“The meltdown in the housing market and slowing California economy are likely to create a shortfall in the state budget next year of as much as $11 billion, according to estimates made Tuesday.”
“[C]ollection of taxes from the state’s three major sources of income – personal income tax, sales taxes and corporate taxes – have been sliding downward since spring.”
“We went through the reserves that were built up in the Google years,” [Stephen Levy, senior economist for the Center for Continuing Study of the California Economy] said. “And now with the housing market, we have all major tax forecasts going lower.”
∙ California faces potential $11 billion deficit in budget next year [SFGate]
With Sac’to and City Hall unwilling to reduce the bloated, grossly overpaid public employees, the only way to ‘finance’ this would be by (a) increased taxes and (b) further bond issues, which will haunt us for years to come. Rent controlled tenants will not pay anything of the increased property (and ancillary) taxes, Muni drivers and city employees will not see any pay cuts, but the property owners in SF will continue to get screwed while the value of their assets continue to diminish.
Hey, I am all for getting rid of rent control if the state will get rid of Prop 13.
Property owners “continue” to get screwed? Are you fricking kidding me? When I think of people who have been screwed, by either the state or the city, property owners are not a class of people that comes to mind. The reverse maybe…
When (and if) their assets diminish in any kind of substantial way, I think that will have more to do with the market considering them overvalued in the first place as opposed whatever marginal impact property taxes have.
For crying out loud, we are talking about 1% here. And *that* is too much for you? California has some of the lowest property taxes in the United States, despite having the most expensive homes.
Second of all, thanks to Prop 13, there will not be any increase in property taxes so you can quit worrying your little head over that.
Why don’t you go read up on Prop 13 and the effect it has had on our housing market. Young couples and families have been subsidizing the wealth of older homeowners and their families, and those lucky enough to get in before the proposition. A fantastic transfer of wealth has occured from working young families to older folks who aren’t even working, and from the public in general to owners of commercial property. This has also had the affect of introducing a great deal of friction in the real estate market, and of course has been another example of the rich getting richer, at the expense of the poor and the working class. This isn’t capitalism, it’s oligarchy.
http://en.wikipedia.org/wiki/California_Proposition_13_%281978%29
I agree that the city should be able to tax that hypothetical mansion on Pacific Street which has been paid off since ’77 as worth more than $250K when it’s actually worth $20 million. But I don’t know how many properties there actually are like that anymore around here. They’re out there, but we’re talking ’78 now. Properties that have changed hands in the last six or seven years are subject to pretty hefty property tax. Again, property tax is deductible if itemized on a Fed sched.
imagine if the democrats took away the mortgage deduction? we’d be just like canada. maybe we’d get socialized medicine in return?
Property owners “continue” to get screwed? Are you fricking kidding me? When I think of people who have been screwed, by either the state or the city, property owners are not a class of people that comes to mind. The reverse maybe…
Uh, yes. Property taxes pay for a lot of the services in this city that people who rent use. I pay 7K a year in property taxes and use very little of the city services. Life long renters think anyone who owns is rich, which is not true. I’d rather see a more equitable way of raising funds, like raising the cost, when possible, of the city services to a level that actually pays for them. If that ever happened, we’d see how fast the bloated SF city government would shrink.
Prop 13 still prohibits upward reappraisals (generally) no matter when you bought your place — it is not limited to pre-’78 purchases. So anyone who bought in 1980, 1990, or 2000 is still paying taxes on a much lower basis than someone (generally a younger buyer) who bought an equivalent place in 2005.
Here is a dilemma for California with prices now falling pretty considerably statewide. Are we going to see a flood of downward appraisals sought by owners to lower their tax bill for homes that were bought in the last three years? I can’t say I’m an expert in Prop 13, but I think this would be proper.
Prop 13 still prohibits upward reappraisals (generally)
No, it just caps them to something like 2% a year. I owned a place for 7 years, and in that time the property taxes went up about $1000/yr.
About lowering the tax bill (assessed value) anyone who was smart would try to do that every year. Depending on the assessor you get, it can be done very easily (I did it for 4 years, the most it ever took was an email).
Kevin Drum had a good comment on this situation:
link http://www.washingtonmonthly.com/archives/individual/2007_11/012446.php
Heck I would be ok if the just got rid of the ‘Change of Ownership’ exclusions
• Inter-spousal transfers
• Transfers between registered domestic partners
• Parent-child transfers
• Grandparent-grandchild transfers
• Transfers of the base year value (Proposition 13 value) for persons 55 or older
The exceptions for passing the property down through a family without any reassessment is bad enough. But what really gets me is, if you are over 55 can sell your old home and build a replacement property (that has the same or lesser value) and transfer the property tax assessment value to the BRAND NEW HOME!
