Proposition 13

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Submitted by kev374 on March 18, 2014 - 12:46pm

Any chance of Proposition 13 being repealed any time soon? If it's repealed how do you think it will be approached? Would it apply to current homeowners or will it apply only going forward to new home purchases?

Submitted by Coronita on March 18, 2014 - 12:48pm.

Why does it matter?

Submitted by UCGal on March 18, 2014 - 6:35pm.

I don't think it will be broadly repealed. But I can see it being modified.

- eliminating Prop 13 for investment or non owner occupied properties.
- perhaps allow a slightly higher increase per year.
- eliminate the family transfers or senior transfers. (Disclaimer, I benefited from the generational transfer, otherwise my dad would have used the clause that lets seniors transfer their rate to an equal or lesser value property.)

Submitted by joec on March 18, 2014 - 7:07pm.

I honestly don't think it will be repealed anytime soon...The reason being is that if you believe politicians care more about their own jobs and livelihood and they will sell their 1st born down the river if it will enrich their situation, doing this isn't very popular among the voting public and gets the legislature very little.

If they did this, they would be voted out of office with the new candidate running to put this back in place...

Yes, economists all harp about how it's not good, it skews the market, etc etc etc, but at the end of the day, people do what's in their own best interests and self preservation.

I have read some proposals where they will simply up the standard deduction to say 25-30k so pretty much everyone who takes the mortgage deduction would get more with that new plan. This also solves the issue of really poor people not paying any tax as well and this may work, but obviously, they are going to have to take the money from somewhere else and that's where you'll see another fight and lobbyist.

I recommend having your hands and money in everything and based on tax laws, just play along and minimize tax every year based on who's in govment and the "current" tax policy...

Submitted by CA renter on March 19, 2014 - 12:47am.

UCGal wrote:
I don't think it will be broadly repealed. But I can see it being modified.

- eliminating Prop 13 for investment or non owner occupied properties.
- perhaps allow a slightly higher increase per year.
- eliminate the family transfers or senior transfers. (Disclaimer, I benefited from the generational transfer, otherwise my dad would have used the clause that lets seniors transfer their rate to an equal or lesser value property.)

Agree with this.

Eliminating or reducing Prop 13 benefits for investors is not nearly as unpopular as many seem to think it is. Many young people, in particular, really hate Prop 13 because they (rightly) feel that they are having to pay higher taxes/get fewer benefits to offset the tax losses from those who get the Prop 13 tax subsidy. The population of those who oppose Prop 13 is constantly growing.

While I like Prop 13 for a single, primary residence ONLY, I do not support tax subsidies for rentier capitalists.

Submitted by an on March 19, 2014 - 12:49am.

CA renter wrote:
Many young people, in particular, really hate Prop 13 because they (rightly) feel that they are having to pay higher taxes/get fewer benefits to offset the tax losses from those who get the Prop 13 tax subsidy.
Nope. I'm pretty sure I know a lot more young people and those who even know what prop 13 is doesn't hate it. As for hire taxes, they just attribute it to being in CA and they deal w/ it.

Submitted by flyer on March 19, 2014 - 1:34am.

Hopefully, not, but we'll see. I can see modifications occurring in the future, but I doubt if it will be fully repealed.

I can't deny that our family and extended family have greatly benefited from that proposition, as have many long-time residents, so I can understand how it could annoy some people.

Submitted by CA renter on March 19, 2014 - 2:12am.

AN wrote:
CA renter wrote:
Many young people, in particular, really hate Prop 13 because they (rightly) feel that they are having to pay higher taxes/get fewer benefits to offset the tax losses from those who get the Prop 13 tax subsidy.
Nope. I'm pretty sure I know a lot more young people and those who even know what prop 13 is doesn't hate it. As for hire taxes, they just attribute it to being in CA and they deal w/ it.

