What will the repeal of Prop 13 do to the market?

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Submitted by Doooh on January 7, 2011 - 12:41pm

I could only cross my fingers, but, I think Jerry is full of hot air.

Submitted by enron_by_the_sea on January 7, 2011 - 12:42pm.

Nothing

Submitted by jpinpb on January 7, 2011 - 12:47pm.

I don't understand why people are still against Prop 13. There are few people who are paying low property taxes, especially after this last bubble. If we get rid of Prop 13, 20 years from now, anyone who has bought a house recently will be praying for today's taxes IF values go up. IMO Prop 13 is just one more incentive for real estate in California. I always hear about the really high property taxes in NJ and NY. And they still have budget problems! Prop 13 really is a blessing in California, IMO. People should be thankful to have it, not trying to get rid of it.

Submitted by bubba99 on January 7, 2011 - 1:48pm.

Way back in the day, we passed prop 13 because there was no end in sight to rising property taxes. We set an absolute limit that could not be exceeded without the express vote of the people.

Imagine where we would be today if Prop 13 were not in place. The give aways to state employees would be double, and propertty taxes would be monotonically increasing to pay an ever increasing state employee benefit and pay package. We already have 9% sales tax, 9.6% imcome tax, rising auto and boat taxes. Im only sorry we did not pass a limit on all taxes

Submitted by Tillers on January 7, 2011 - 1:54pm.

It will enable the state to raise the property tax above and beyond 1%, where it's capped now.

Section 1. (a) The maximum amount of any ad valorem tax on real property shall not exceed one percent (1%) of the full cash value of such property. The one percent (1%) tax to be collected by the counties and apportioned according to law to the districts within the counties.

Submitted by SD Realtor on January 7, 2011 - 2:26pm.

I think that it is very telling that those in power view the solution to be increasing tax revenue rather then decreasing spending.

Lets all be honest here, do we really think that increasing tax revenues to the state will benefit in the long run? Sure the increased revenues will help reduce the current state budget woes but will it cure the disease? Didn't we JUST have a state income tax increase?

Submitted by poorgradstudent on January 7, 2011 - 2:40pm.

Nothing.

Gay and Lesbian couples already buy property together all the time (so do unmarried heterosexual couples).

I suppose long term there could be some minor inheritance issues, as gay marriage smooths out transfer of property if one partner passes away.

Submitted by faterikcartman on January 7, 2011 - 3:19pm.

WTF?

Obviously I missed something in the news. What happened/is happening regarding Prop 13?

Submitted by permabear on January 7, 2011 - 3:20pm.

poorgradstudent wrote:
Gay and Lesbian couples already buy property together all the time (so do unmarried heterosexual couples).
LOL am I missing something or are you mistaking Prop 13 for Prop 8?

Submitted by Eugene on January 7, 2011 - 3:39pm.

SD Realtor wrote:
I think that it is very telling that those in power view the solution to be increasing tax revenue rather then decreasing spending.

Lets all be honest here, do we really think that increasing tax revenues to the state will benefit in the long run? Sure the increased revenues will help reduce the current state budget woes but will it cure the disease? Didn't we JUST have a state income tax increase?

Didn't we also cut spending across the board at least three years in a row?

There's not much room to reduce spending even further, unless you want to compete with Texas for the largest percentage of poor people without health insurance (cut Medi-Cal), with Mississippi for the lowest K-12 spending per pupil and lowest school test scores (cut K-12), or to dismantle/cripple/cut loose the best public university system in the country (cut UC subsidies).

Submitted by enron_by_the_sea on January 7, 2011 - 3:48pm.

And (promised land of) Texas also can not budget their budget :)

http://www.businessinsider.com/texas-sta...
http://www.economist.com/blogs/democracy...
http://www.nytimes.com/2011/01/07/opinio...

Neither can Arizona (rest stop on the way to promised land)
http://www.azcentral.com/arizonarepublic...

Submitted by no_such_reality on January 7, 2011 - 3:58pm.

Eugene wrote:
SD Realtor wrote:
I think that it is very telling that those in power view the solution to be increasing tax revenue rather then decreasing spending.

Lets all be honest here, do we really think that increasing tax revenues to the state will benefit in the long run? Sure the increased revenues will help reduce the current state budget woes but will it cure the disease? Didn't we JUST have a state income tax increase?

Didn't we also cut spending across the board at least three years in a row?