I mean come on!
Prop 13 should be repealed so the free market could actually take over the price of housing. People who bought just 5 years ago would see their property taxes double and of course that 200M mansion shoudl be paying mroe property tax than that of a 250K home. I think this would level the playing field. Some older oners may lose their homes right away but it would be better for the housing market in the long run and go a long way to keep the market from bubbling again.
sorry forgot the link to the exclusions document
oops and I should have said build a new home with same, or less , MARKET value of the current home.
So if they bought that 250k home that is now worth 20 Million (or whatever) and then the sell the $20 Million home they can build a new $20 Million home and transfer the tax assessed value of the OLD home to the NEW home!
Repealing Prop. 13 would cause immediate and substantial downward pressure on house prices in San Francisco. The only question is how long such a repeal would take to manifest itself as lower prices. For this reason, it will not be repealed absent a prior substantial decline.
Rent control is a similar issue. Cities that have adopted rent control have seen substantial increases in equilibrium rental prices. (Consider just Boston, New York City and San Francisco, for the most glaring examples). The ideas that rents have risen because of population pressures, or that there’s no available land, are silly.
Price controls by government, whether control of taxation levels (Prop 13) or rental prices (rent control) always have severe unintended consequences. Wait, maybe they were really intended after all?
Public employers definitely need to re-examine their retiree healthcare benefits and the expected “vesting” of those benefits. San Francisco offers retiree healthcare benefits to those persons who work for the City for 5 years. This is a ridiculously low hurdle considering the City pays its employees salaries fairly similar to those salaries paid by private businesses these days (thus, this is more like berries instead of a necessary carrot to get employees).
The State of California has about 1/4 million employees, and the current estimate on the liability for retiree healthcare that active and retired workers have already accrued (or earned) during prior work years is approximately $46 billion (last I heard).
There is a public finance tsunami for all public entities in this Country – California is just one of many.
By the way, renters pay for property taxes as part of their rent, no? The statement that renters use public services that they don’t pay for is ridiculous.
Rent controlled renters pay very little toward property tax, building upkeep, or anything worth mentioning. I suppose they do account for utilities.
Prop. 13’s 2% cap in increase in property tax should be repealed for commercial properties. People move or die, and then properties are reassessed. Land owning corporations live forever, so commercial property rarely gets reassessed. The 1% (plus bond assessments) rate can stay, but commercial properties should be reassessed regularly, so the basis for the 1% tax is brought up to market value. As it stands now, the proportion of property tax paid by corporations keeps declining.
Do any of you actually imagine that a state with an overwhelmingly graying older population would vote for a measure that would INCREASE their property taxes?? I.e. the repeal of Prop. 13. Not gonna happen, EVER. To hear the old folks say it “young people use all the resources like schools — old people just sit at home and do nothing. So we shouldn’t have to pay extra taxes for services we don’t use.” Uh, right.
Let the state go bankrupt & burn, baby, burn!!
By the way, renters pay for property taxes as part of their rent, no? The statement that renters use public services that they don’t pay for is ridiculous.
The max permitted % increase in rent (for rent controlled units) is nowhere close to the increased annual appreciation of the property + increased property taxes + CPI increases. More important is that fact, that when a property changes hands the new owner’s tax basis jumps a huge amount, whereas the rent stays static!
While I have no empirical evidence to back this up, I would bet renters use far more public services AND benefits, than property owners do. Most owners would be automatically denied for means tested benefits, simply because they own property; no such hurdle (on this count) for renters!
Prop. 13 ain’t goin’ nowhere. No judgement here, just political reality. (“third rail” of politics . . . or something like that)
I believe that’s a separate tax policy and public services discussion.
I stand by the statement that renters do contribute to property taxes – and I ridicule the idea that renters contribute $0 to property taxes. Then there are sales and use taxes and other fees that everybody pays regardless of whether or not they are renters or owners.
i have to agree with jamie here, as an owner. if i rented my place out at a price that helped me cover my costs, that would be instrumental in my ability to pay my property tax. the rent control bs causing all of our problems with lack of housing, imo, is another subject. rent controlled properties should not even have to pay property tax.
I agree that Prop 13 isn’t going away. I just think it should.
But hey I also think rent control should go away too.
Oh and can we do something about the crazy anti development policies of SF while we are at it so we can actually build some new housing around here.
Let the market work it out and let the baby boomers who want SF to stay trapped in some ’67 summer of love fantasy of SF eat it.
badlydrawnbear.
I totally agree with your post.