By 2012, however, public attitudes appeared to be changing. Opinion polls conducted last year and again this spring by the Public Policy Institute of California (PPIC) showed that although residents feel Prop. 13 as a whole has been good for the state, a majority now favors modifying some of its parts - in particular, to tax commercial properties at their market value. This is a marked change from 20 years ago, when Prop. 167 - a proposal to permit reappraisal of most business-owned real property after a specified change in ownership - went down by a 3-2 margin.

Even among Republican voters, support for some sort of Prop. 13 reform now hovers around 50 percent. The latest PPIC survey shows a majority of voters also supports allowing localities to raise specific-use taxes with a 55 percent vote. That shift comes in the wake of failed local measures in Los Angeles County and elsewhere last November; designed to fund basic infrastructure, they fell just shy of the two-thirds requirement.

http://www.callawyer.com/Clstory.cfm?eid...

-------

But a growing number of critics, Bestor among them, are part of a movement to change Proposition 13 in its application to commercial property by “splitting the rolls” and assessing commercial property at its market value on a periodic basis rather than only upon change of ownership.

http://california-in-crisis.news21.com/n...

------

Split roll assessments will probably be here within the next 10-15 years, IMO. Not sure about investor-owned residential properties, but I've yet to hear a good argument for tax subsidies for landlords, especially if they don't pass along at least part of the savings to the renters. If anyone has a good reason for why these provisions of Prop 13 should stay, I'd love to hear more about it.

The reason Prop 13 passed is because people overwhelmingly felt that people should not be taxed out of their own homes, and I would agree with this. Most voters in California don't support giving wealthy corporate entities and landowners extra subsidies at the expense of other taxpayers and California residents.

Submitted by Coronita on March 19, 2014 - 4:11am.

Well it would probably do a pretty good job squeezing out young people and some individuals who barely can afford home prices and probably put more real estate in the hands of corporations and wealthier individuals that have better economies of scale probably that could probably eat more of the cost.

I love how people think increasing taxes for the very things that younger people could use to build their wealth are systematically being eliminated for them so that it's *that* much harder for younger people to end up being financially independent.....

Let's see. Raising property taxes for investment property might make my bottom line less profitable. But it wouldn't affect my buying/selling decision in as much as I have sufficient resources to absorb the increased costs..... But it would be interesting to see how people just starting out to build their wealth will have one less tool to help them build wealth, as well as all the other tools that are gradually disappearing... But hey, I guess they can always join MyIRA and earn that most likely pathetically low interest rate...

I feel sorry for younger people that don't have a silver spoon they will be inheriting...Things definitely aren't looking good for them..

Submitted by scaredyclassic on March 19, 2014 - 7:13am.

i am planning to sell at a regained peak, then go live in a hole in the ground covered by a tarp.

Submitted by an on March 19, 2014 - 7:37am.

CA renter wrote:
AN wrote:
CA renter wrote:
Many young people, in particular, really hate Prop 13 because they (rightly) feel that they are having to pay higher taxes/get fewer benefits to offset the tax losses from those who get the Prop 13 tax subsidy.
Nope. I'm pretty sure I know a lot more young people and those who even know what prop 13 is doesn't hate it. As for hire taxes, they just attribute it to being in CA and they deal w/ it.

By 2012, however, public attitudes appeared to be changing. Opinion polls conducted last year and again this spring by the Public Policy Institute of California (PPIC) showed that although residents feel Prop. 13 as a whole has been good for the state, a majority now favors modifying some of its parts - in particular, to tax commercial properties at their market value. This is a marked change from 20 years ago, when Prop. 167 - a proposal to permit reappraisal of most business-owned real property after a specified change in ownership - went down by a 3-2 margin.

Even among Republican voters, support for some sort of Prop. 13 reform now hovers around 50 percent. The latest PPIC survey shows a majority of voters also supports allowing localities to raise specific-use taxes with a 55 percent vote. That shift comes in the wake of failed local measures in Los Angeles County and elsewhere last November; designed to fund basic infrastructure, they fell just shy of the two-thirds requirement.

http://www.callawyer.com/Clstory.cfm?eid...

-------

But a growing number of critics, Bestor among them, are part of a movement to change Proposition 13 in its application to commercial property by “splitting the rolls” and assessing commercial property at its market value on a periodic basis rather than only upon change of ownership.

http://california-in-crisis.news21.com/n...