There's not much room to reduce spending even further, unless you want to compete with Texas for the largest percentage of poor people without health insurance (cut Medi-Cal), with Mississippi for the lowest K-12 spending per pupil and lowest school test scores (cut K-12), or to dismantle/cripple/cut loose the best public university system in the country (cut UC subsidies).

In 2007-2008, 68.3% of California Students graduated...

20.1% drop out, 11% are GED, 5th year seniors etc.

In counties like Los Angeles, the drop out rate is 34.9%

34.9% The problem is much deeper than funding.

Submitted by faterikcartman on January 7, 2011 - 4:04pm.

Eugene wrote:
SD Realtor wrote:
I think that it is very telling that those in power view the solution to be increasing tax revenue rather then decreasing spending.

Lets all be honest here, do we really think that increasing tax revenues to the state will benefit in the long run? Sure the increased revenues will help reduce the current state budget woes but will it cure the disease? Didn't we JUST have a state income tax increase?

Didn't we also cut spending across the board at least three years in a row?

There's not much room to reduce spending even further, unless you want to compete with Texas for the largest percentage of poor people without health insurance (cut Medi-Cal), with Mississippi for the lowest K-12 spending per pupil and lowest school test scores (cut K-12), or to dismantle/cripple/cut loose the best public university system in the country (cut UC subsidies).

First, spending clearly has not been cut enough or we wouldn't be discussing this.

Second, it has been shown time and time again that pumping money into a school system does not translate to better educational outcomes. Isn't 40% of the state budget spent on education with little, if not negative, returns?

Poor people without health insurance? The American understanding of "poor" is wildly different than the rest of the world. Our so-called "poor" live rather well in comparison. Moreover, just because someone doesn't have health insurance doesn't mean they could not buy it if they so chose. Often they decide to gamble and buy other things like cars, cell phones, and televisions instead. That's not my problem. Moreover, catastrophic care insurance would be more affordable but for do-gooders insisting all policies include things like psych and maternity care or sex changes (or some other crazy non-essential) so that the free market is not free and, hence, not functioning properly.

I suspect that people who will shoot me or have me shot (that's what happens if you don't pay your taxes and resist arrest and prison) to take care of children I've not created, and adults over whom I have no control, will not be satisfied until entire paychecks are taken and then redistributed by those who know better (like themselves). The problem being, if one pays attention to history, is that people will not work to produce the excess they produce now and the system will eventually fail.

Moreover, one cannot have a socially liberal society contemporaneously with a fiscally oppressive and confiscatory one. Taking others [fill in the blank] at the point of a gun is inherently not liberal.

I suggest you read "The Road to Serfdom" by Hayak. The arguments are not new and the results remain the same.

Submitted by andymajumder on January 7, 2011 - 4:15pm.

faterikcartman wrote:
Eugene wrote:
SD Realtor wrote:
I think that it is very telling that those in power view the solution to be increasing tax revenue rather then decreasing spending.

Lets all be honest here, do we really think that increasing tax revenues to the state will benefit in the long run? Sure the increased revenues will help reduce the current state budget woes but will it cure the disease? Didn't we JUST have a state income tax increase?

Didn't we also cut spending across the board at least three years in a row?

There's not much room to reduce spending even further, unless you want to compete with Texas for the largest percentage of poor people without health insurance (cut Medi-Cal), with Mississippi for the lowest K-12 spending per pupil and lowest school test scores (cut K-12), or to dismantle/cripple/cut loose the best public university system in the country (cut UC subsidies).

First, spending clearly has not been cut enough or we wouldn't be discussing this.

Second, it has been shown time and time again that pumping money into a school system does not translate to better educational outcomes. Isn't 40% of the state budget spent on education with little, if not negative, returns?

Poor people without health insurance? The American understanding of "poor" is wildly different than the rest of the world. Our so-called "poor" live rather well in comparison. Moreover, just because someone doesn't have health insurance doesn't mean they could not buy it if they so chose. Often they decide to gamble and buy other things like cars, cell phones, and televisions instead. That's not my problem. Moreover, catastrophic care insurance would be more affordable but for do-gooders insisting all policies include things like psych and maternity care or sex changes (or some other crazy non-essential) so that the free market is not free and, hence, not functioning properly.