Spencer
did you guys all vote yes on H?
put your money where your mouth is or shut up!
How about the state spending less! We all have to live within our means. And I resent having to pay more taxes than I already do. I remember paying $500 a month on my first home in property taxes and found out that the city was paying out $500 a month to the homeless. I chose to work hard, save and sacrifice to own my own place and in doing so I have to subsidize people that will do neither! And to the moron who says it’s only 1%, fine, I can send you my $12,000 bill! And NO, I’m not rich, just making a go at it!
I find it amazing that we continue to pass bonds to cover basic things that should already be in the budget, since most people in this city don’t pay property taxes, why not, let the property owners pay for everything.
fwiw, i sent this same story that came out about ny state and nyc expecting a similar shortfall a few weeks back to supervisor mirkirimi. i asked him to share it with daly to try and educate him on the coming shortfall and to never count your chickens, so to speak.
daly and peskin are a cancer on this cities budgeting proces right now.
“San Francisco offers retiree healthcare benefits to those persons who work for the City for 5 years…”
My recollection is that this was approved by voter initiative in the late 90’s, not through collective bargaining, and that NOTHING was asked from the unions in return – no salary or productivity concessions, no nothing. I find it absolutely astonishing that SF saddled itself with a $5 billion retiree health care obligation, just like that.
It is easy to spend the next generations money, I suppose. Thanks Baby Boomers!
“How about the state spending less! We all have to live within our means. And I resent having to pay more taxes than I already do.”
A typical example of American bad values, in my opinion.
This state has slashed funding for higher education, and we have a huge prison budget. The guv issued bonds rather than get California onto a sustainable path.
The American Way didn’t used to be kiss rich butt for any reason and never stop. We used to be able to tax ourselves to fund our development. California built a world class university system, and has the high tech sector to show for it. What do we do? Hack it to bits. Disgusting.
Now the middle class can’t even educate itself without going tens of thousands into debt.
My partner and I are on the path to getting an E.U. passport, for certain family reasons we qualify.
This country is going downhill fast because of greed and bad judgment. The E.U. is run by grownups and not only that, a large per cent actually vote.
In the long run, voters get the democracy they deserve.
Wow, some of you guys are really a piece of work, aren’t you?
“I pay 7K a year in property taxes and use very little of the city services.”
If your house catches on fire you’ll dial 911, right? And you’ll expect the fire trucks to come, right? And you live in your home reasonably free of the fear that someone will break in and kill or rob you right? Maybe that city service called “the police” might have something to do with it? What about the water you drink? And presumably you use streets to get around? You probably like to complain about potholes but you aren’t driving an ox on a muddy road, are you?
The fabric of society cannot operate if every member of said society is given a line item veto on what they will or will not pay for, based on what they “think” they use or don’t use.
You pay $7k a year? How sad. I pay more then that a *month* in sales taxes for my business, and I’m not whining. If you don’t want to pay taxes then drop out of society and go live in the desert. But don’t suck from the teat of civilization and then complain when you are asked to give back.
“While I have no empirical evidence to back this up, I would bet renters use far more public services AND benefits, than property owners do.”
I would argue the exact opposite. Not only do property owners directly benefit from most of the public services we all use like water, police, fire, street cleaning, park services, capital improvements, etc. But they also benefit additionally from these city services because they increase the value of their property! (Where would Dolores heights be without Dolores Park? etc..) And the services they don’t directly benefit from (such as Muni and health services for example) they indirectly benefit from by either allowing their renters or employees to get to work, or by keeping them alive and off the streets which also coincedentally increases the value of their property.
“I remember paying $500 a month on my first home in property taxes and found out that the city was paying out $500 a month to the homeless. I chose to work hard, save and sacrifice to own my own place and in doing so I have to subsidize people that will do neither! And to the moron who says it’s only 1%, fine, I can send you my $12,000 bill! ”
Your $500 did not directly subsidize the homeless in the way you are implying here. Only 57% of Property taxes go into the general fund, and they make up less then a third of the general fund which is where homeless care funding comes from. The general fund itself is 48% of the city budget, which means you contributed roughly $2 a month to helping the homeless, or a little over a nickel a day. I know that must have been quite a strain on you at the time, but somehow you persevered and are now paying twice as much in property taxes, so apparently it didn’t set you back that much. Was it really that hard lending a puny little hand to those less fortunate?
And while it’s true that many of the less fortunate probably took the money and did god knows what with it, there are always some every year who use it to get themselves off their feet and wind up contributing a great deal to society. Did you catch “the pursuit of happyness”? Chris Gardner was one of those homeless freeloaders you are spouting about. If you were around then some portion of your $2 might even have helped feed his kid.