------

Split roll assessments will probably be here within the next 10-15 years, IMO. Not sure about investor-owned residential properties, but I've yet to hear a good argument for tax subsidies for landlords, especially if they don't pass along at least part of the savings to the renters. If anyone has a good reason for why these provisions of Prop 13 should stay, I'd love to hear more about it.

The reason Prop 13 passed is because people overwhelmingly felt that people should not be taxed out of their own homes, and I would agree with this. Most voters in California don't support giving wealthy corporate entities and landowners extra subsidies at the expense of other taxpayers and California residents.


How is this in response to my objection to your statement of:
CA renter wrote:
Many young people, in particular, really hate Prop 13 because they (rightly) feel that they are having to pay higher taxes/get fewer benefits to offset the tax losses from those who get the Prop 13 tax subsidy.
It didn't say young people really hate Prop 13. When you hate something, you want to abolish it, not modify it. Kind of like the Republican vs the ACA. It's the Democrats who love the ACA and want to modify it because they know the public sentiment is against the ACA as it stands today.

Submitted by SK in CV on March 19, 2014 - 7:43am.

I think there's some broad misconceptions on what a repeal of prop 13 has to look like. Most seem to assume that it would keep property taxes (at very least) at their current level for those with properties currently assessed at market value, and raise property taxes for those properties with assessed values below current market values. That isn't the way it has to happen.

I don't know what the stats look like for percentage of properties currently assessed below market value. I'm guessing the total actual dollars below market value is more impressive than the percentage of properties below value. But if prop 13 were repealed or changed, with the provision that total property taxes collected don't increase (or with limited annual increases), the net effect would be to decrease property taxes for current buyers, as the tax on legacy property tax properties increase.

This would DECREASE the cost to new buyers (i.e., young people), not increase it.

Some would argue that it can never happen this way. That legislators won't ever pass up a chance to collect more taxes. Arguably true, but demonstrably false. It happened when prop 13 was originally voted in. Except that revenues were capped in the wrong place, at the assessment level, rather than at the collection level. The net result was exactly the opposite of what Howard Jarvis claimed he wanted. Property tax revenues skyrocketed as values increased. In the last 30 years, total property taxes collected have increased at a rate 3 times that of total population growth and inflation combined. As measured by Jarvis' original platform, Prop 13 has been a total failure. It can and should be fixed. I have no idea whether or not it will be.

Submitted by FlyerInHi on March 19, 2014 - 1:56pm.

SK in CV wrote:
The net result was exactly the opposite of what Howard Jarvis claimed he wanted. Property tax revenues skyrocketed as values increased. In the last 30 years, total property taxes collected have increased at a rate 3 times that of total population growth and inflation combined. As measured by Jarvis' original platform, Prop 13 has been a total failure. It can and should be fixed. I have no idea whether or not it will be.

True... but that main impetus for changing Prop 13 is for more revenue, not the same amount or less revenue.

If tax revenues don't increase, I doubt stakeholders will have any interest in upsetting the applecart.

Submitted by joec on March 19, 2014 - 6:14pm.

Another thing to consider is the powers with money (corporations or large property owners), now see another reason to ditch and leave California and their businesses here. It's certainly a benefit if you're looking to own property in CA or buy/lease back buildings.

If demand drops, people will just setup in Nevada or Arizona and that hurts CA taxes again. Businesses already feel CA is one of the worst places to run a business.

Of course, other states reassess property yearly and tax it, but just more reasons for someone to leave and take all the jobs with them.

Submitted by CA renter on March 19, 2014 - 11:56pm.

joec wrote:
Another thing to consider is the powers with money (corporations or large property owners), now see another reason to ditch and leave California and their businesses here. It's certainly a benefit if you're looking to own property in CA or buy/lease back buildings.

If demand drops, people will just setup in Nevada or Arizona and that hurts CA taxes again. Businesses already feel CA is one of the worst places to run a business.

