protecting against defaults. We are protecting against having to sell to avoid defaults. Is this guy an idiot? He can't be but but but
Tax and Spend Liberal
Last but not least is the common refrain among Prop 13 supporters that getting rid of the law would be unfriendly or damaging to business in the state. California certainly has its share of strikes against it in trying to attract new businesses – and Prop 13 is one of those strikes. New investors in any economy face an uphill battle. They must learn local rules and regulations, develop new networks of clients and vendors, and of course build their local labor force. In California, they are also handed the burden of paying higher property taxes than the other businesses around them, perhaps businesses they compete with.
And one thing that clearly makes California business unfriendly is its exceedingly volatile and cyclical tax system. I have never argued that Prop 13 should be tossed out on its own. I would prefer to see it dismantled in the context of overall tax reform, including lowering and flattening the income tax, lowering the corporate tax, and lowering the sales tax while extending it to some or all of the service sector. This allows for small, even taxes spread across a large base.
I am not arguing for higher taxes – I am arguing for their fair distribution.
M: Even if it means being unfair to some you call rich via having bought when as average person could afford to buy.
A Waste of Breath?
When I rail against Prop 13, I often get this friendly piece of advice: You’re wasting your breath kid. It’ll never change. Forget it. It’s a third rail.
Well, maybe. Consider this: 7 out of 10 self-made wealthy people in California made their fortunes in real estate. These are powerful and connected families – and they, more than anyone in the state, benefit from Prop 13. Their long-term holdings are taxed at some of the lowest rates. And they wield tremendous political clout. They want Prop 13 to continue to be a political third rail.
But if we can debunk the myths, and help people see through the frayed and broken logic peddled by proponents of Prop 13, perhaps we can begin the long process of finally overhauling California’s badly broken revenue system. Yes, we need expenditure reform. And pension reform. All of these represent significant status quo-breaking challenges. Dumping Prop 13 is a necessary step in the process of fixing these larger problems.
M: It's worse than that. You will have to overcome human decency
The good news? We still get to live in paradise!
M: Those you don't force out of state. It's paradise because past nimbys made it that way and new ones moving in now will keep it that way.
ivwshane
Lifer
So they instead support tyranny from those that share their views?
I'm not seeing anyone on the left supporting "their own kind of justice" to deal with people who have different views than them. But keep defending them, we know what side you stand on and it ain't with Americans, America, or the constitution.
Triloby
Senior member
And yet, that particular side had several opportunities to rise up to overthrow their "tyranny from the majority", only for it to never pass. At the end of the day, Texas is just one state out of 50 other states within the Union. We've been with the Union for more than 170 years, and I don't see Texas seceding anytime soon regardless of who's in office.
zinfamous
No Lifer
What the holy fuck are you talking about?
Also, I absolutely love how you racist rednecks constantly blame Obama for the "Obama years" making race relations so bad. Guess what, genius--it's the fucking racist shitburgers that still can't gtfo blackie being in the White House, fellating the racist Orange One to save them, for making race relations such shit.
Yeah, it's Obama's fault that fucking racist rednecks were even angrier and more vocal about their racism.
Fucking idiot.
ivwshane
Lifer
How so? I've never, ever in the history of all my purchases of goods and services, purchased something and then was asked to pay more for something after I already paid for it. Am I just lucky? Why would owning a house be different?
Moonbeam is arguing that new homeowners should pay more in property taxes because they have more money. He then rejected the argument that incumbent homeowners should pay more in property taxes (actually, the same as everyone else) because they had more money. Doublethink.
As to what you wrote what you're doing here is arguing against the entire principle of property taxes. If that's something you want to do that's fine but that's an entirely different discussion as prop 13 doesn't get rid of property taxes, it just selectively enforces them based on how long you've owned a piece of property. If property taxes are wrong they are wrong for everyone. I'm probably at best a mild proponent as I agree paying taxes on something just for owning it seems weird. On the other hand they are excellent public policy tools as they tend to be recession resistant and one of the big problems California has is wild revenue swings because they can't rely on property taxes as much.
MrSquished
Lifer
if we could have peaceful secession from Texas and some other deep red states, really would you care that much?
repoman0
Diamond Member
Texas should go ahead and secede so it can be the ultimate shithole country. Right now it's just a shithole state.
dainthomas
Lifer
California produces a third of what it needs, and gets the rest from Alaska or overseas.
http://www.energy.ca.gov/almanac/petroleum_data/statistics/crude_oil_receipts.html
Doesn't look like it gets any from Texas.
http://www.energy.ca.gov/almanac/petroleum_data/statistics/crude_oil_receipts.html
Doesn't look like it gets any from Texas.
ivwshane
Lifer
Only if we can put up a wall.
MrSquished
Lifer
I could get down with secession of a bunch of red states, wouldn't you be happier? I mean you could round up the gays, put them in camps, and make them straight? Same with minorities. Round all the brown folk up, green card or no green card. Put 'em in camps, maybe go all Michael Jackson on them, make them more white and shit. Make them great! (Can't be great again, no minority could be great again, they were never great in the first place, bein' a minority and all)
But we could have two Americas without needing to be too spiteful about it. We should be able to travel to and from our states with ease. You will need to trade with us and vice versa. I think there could be some terms agreed to. The main thing is just make these two countries separate, and the logistics of travel and the such could be amicably figured out I'm sure.
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