As far as the $12k you are paying now, again I feel your pain. I know it’s tough having one of the lowest property tax rates in the country, and it would make your million dollar home even nicer if you didn’t have to pay any taxes at all. :/
I don’t know why you feel entitled to an existence free of responsibility but that’s the breaks when you are part of civilization: you are expected to give something back, not just to help yourself, but also to people further down the ladder who could use your help. If you are religious at all it’s a theme that runs through most religions. You might want to think about that.
My goodness, some of the selfish, greedy, entitled and arrogant comments I see here really just turn my stomach, not out of disgust, but out of pity. It must be a miserable existence to be that self centered.
Finally some common sense. Thank you missionite. Better than discussing heated towel racks or the best heck of a deal in town 🙂
Thank God for missionite–who said what I had no words or energy to. I almost died when I read some of the stuff on this post. Am I still in San Francisco, or has this suddenly become middle America?
I don’t mind paying my fair share for everything – and I can reluctantly see the logic in getting rid of Prop 13 – but a fundamental problem exists in San Francisco and at the state level in Sacramento. There is simply way too much governmental spending. The size of the SF and CA budgets are truly mind boggling. The city 2008 budget is larger than the majority of state budgets in the US. The total tax burden on most families (at least productive ones) is unconscionable. There is waste and unneeded bureaucracy in ever corner of the city and state governments. Most civil servants (even our respected fire and police departments) are way overpaid and underutilized. Seven states have no state income tax – why can’t CA get by without one? In fact, we have the highest marginal state rate in the country except for Vermont. Our sales tax rate is the highest in the country. The city has a huge tax burden on businesses which contributes to our ridiculously high cost of living. The city and state budgets need to be completely zero-based – they are criminally out of control. Let Arnold wrestle with the budget deficit – and find a way to CUT SPENDING to balance it. That’s why we elected him.
Oh please, missionite, spare us the sanctimony. I’m not impressed.
Mind you, I’m not reflexively anti-tax. I’ve voted repeatedly to tax myself when I perceive value for my tax dollar. But I draw the line at a grotesquely bloated city government that fails with the most basic tasks of city governance, like cleaning streets and filling potholes. This, despite having a stunning budget larger than that of 20 states and 28,000 highly compensated city workers – the highest ratio of city workers anywhere in the country, even allowing for SF’s status as a city and county. I’ll say it loud and clear: we’re not getting our money’s worth, and it’s time for SF city government to go on a starvation diet.
Free of responsibility? What the hell do you know about me? I pay taxes, I work, I’m not complaining about my fair share. Where the hell is yours? Where is the fair share of all the bums that feed off everyone else while you pathetic sypathizers don’t do a damned thing to correct the problem, just feel that’s its a good thing. Everyone benefits and what I’m saying is that I don’t want have to pay for those that also benefit and don’t pay. Yes, I live in a 1 million plus home, but I’ve worked for every single penny of it, educated myself without help from anyone, and never asked for help. What the responses against me is what is truly wrong with this country. The entitlement attitude without having to actually pay YOUR fair share is what is causing the problems this country faces. I am greatful that my hard work and determination have paid off, and don’t need anything from anyone at this point. Besides, I have given out more in charity and yes, helping the bums, more than some of you losers pay for rent in a year. It is obvious to me that if you A holes had to work as much as I have you may have some enlightment.
How does this tie to the subject at hand? Well for one, it’s about property taxes. If prices do fall and property taxes decrease, are the none property owners prepared to have to pay for the deficit? Doubt it, just have the RICH pay for it all. I sure wish the entitlemen attitude gets canned out of people taking responsibility, otherwise, economics will take care of it for us and we will all suffer.
If one defines taxes as taking from one group to give to another, the taking should be as equally shared as possible.
It’s my opinion property taxes are an awful way to fund for human services. Assessing propery fairly and equally is difficult, arbitrary, and expensive. Either newer property owners subsidize older owners, ala Prop 13, or older property owners risk losing their property as housing values escalate while on fixed incomes. A better way to fund would be either sales (consumption)or income tax.
The bigger problem is the growing influence, (some say intrusion) of government in our lives. What would never be considered the role of government a generation or two ago, is now taken for granted. The size of government expands and we assume it is all for the better. Unfortunately, so does the cost of government. I have not researched this but I would bet the cost of government has grown at a multiple of CPI, or personal income for almost any timeframe since World War Two.
We spend a great deal of time arguing the merits of government programs, (Usually the payers howl at the recipients) but little time whether we should have, or can afford the programs in the first place. The next time, you as a voter, hear the complaint about “special interests” think of how many you belong to.