Of course, other states reassess property yearly and tax it, but just more reasons for someone to leave and take all the jobs with them.

If they leave, others will take their place. In a high-demand state like California, this isn't a real threat.

And other states will have other taxes or fewer/lower-quality services, instead. Every state has its pros and cons; people just have to decide what's right for themselves. You can't get something for nothing, no matter how hard you try.

Submitted by CA renter on March 19, 2014 - 11:51pm.

FlyerInHi wrote:
SK in CV wrote:
The net result was exactly the opposite of what Howard Jarvis claimed he wanted. Property tax revenues skyrocketed as values increased. In the last 30 years, total property taxes collected have increased at a rate 3 times that of total population growth and inflation combined. As measured by Jarvis' original platform, Prop 13 has been a total failure. It can and should be fixed. I have no idea whether or not it will be.

True... but that main impetus for changing Prop 13 is for more revenue, not the same amount or less revenue.

If tax revenues don't increase, I doubt stakeholders will have any interest in upsetting the applecart.

Agree with Brian on this one. The impetus behind tinkering with or abolishing Prop 13 is to get more revenue by eliminating the tax subsidies for those who don't need or deserve them.

Submitted by SK in CV on March 20, 2014 - 7:39am.

CA renter wrote:

Agree with Brian on this one. The impetus behind tinkering with or abolishing Prop 13 is to get more revenue by eliminating the tax subsidies for those who don't need or deserve them.

I'm not sure there is any significant impetus behind abolishing it. And I think the reason for that is those supporting a repeal are making the wrong argument. The problem with it is not that it mandates too much or too little tax, but rather that it mandates a tax that is unfairly distributed. And the only fix that's been proposed is one that increases total revenues. It doesn't have to do that. If the limits were set at the revenue end, instead of the assessment end, the state and municipalities wouldn't have huge swings in revenues as they've seen over the last decade. No huge increases when property values skyrocket, or huge decreases when property values plummet.

Submitted by FlyerInHi on March 20, 2014 - 9:55am.

joec wrote:
Another thing to consider is the powers with money (corporations or large property owners), now see another reason to ditch and leave California and their businesses here. It's certainly a benefit if you're looking to own property in CA or buy/lease back buildings.

If demand drops, people will just setup in Nevada or Arizona and that hurts CA taxes again. Businesses already feel CA is one of the worst places to run a business.

Of course, other states reassess property yearly and tax it, but just more reasons for someone to leave and take all the jobs with them.

Actually, rents are based on what the market will bear, not the costs of the landlord. If you had low costs, you would not give your tenant a discount; you will still charge market rent. And if you had high costs (like buying at the peak) you can't charge more than what the market will bear and you have to suck it up.

Businesses that own their buildings like car dealers need to be in Cali to generate revenue. Tech companies rent and they are not in Cali because of the lowest costs to begin with.

Submitted by CA renter on March 20, 2014 - 3:42pm.

SK in CV wrote:
CA renter wrote:

Agree with Brian on this one. The impetus behind tinkering with or abolishing Prop 13 is to get more revenue by eliminating the tax subsidies for those who don't need or deserve them.

I'm not sure there is any significant impetus behind abolishing it. And I think the reason for that is those supporting a repeal are making the wrong argument. The problem with it is not that it mandates too much or too little tax, but rather that it mandates a tax that is unfairly distributed. And the only fix that's been proposed is one that increases total revenues. It doesn't have to do that. If the limits were set at the revenue end, instead of the assessment end, the state and municipalities wouldn't have huge swings in revenues as they've seen over the last decade. No huge increases when property values skyrocket, or huge decreases when property values plummet.

There is a lot of energy behind the split roll property taxes. Prop 13 would never have passed if it was presented solely as a means to give commercial/industrial property owners or landlords a tax subsidy (at the expense of others, either in the form of higher fees/taxes or reduced services). The ONLY reason it passed was because it was a way of "keeeping granny from being taxed out of her home."