I suspect that people who will shoot me or have me shot (that's what happens if you don't pay your taxes and resist arrest and prison) to take care of children I've not created, and adults over whom I have no control, will not be satisfied until entire paychecks are taken and then redistributed by those who know better (like themselves). The problem being, if one pays attention to history, is that people will not work to produce the excess they produce now and the system will eventually fail.

Moreover, one cannot have a socially liberal society contemporaneously with a fiscally oppressive and confiscatory one. Taking others [fill in the blank] at the point of a gun is inherently not liberal.

I suggest you read "The Road to Serfdom" by Hayak. The arguments are not new and the results remain the same.

Great post...couldn't agree more, I am a fan of "faterikcartman"

Submitted by jpinpb on January 7, 2011 - 5:17pm.

After Prop 13 in the later '70's didn't they come up w/a way to get extra money for schools? Wasn't some of the money derived from the Lottery supposed to go to schools?

I understand that money is needed for cities and states to function and operate. However, I think that there is a great deal of mismanagement of funds.

I get very upset about discussion of lack of money in this state b/c people over the past decade of this bubble were paying 2 to 3 times the amount of property taxes due to the value of the properties doubling and the flipping going on.

Where did all the money go? I've said this before. It's like being in Vegas at a magic show. The money disappears and the more you give, the more it vanishes into the black hole.

I think if they get rid of Prop 13, it would be the nail in the coffin for real estate in California. JMO.

While I would like prices to come down, I don't think Prop 13 will help people. I'd like to think it would help the finances of this State, but as already mentioned, that is a bandaid.

People can't manage their money, and cities and states are equally unable to manage money.

Submitted by permabear on January 7, 2011 - 5:25pm.

jpinpb wrote:
I understand that money is needed for cities and states to function and operate. However, I think that there is a great deal of mismanagement of funds.

This has populist appeal, but all organizations are inefficient. Large corporations are just as bad as governments. I've worked at enough to know that misplacing a few million here or there is no biggie. It's basically purely a matter of size.

At some point you wind up in a cost-cutting death spiral. You can't keep parks and museums open, which then means you don't collect money from admission, which then means you have to keep them open even less...

Case in point:

http://www.blackvoicenews.com/news/45552...

The federal Centers for Medicare & Medicaid Services (CMS) announced on Monday, over $200 million in awards to 15 states that were able to significantly boost children’s enrollment in Medicaid. California will not be receiving any award money.

According to Hardy, cuts in personnel are responsible for the state missing out on federal dollars. “California is missing out of millions of dollars in federal money because it has failed to take the necessary steps to enroll children,” she said. A report by the Children’s Defense Fund cites more than 1 in 5 children are living in poverty, the highest rate in 51 years.

In Los Angeles there is not enough staff to process the applications. “Shortsighted budget cuts are symbolic of a larger problem,” said Hardy.

Submitted by XBoxBoy on January 7, 2011 - 6:31pm.

jpinpb wrote:
There are few people who are paying low property taxes, especially after this last bubble.

Not true. Here in La Jolla there are lots of people with tax basis that is a tenth of what their neighbors is. Several people on our street are original owners who paid 8-12k for their places. Their neighbors are paying taxes on a basis of 1.5 to 2.5 mil. I find that hardly a fair distribution of the tax burden.

Submitted by Eugene on January 7, 2011 - 6:44pm.

Quote:
First, spending clearly has not been cut enough or we wouldn't be discussing this.

Depends on what you mean by "enough". Not enough to close the budget hole. Enough that there are no easy solutions left.

Quote:
Second, it has been shown time and time again that pumping money into a school system does not translate to better educational outcomes.

Yes, it does. States with high K-12 spending per capita, (MA/NJ/CT/VT/...) tend to have high test scores and high apple-to-apple (race-adjusted) graduation rates. We spend 40% of the state budget on K-12, but that 40% is quite low by national standards. (Which is further proof that the state budget is bare bones, without much meat left to cut.) Last year California ranked 43rd out of 50 states by spending per student. NJ or VT spend twice as much as we do. Cutting the spending any further does not strike me as a wise experiment.

Quote:
Moreover, just because someone doesn't have health insurance doesn't mean they could not buy it if they so chose.

I don't want to get into a full scale healthcare debate here, but I'll just say that an average individual family health plan costs $6,500/year and comes with a $5,000/year deductible. And it does not cover sex changes. (Not that sex changes would account for more than 0.001% of the total premium, even if they were covered.)

Accusing people with 20-30k/year incomes of buying cell phones over health insurance seems silly.