Cary
View Lover,
I know about you what you post. No more, no less.
I will once again point out that you live in a state that has one of the lowest property tax rates in the country, and indeed the civilized world. So when you complain about how much you pay in property taxes, it strikes me as more then a bit whiny.
If you lived almost anywhere else, you would be paying far more. In fact, it might be inferred from your posts that it is precisely our low property tax rate that enabled you to buy your million dollar home in the first place.
As for where my fair share is I will point out that I don’t take any entitlements at all. I am a renter, but I don’t enjoy any more city services then you do. I own and run a business. My *monthly* sales tax bill alone is often higher then your *annual* property tax, and then I have to pay federal, state, and city taxes and fees on top of that. So yes, I pay a lot of fricking money, and no, it isn’t fun to cut a check every month for thousands of dollars. Also, unlike property tax, California has the highest sales tax rate base in the country. Period.
As for your contention that your taxes are paying for bums, from what I can tell from looking at the city budget, it looks like roughly 1.5% of the general fund went to helping the homeless, an investment I might add that helps keep them off the streets, probably saves money in a number of different ways, and of course also boosts property values. Property taxes contributed to 1/3 of that 1.5%, so running the numbers it appears that your net contribution to the homeless is approximately $8/month which strikes me as hardly the miscarriage of justice that you are making it out to be.
The majority of your property taxes, by statute, goes to paying for education, which by your own admission is something you have taken advantage of. It’s possible of course that had a priveleged youth and never once stepped foot in a public institution, but I’m willing to bet that at some point or another you directly benefited from people before you who paid their property taxes. Now it is your turn.
Great post Cary, much more articulate and provocative than most I’ve seen here, specially my heated rantings.
I find it amazing that the state budget and spending grew at the same pace as the housing market. Just goes to show that you feed the beast and it just keeps getting bigger, and not necessarily for the better. That’s the real problem I have with the system. The lotto for example, was implemented to fund education, but the state decided to use it for the general fund and now we don’t have enough teachers, etc., and we sometimes have to pass bonds for additional eductional programs. I mean has anyone voted in the past and seen all these measures for items that we believed were already in place? Safe drinking water and libraries to name a few. The politicians just keep taking and taking and then impose even more sanctions on us.
One more thing. Look at Daly, the father figure for the do gooders. He fights for more from the developers,GOOD GUY. But then buys below market cause he’s poor, gives himself a raise that pushes him where he does not really qualify for below market housing, i.e, takes away from someone who does qualify, and does he give back the property, pay the market rate, or make up for it by paying a higher percentage on property taxes? I doubt it, just confirms the hypocrisy. True alturism is not in how or what you think, but what you do, and it should not be expected from the government. Just my opinion.
Missionite
True, lowest property taxes than any other place, but high property values, and an income tax, and a much great overall cost of living. So what if the taxes are maybe 5% in another state, the national average in housing is roughly $220K, same amount, and my million dollar house is probably only really worth $200K anywhere else. It is roughly the same.
As a renter, you are entitled to rent control more than likely, and as such you are already being subsidized unless you just started renting, but you will be as long as you stay there.
By your calculation of my $8.00 a month, that’s what my taxes pay out. It does not take into account the money that I hand out to people or give to charity. However, that is my choice and I want to keep it that way, not have it imposed on me as punishment for being a homeowner.
As far as education. It took me 8 years to graduate because I had to pay for it as I worked. So because I attended a public university does not mean that I benefited from the system, I was also working and paying taxes for it. Granted, I know things are much worse for kids these days, more materialism and republicanism have made it very difficult. But this is where people can make a difference, vote for change. I did not take out loans, but nowadays, the government backs the loans to private investors which then gouge the students for “risk” they do not really have as the goverment guarantees the loans anyway.
Rise up in protest! I don’t know, but tackle the specific issue.
The only privalidge I have is having been born dirt poor and a minority and actually making something of my self.
I am very scared about our nations future. I don’t disagree that there are great disparities, and much needs to be done, but more taxation on property values is not the answer, and that’s what this topic was about.
“My *monthly* sales tax bill alone is often higher then your *annual* property tax,”
That’s a bit disingenuous. The sales tax you’re speaking of is not something “you’re” paying. Your customers are paying the sales tax. You’re just forwarding it onto the government.
“So yes, I pay a lot of fricking money,”
No you don’t. Your customers do. But don’t let that get in the way of your rant.
“As for your contention that your taxes are paying for bums…..”