We DO need more revenues, and there is no doubt that the state and municipalities are losing billions each year on these subsidies. They are not needed and, IMHO, can distort the market, as well. We need to split the rolls, at the very least, and there is quite a lot of energy behind this.

Submitted by joec on March 20, 2014 - 6:48pm.

CA renter wrote:

If they leave, others will take their place. In a high-demand state like California, this isn't a real threat.

And other states will have other taxes or fewer/lower-quality services, instead. Every state has its pros and cons; people just have to decide what's right for themselves. You can't get something for nothing, no matter how hard you try.

I disagree with this completely. A company like Twitter is in San Francisco because they (San Francisco) gave/"was Forced" to give them a huge tax break to build and have their HQ there.

http://america.aljazeera.com/watch/shows...

Doesn't benefit the "other" poor people neither.

If another state offers them that tax break, you can say a lot of businesses will move...

A quick google found these quick links in a second...There are tons more offering employers to move their HQ to lower tax cost areas:

http://blog.heritage.org/2014/02/23/tony...

http://www.boston.com/business/personal-...

Sure, you will always have a guy selling food or haircuts in california, but higher paying jobs will leave if you make it a more inhospitable business climate.

That, and housing is already so expensive in the state that companies aren't against moving as much to improve the overall quality of life for their employees.

Submitted by CA renter on March 20, 2014 - 7:21pm.

As you can see, there are very legitimate arguments against these tax breaks. I do find it funny when other states use taxpayer money to try to lure companies from California (or somewhere else) and then claim that they are "creating jobs." Idiots.

Governments are going broke (blaming the unions, of course) while shoveling money at these companies in a race to spend the most money possible on these ventures that often backfire in their faces. All too often, the companies take the money, do business in the state for as long as necessary, and then leave town after using all the resources and demanding taxpayer-funded infrastructure for their businesses that ends up going to waste.

Submitted by livinincali on March 21, 2014 - 7:08am.

CA renter wrote:
As you can see, there are very legitimate arguments against these tax breaks. I do find it funny when other states use taxpayer money to try to lure companies from California (or somewhere else) and then claim that they are "creating jobs." Idiots.

Governments are going broke (blaming the unions, of course) while shoveling money at these companies in a race to spend the most money possible on these ventures that often backfire in their faces. All too often, the companies take the money, do business in the state for as long as necessary, and then leave town after using all the resources and demanding taxpayer-funded infrastructure for their businesses that ends up going to waste.

In states with high income tax it might make sense to offer corporate tax breaks. For example Facebook made about 1.5 billion last year and CA corporate tax is 8.84% so CA got $126 million in corporate tax from Facebook barring some kind of tax break that I don't want to investigate. Facebook spent 6.4 billion to generate that 1.4 billion in profits and let's just guess that at least 75% of that expense is in labor costs. So 4.8 billion but let's just round to $5 billion in labor to make the math easier. Income tax in CA is 9% and for many people at Facebook it's higher than that. So let's just assume a blended rate of 8% on that $5 billion in labor. So CA collected 5.0*0.08 = $400 million in income tax from the Facebook employees. So CA get's 3+ times the amount of revenue from Facebook employee incomes vs corporate tax rates. So keeping those jobs is far more of a revenue benefit than losing them because of a couple of percentage points in corporate tax breaks.

Submitted by CA renter on March 21, 2014 - 3:43pm.

Absolutely, the companies with many very highly paid employees make it worthwhile to offer tax breaks, though it might still shift costs and benefits between the state and municipalities, depending on where the breaks are coming from, and where the taxes are coming from; but the examples of this type of situation are not necessarily the norm.

Submitted by FlyerInHi on March 21, 2014 - 11:18pm.

You know what, the highly paid tech employees will always be in Cali or NYC or Boston or Seattle.

I think tax breaks are better going to manufacturers or call center or the types of operations that can easily move. Facebook, not so much. Would they really move to Phoenix or Dallas? Ha, that would be a first.

If you look at the Bay Area, people are commuting from San Francisco to San Jose, they are not coming to San Jose from Vallejo where they could enjoy lower costs. Costs don't seem to be a concern.