Submitted by SD Realtor on January 7, 2011 - 8:27pm.

Well Eugene, it is obvious by your logic that the only solution is to continue to raise taxes. Clearly you have pointed out that we have slashed spending enough or perhaps to much. It is evident to me that the state legislature is doing a fantastic job and that this tax hike, whether it is wiping out prop 13 or simply piling more on top of the already high state income tax we pay will surely solve our budget problems and we will never have to raise taxes again after that. Surely you can point out several cases when California taxes were increased and then were lowered again after shortfalls were met.

Submitted by jpinpb on January 7, 2011 - 8:57pm.

I do not believe that giving them more money is the answer. Take a look at the state of New Jersey. They pay high property taxes AND have to pay to drive on the highways. They still have budget problems. I don't know what the solution to this dilemma is. All I know is if you give more money, it will be gone and they will still need/want more.

Submitted by SD Realtor on January 7, 2011 - 9:12pm.

I agree JP I do not know what the solution is either. It is an epidemic though not limited to California. It is at every level of govt we have. I would agree with the argument that using other states is a path to success however under closer examination it is intuitively obvious that those states that are not underwater because the differential in the populations are drastically different.

The way this state operates simply does not work and the steady drumbeat of increasing taxes has not solved the problems.

Submitted by bearishgurl on January 7, 2011 - 10:13pm.

XBoxBoy wrote:
jpinpb wrote:
There are few people who are paying low property taxes, especially after this last bubble.

Not true. Here in La Jolla there are lots of people with tax basis that is a tenth of what their neighbors is. Several people on our street are original owners who paid 8-12k for their places. Their neighbors are paying taxes on a basis of 1.5 to 2.5 mil. I find that hardly a fair distribution of the tax burden.

Absolutely agree, XBoxBoy. In my older "tract" of 75-80 properties, there were 8 homeowners paying "market rate property taxes" last time I looked. There have been 2-3 recent sales since then which were all "arms-length," I believe. That would make approx 10-11 homeowners paying market rate property taxes today. I am one of those "unfortunates." The neighbor on the right side of me pays approx $792 year and the my neighbor on the left side of me pays approx $380 yr.

These close neighbors of mine are NOT orig Prop 13 homeowners. They are HEIRS of prop 13 homeowners, age 61 and 64, respectively ("baby-boomers," if you will), who "inherited the Prop 13 tax treatment" from their last living parent. Both "inherited" their properties in the early eighties and have been enjoying this low tax rate ever since. I am also a "baby-boomer," a few years younger than my neighboring homeowner-heirs. I currently pay approx $3100 yr in property tax (after two reductions by the county assessor). The first reduction was obtained by me through a stipulation in lieu of a pending assessment appeal hearing and the second reduction was voluntary, by the assessor. Without these recent reductions, my current annual property tax would be approx $4600.

How is this fair to me or any other market-rate buyer in the last 20 years?? I'm not a RECENT buyer (almost 10 yrs. ago) and actually got a good deal at the time of purchase, including a large cash credit at COE. How are these two "heirs" (out of several hundred thousand in CA) any less able-bodied than myself to pay a market-rate property taxed based upon the stepped-up value at the time of death?? This is the way OTHER STATES handle this issue.

I understand that 75+ year-old seniors need an affordable place to live until they pass. That was the original purpose of Prop 13, to protect seniors from having to sell their principal residence, due to exorbitant property taxes. But the ability to "pass on" its benefits to heirs makes Prop 13 "unjust enrichment" to CA heirs in perpetuity (several generations hence), simply by virtue of a parent/grandparent buying the property before April 1978.

Do Piggs see all these "heirs" and "heirs of heirs" any LESS able-bodied than you and I to pay "market-rate" property tax.

I believe in Prop 13's original intended purpose but propose that this benefit die with the last (pre-April 1978) owner.

Submitted by ILoveRegulation on January 7, 2011 - 10:06pm.

jpinpb wrote:
I don't understand why people are still against Prop 13. There are few people who are paying low property taxes, especially after this last bubble. If we get rid of Prop 13, 20 years from now, anyone who has bought a house recently will be praying for today's taxes IF values go up. IMO Prop 13 is just one more incentive for real estate in California. I always hear about the really high property taxes in NJ and NY. And they still have budget problems! Prop 13 really is a blessing in California, IMO. People should be thankful to have it, not trying to get rid of it.