I suspect that the original poster isn’t concerned with the $0.05 per day it’s costing him as much as he/she is concerned with the general trend. You could tax people $0.05 now, and it would be overlooked. Do it again, and it probably is still overlooked. Continue to do it and those $0.05/day bills get pretty big after a while. At some point the gov’t needs to look at all these $0.05/day bills and determine which are worthwhile. And your rant about Chris Gardner was nice and all (a person who never benefited from such a hand out anyhow), it’s hardly compelling evidence that this $500/mo to every homeless person is a good spend of public money. Give a person a fish……
Now I get that San Francisco is not capitalistic and is more socialistic in nature, but are you kidding me?!?!? Paying the homeless? How this ever passed as a measure I’ll never understand.
Many of the current problems with the cost of housing in San Francisco stems from the politics of the city. It’s damn expensive to keep up all this socialistic behavior, and it legislates the local economy.
Im not sure why it is so difficult to repeal Prop 13. Most of the residents of this state are not property owners.
Being a property owner usually means you are more wealthy and the mortgage deduction more than makes up for the extremely low property tax.
Effectively, wealthier homeowners are taxed less than their almost as welathy renter brethren.
I agree that income tax is too high, but property tax is too low IMHO.
Prop 13 will never be repealed because the rich rule the body politick of California. Also because homeowners have a greater tendency to actually go to a polling station and vote. Last, property tax is tax deductible.
New rant: I guess H is getting creamed. Somehow the progressives managed to get the word out that more parking spots for individuals automatically means 10,000 more people would go out and purchase an automobile. Baloney. Most people who need a car already have one.
how much is your property tax bill spencer?
“Some older oners may lose their homes right away but it would be better for the housing market in the long run and go a long way to keep the market from bubbling again.”
Oh, that’s a good tradeoff. Which older homeowners deserve to lose their homes? That’s the whole reason why Prop.13 passed. Homeowners were losing their homes because municipalities wouldn’t/couldn’t budget expenditures each fiscal year. Yes, I’m an older San Francisco homeowner. I’m retired, not certainly rich by any means, and living in the home with my wife that was purchased in 1981, for #115,000. My payments then were more than $1300/month with a first mortgage at the best rate of that time, 15/1/2%! The house is paid for, the kids are gone, and after working more than 40 years, I’d like to stay in this home for as long as I’m able to. It’s worth approximately $700K now which, if you think about investment choices for the past 26 years for that $110,000K may not have been the best option. Other posts are correct, there is no way Prop. 13 will be repealed. It is the third rail of California politics.
how old are you john? why are you still sitting on that equity? i only ask because my parents in law did the same thing with their place. we tried to convince them to sell it and see the world. they missed a window to really cash in a couple of year ago when it was paid off.
Cary,
I don’t define taxes as taking from one group and giving to another. I define taxes as something we all pay, which (in theory) is for the greater good of all.
In a perfect world taxes go towards supporting the goverment, which in turn, by viture of our elected representatives, is supposed to be making decisions that benefit all of us. And while reality sadly does not match this rosy picture, it also has to be truthfully said that most of your taxes do in fact go towards basic services which everybody, including yourself, benefits from: education, police, fire, infrastructure, water, debt servicing, etc. Take a look at the budget this year and you’ll see this is the case. Entitlements, benefits and distributions to people that only pay modest amounts into the system are a small fraction of our budget expenses, and eliminating them would do little for your tax bill but would dramatically affect your quality of life. In other words, you can’t have it both ways: you either pay a little more in taxes and get homeless people off the streets (down 30% this year if you take Newsom at his word), or you can pay a lot more in reduced property values and watch San Francisco turns into a New Delhi-esque horror show of streets lined with men, women, and children, begging, starving and dying everywhere you turn.
We have determined it is for the greater good to provide some services to those who need it, a decision most thinking people agree with, given the alternative.
You make the case that a better way to fund city services would be through income or sales tax. I would argue that we are already there. California has among the lowest property tax rates in the United States. However it has the highest sales tax rate base. No state is higher.
Most economists consider this a regressive tax, in that the poor wind up paying a greater share of their income in taxes then the wealthy.
For example, someone who makes $50k a year will be assesed sales tax on nearly all of it, since they will need to spend most of their income on neccessities, giving them a base tax rate of 8.5%.
Meanwhile someone who makes a million dollars a year, will not need to spend substantially more then $50k on neccesitites, but even if they spend twice as much, they still have a base tax rate of less then 1%.
If you feel the wealthy should pay less taxes as a percentage of income, then this will certainly be an appealing solution.
A progressive income based tax has a better chance of being fair, but as we all know, the wealthy have more opportunities to shelter/hide income from taxes than the poor, working, and middle classes.