Submitted by moneymaker on March 22, 2014 - 9:05am.

I think Prop 13 is being worked around with special voter approved taxes like MM where special assessments are collected by the city. The most expensive neighborhoods in the county actually have the lowest tax rates, Solana Beach, Del Mar, Coronado. That is because rich people hate taxes. I hate taxes but I'm not rich yet, got the mindset ready however.
P.S.- 2 things that really piss me off about the whole tax structure are paying double taxes and tax loopholes. Maybe when I'm rich the loopholes won't bother me so much.

Submitted by CA renter on March 22, 2014 - 5:14pm.

They pay the lowest taxes because of Prop 13, and it's hurting the cities' finances. Most of these houses are the "dream homes" to which these families aspired, so they bought them with the intention of staying in them indefinitely. After all the appreciation, they'd be fools to let go of these homes with their Prop 13 tax rates, so they (and their heirs) stay. Many of them are paying lower property taxes than people who live in Vista, Oceanside, etc.

Submitted by skerzz on March 27, 2014 - 3:34pm.

CA renter][quote=SK in CV][quote=CA renter wrote:

We DO need more revenues, and there is no doubt that the state and municipalities are losing billions each year on these subsidies. They are not needed and, IMHO, can distort the market, as well. We need to split the rolls, at the very least, and there is quite a lot of energy behind this.

I disagree. We don't need more revenues, we need politicians that spend less and citizens that rely less on government services.

Submitted by skerzz on March 27, 2014 - 3:56pm.

livinincali][quote=CA renter wrote:

In states with high income tax it might make sense to offer corporate tax breaks. For example Facebook made about 1.5 billion last year and CA corporate tax is 8.84% so CA got $126 million in corporate tax from Facebook barring some kind of tax break that I don't want to investigate. Facebook spent 6.4 billion to generate that 1.4 billion in profits and let's just guess that at least 75% of that expense is in labor costs. So 4.8 billion but let's just round to $5 billion in labor to make the math easier. Income tax in CA is 9% and for many people at Facebook it's higher than that. So let's just assume a blended rate of 8% on that $5 billion in labor. So CA collected 5.0*0.08 = $400 million in income tax from the Facebook employees. So CA get's 3+ times the amount of revenue from Facebook employee incomes vs corporate tax rates. So keeping those jobs is far more of a revenue benefit than losing them because of a couple of percentage points in corporate tax breaks.

Agree with the point you are trying to make -- increasing business activity is the best way to increase tax revenues. However, the math you used to calculate CA's tax revenues from FB has seriously flawed assumptions. 1 - Not all FB employees are California tax payers, 2 - The computation used to derive GAAP income (which you probably pulled from a 10K filing), is significantly different than the calculation of Taxable income. FB likely reported a significantly lower tax (vs. GAAP) income due to employee exercises of in-the-money stock options (Per the 10K, these "excess" tax deductions resulted in a reduction of cash tax liability greater than $600M in 2013), 3- California only gets to tax income attributable to California sources -- which is very likely significantly less than world wide income (apportionment rules).

Proof of this is in the financial statements -- FB's US state CASH income tax liability for all of 2013 was only $69M. You can assume less than 50% of this was paid to California due to apportionment rules and the Company's global presence.

My best guess is that FB pay little or no Corporate income tax in California due to the facts above and the availability of R&D tax credits.

Submitted by CA renter on March 27, 2014 - 7:40pm.

skerzz][quote=CA renter][quote=SK in CV wrote:
CA renter wrote:

We DO need more revenues, and there is no doubt that the state and municipalities are losing billions each year on these subsidies. They are not needed and, IMHO, can distort the market, as well. We need to split the rolls, at the very least, and there is quite a lot of energy behind this.

I disagree. We don't need more revenues, we need politicians that spend less and citizens that rely less on government services.

If you've ever had the opportunity to witness what these politicians have to deal with regarding all the different interests knocking on their doors and calling them all day looking for money, you'd know how distant that dream is.

Until we get citizens and various interests who want less from the government, we need more revenues.

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