Proposition 13 is a horrible law. It allows for wealthy, old people to pay little tax and then suck like a leech off the income taxes of young workers. It's really disgusting to me as it benefits the superrich who don't do anything while penalizing productive young workers.

Those who have large estates should be paying the highest taxes as they are using up all the resources, but instead they are paying the least taxes. Plus, raising property taxes would cause the price of real estate to come down, benefiting young people.

Proposition 13 benefits the old and unproductive and should be abolished. Let's abolish Proposition 13, raise property taxes, and lower income taxes. This would do nothing but make California more productive.

Submitted by ILoveRegulation on January 7, 2011 - 10:14pm.

bearishgurl wrote:

Do Piggs see all these "heirs" and "heirs of heirs" any LESS able-bodied than you and I to pay "market-rate" property tax.

Amen. How can anyone be for a feudalistic law like Proposition 13 which allows for a decreased tax rate to be passed on to heirs and heiresses who have done nothing to earn it? I guess some people miss the Middle Ages when the vast majority of people were peasants forced to work for wealthy landowners who came about their land wealth by inheriting it rather than earning it.

Submitted by bearishgurl on January 8, 2011 - 12:53am.

If Prop 13 were repealed, what would it do to the market?

It would put a more inventory out there. Even if it is just repealed for "new and subsequent heirs," a decedent's property would likely be put on the market instead of one heir "buying out" the others, due to the permanent low tax basis. The heir(s) will have no incentive/reason to hang onto a deceased parent's property and will just want to "cash out."

As it stands, many more decedents' properties in CA are actually "handed down" (by bequest or quitclaim deed) than are marketed, due to the "Prop 13 perk," which allows (future or present) heirs to live in these (often free-and-clear) properties practically free (+ ins/utils).

In addition, when Prop 13 homeowners get ready to move in with kids or to an assisted-living facility, their property will be marketed instead of one of the kids "automatically" moving in to "hold down the (free) fort." There's no reason to hang onto it with market-rate taxes attached to it.

Submitted by Coronita on January 8, 2011 - 8:39am.

ILoveRegulation wrote:

Do Piggs see all these "heirs" and "heirs of heirs" any LESS able-bodied than you and I to pay "market-rate" property tax.

Welcome back IForget or is it BigGovernmentIsGood? Why aren't you using your original handle?

Submitted by Coronita on January 8, 2011 - 8:40am.

Of course we like to focus on things that would make housing more affordable. Anything at this point to crash the housing markets..Lol.

Submitted by SD Realtor on January 8, 2011 - 9:14am.

Yeah I know FLU. Obviously there are just so many of these wealthy old people around. They just flood the San Diego area. It also goes without saying that there are tons and tons of kids who have these homes from there old but not dead parents and are not paying the so called market rate property taxes.

It is almost laughable.

At least the opponents for prop 13 should argue other problems with it (as there are many) and they don't have much to do with residential real estate.

Submitted by sdrealtor on January 8, 2011 - 9:48am.

I dont think anyone should be able to pass down their prop 13 tax basis to their heirs. Well one person should...ME. And there in lies the problem with repealing it.

Submitted by jpinpb on January 8, 2011 - 10:25am.

BG - you do live in an older neighborhood, as I gather from your posts, I think down in Chula Vista area?

Now think about San Diego county in general. Then think about all of California.

Do you realize how much new construction we've had in the past 10 years? People that purchased w/in the past 10 years are not paying low property taxes.

I think those people far outweigh many of the few people who are paying low property taxes.

Now let's address some of the heirs of these old properties. If they are smart, they will keep them. But so many of them have homes of their homes they purchased w/their own families. Brothers and sisters are likely to sell the outdated home of the parents so they can split the proceeds and use the money for their own struggling payments. So many people are not working or have less hours or cut pay.

I don't have kids of my own and I still think we should not take away Prop 13. Do that and your taxes will be going up. Don't like the amount you're paying now. Stand by to stand by for it to be way higher.

Submitted by peterb on January 8, 2011 - 10:47am.

Prop 13 is unfair as two homes within feet of eachother can have two vastly different tax payments. The recent buyers carry the tax load, while the people that have been "enjoying" the same govt services for decades pay far less. Govt services are not a capital investment to be enjoyed over the years. They are on-going costs that must be paid every month.

This may put downward pressure on home prices as the threat of rising property taxes may scare home buyers. If the law was structured that way.

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