Seen from that perspective, a property tax is even closer to fair, in that you can’t hide property. You also have a choice of not buying property if you don’t want to pay the tax. No matter how rich you are, you always have the option of renting.
Appraisals can be somewhat subjective of course, but it’s hard to argue that the property wasn’t worth what you chose to pay for it. To you, apparently, it was. And if prices decline, you can always ask for a reappraisal. Property oners benefit from a host of city services that add to the value of their property, so it’s hard to argue that they aren’t getting anything for their money.
View lover,
You may have paid money for that education, but so did I vis a vis taxes. Tuition does not even come close to covering 100% of the expenses of running public schools and colleges. Ergo, you benefited from my hard work, and since I have not attended school in California I could employ your arguments and wonder why I am being forced to subsidize the education of other people, some of whom can likely pay for their education with no help from me. But I’m not making that argument, because I recognize that an educated populace is in the best interest of society in general.
“As a renter, you are entitled to rent control more than likely,”
Actually, in my case, I am not, but fortunately my landlord is very kind and has not risen the rent in several years.
“By your calculation of my $8.00 a month, that’s what my taxes pay out. It does not take into account the money that I hand out to people or give to charity. However, that is my choice and I want to keep it that way, not have it imposed on me as punishment for being a homeowner.”
That’s great you give money to charity and I salute that, but it’s an inefficient way to handle large scale problems like homelessness. There are many instances where it is in the greater good if a large amount of people pay a nominal amount. That way the net impact on personal finances is small (in your case about $8/month on a million dollar home) and the public benefit is great.
If we expect charities to solve our problems, what winds up happening is that a greater portion of our dollar is spent by the charities on fundraising and administration competing for our donation dollars, and the overall response is diffused and not coordinated like a goverment response has the potential to be. That’s not to say that there isn’t waste and inefficiency in goverment, of course there is, and sometimes it’s maddening, but having thousands of charities who are each spending 15% of their resources on raising money is vastly more inefficient then one goverment agency who has no budget for fundraising at all.
Bernanke mentioned that the personal savings rate in China is about 50%. 50%!!! He gave the reason that folks saved that much was because of the lack of safety nets provided by the government if a person should get ill or otherwise unable to work. This means their consumers aren’t pouring the fuel into the domestic economy as much.
America certainly doesn’t have that problem – we love to consumer. However, it is interesting to think about how lowering the safety nets provided by social security, medicare, and so on could hurt the economy/GDP by impacting consumer spending (which accounts for around 70% of GDP). Things that make me go hmmmm….
missionite, do you have a life? If so, maybe start living it and leave the problems and none-problems (lifes) of others alone. We don’t live in Utopia. Life is not fair. We are all surviving as best as we can. It’s a jungle out there and life does not really give breaks to everyone.
I noticed you did not address my property tax comparison. Add state income tax and high cost of living and our “higher” salaries don’t put us any further ahead than the rest of the country. So again, even if we have a low property tax base, we still struggle.
I don’t know if you saw the post by John, but this is a person who has done all of the right things. Do you really believe he should lose his home in order to help those that are less fortunate, on drugs or just plain panhandlers?
Once again, to the point of this thread, it’s about the predicted state deficit due to property values decreasing and decipline or lack of in our state government. Some of you want the prices to fall so San Francisco can be affordable (which based on John’s post, it really never has been; 1,300 in 1981 took a lot of work and sacrifice I’m sure) again, but as you can see, it has an impact in other areas. Should this deficit really be put solely on the shoulders of property owners is the question, and I don’t believe so.
I’m having some trouble reconciling all this:
(1) Speculators are bad.
(2) People should buy homes for the long term.
(3) Once you pay off your 30 year mortgage you must hand your home to the tax collector.
Folks, I respectfully suggest reading John’s post. Prop 13 has many problems, but there is a reason for it’s existence. (Indeed, just like rent control.)
emmett/view lover,
It’s really a moot point, as John correctly points out, Prop. 13 isn’t going anywhere.
But in an effort to reconcile everything for you, let me refer you to the wikipedia entry on Proposition 13, particularly the section labeled “Aftermath in California”
http://en.wikipedia.org/wiki/Proposition_13
Pretty much anything I would have to say is well summarized there, including all the unintended consequences of the proposition.
Thanks for re-posting the link, Missionite, I had actually read it the first time. I found it a biased anti-Prop 13, so I did a quick search for a neutral summary of Prop 13. I could find none! Truly polarizing issue. If anyone has a neutral link to the history of pre-prop 13, I would like to see it. Nearly everything revolves around post-Prop 13 and flames away for or against.
I did not know the history of prop 13 but it is not surprising. Govt. took too much and people revolted. The “aftermath” pointed in the article talks about being 48th in education compared to #1 in the 60’s and lack of libraries and fire fighters. Well, I don’t see the relation between low property taxes and kids not learning. Like I posted earlier, the lottery was supposed to take care of this. The issue of smaller class sizes, etc., has been dealt with seperately, and still kids don’t learn. Maybe the parents can step in here too and not buy any more video games until grades improve.
I clearly remember voting for a bond for libraries sometime ago. Again, seperate funding.
I feel vindicated, you feed the beast and it keeps wanting more like I stated earlier.
Thanks for the link.
the lottery has become a joke in funding education. the lawmakers forecast what revenue the lottery will bring in, year over year, then reduce funding from the state accordingly to make the number. it’s really sad. we were better off before the lottery.
Missionite,
In a perfect world our tax code would allocate resources to benefit the most at the least costs. Our tax code doesn’t even remotely approach the ideal. I believe our code has become a free for all grab among competing interest groups for help or protection. One of the largest special interest groups are home owners. Hence, I see taxes as taking from one group (the loser) for the benefit of another.
We are in agreement about much. I do agree a sales tax is regressive. The property tax probably “hits” a wealthier population but I wouldn’t call that population wealthy. I think your example extreme. It’s doubtful someone earning a million dollars a year is spending only a hundred thouand. It just strikes me as fairer that we pay as we spend…or earn.
The property tax rate in California may be lower than much of the country, but since prices are higher the actual tax might be the same, or even more. Being from Chicago, that was my experience.
My problems with the property tax is the arbitrary way the assessments are made and the cost to administer such an unfair system. It’s been my experience that very similar homes can be assessed are very different rates. The cost of dealing with the avalanche of property protests has slowed the tax bills and added more to our tax bills.
Cary
Oh, that’s a good tradeoff. Which older homeowners deserve to lose their homes? That’s the whole reason why Prop.13 passed. Homeowners were losing their homes because municipalities wouldn’t/couldn’t budget expenditures each fiscal year. Yes, I’m an older San Francisco homeowner. I’m retired, not certainly rich by any means, and living in the home with my wife that was purchased in 1981, for #115,000. My payments then were more than $1300/month with a first mortgage at the best rate of that time, 15/1/2%! The house is paid for, the kids are gone, and after working more than 40 years, I’d like to stay in this home for as long as I’m able to. It’s worth approximately $700K now which, if you think about investment choices for the past 26 years for that $110,000K may not have been the best option. Other posts are correct, there is no way Prop. 13 will be repealed. It is the third rail of California politics.
John,
If prop 13 were repealed, you would not lose your house – unless you were REALLY stupid. You see, in the 30 years since prop 13 was passed, the financial world has become MUCH, MUCH more complicated and sophisticated. You now have $700k in equity. You’re saying that you deserve to enjoy the fruits of housing appreciation – but should not have to pay your fair share of property taxes. If you are on a fixed income, there are now plenty of ways to tap the equity in your house to pay for property taxes. If you plan on spending the rest of your days there, you have many, many years of being able to do that by tapping the equity. You shouldn’t be able to have your cake (housing appreciation) and eat it to (no or very little increase in property taxes).
“If prop 13 were repealed …. ”
STOP there. It won’t.
“If prop 13 were repealed …. ”
“STOP there. It won’t.”
I think it will. It’s just a matter of time. Prop 13 is one of the most unjust laws currently. it keeps the rich rich and cretes a barrier of entry for middle class. As more and more californians are unable to afford a home, politicians will start to come after this.
You can read more on what the US Supremes ruled on Prop 13 here: http://caselaw.lp.findlaw.com/scripts/getcase.pl?navby=CASE&court=US&vol=505&page=1
In permitting longer-term owners to pay less in taxes than newer owners of comparable property, Article XIIIA’s assessment scheme rationally furthers at least two legitimate state interests. First, because the State has a legitimate interest in local neighborhood preservation, continuity, and stability, it legitimately can decide to structure its tax system to discourage rapid turnover in ownership of homes and businesses. Second, the State legitimately can conclude that a new owner, at the point of purchasing his property, does not have the same reliance interest warranting protection against higher taxes as does an existing owner, who is already saddled with his purchase and does not have the option of deciding not to buy his home if taxes become prohibitively high.
…
Article XIIIA’s two reassessment exemptions rationally further legitimate purposes. The people of California reasonably could have concluded that older persons in general should not be discouraged from exchanging their residences for ones more suitable to their changing family sizes or incomes, and that the interests of family and neighborhood continuity and stability are furthered by, and warrant an exemption for, transfers between parents and children.