Zoom in on a residential street, particularly in the Bay Area, and you will see a row of houses which are roughly equivalent in value. Some homeowners pay several times as much annual property tax as their neighbors, because they bought their homes more recently and paid more for them.
That's kind of insane, and nobody would design the property tax system that way if they were starting from scratch.
I think if the value increase cap was raised (gradually) to something like 4-5% per year, you would still have assessed values trailing market values, but not by nearly as much. People could still make worst case projections of taxes to see if they could afford things.
Washington state has a different system, where the total property tax of each taxing jurisdiction can only increase by 1% each year (subject to exceptions and what not), and then that amount is apportioned to each property based on the assessed value. This provides a limit on government spending as CA prop 13 does, but it doesn't limit changes in tax on any individual homeowner; if your property becomes more relatively valuable than others in your taxing districts, your bill goes up and theirs goes down. Which I'm sure causes assessments to be a lot more contenious.
This ensures that no one has to move because their home appreciated, but it also ensures that no one gets to pay taxes like their home never appreciated, but then pocket appreciation at sale time.
Let alone letting you retire in your home on a fixed income.
For example, in Florida property tax increases are capped to the lesser of 3% or CPI. 25k of value is also exempted from property taxes and 50k is exempted from non-school property taxes. But only for a single primary residential property.
Where CA13 is different is that it applies to everything: commercial property, industrial property, rental property, second homes, third homes, etc.
I think there is a pretty good case to be made that there is a massive public interest in keeping people from being pushed out of their homes by taxes. Capping tax increases is also necessary to make it possible to financially plan for them (e.g. I can invest enough so that my investments will pay the taxes w/ increases for the rest of my life, and just add that to the 'cost' of the home-- given historical market returns this requires investment of 25x your annual property taxes, so long as they can't grow faster than inflation). One could also make the case for a public interest in not letting some businesses get pushed out (primarily small, single location businesses).
But prop 13 goes far beyond that-- applying to all property and with extremely expansive portability-- and as a result creates a massive windfall for existing property owners at the expense of new property owners.
I'd like to see at least a rule that for rented properties that assessments should be allowed to increase as much as rents have. There is little to no prevent-displacement justification for not tracking rents.
It's even worse than that -- it creates a massive incentive not to sell homes.
People who have owned homes for more than just 10 years would see their property taxes double if they sold their homes today and bought another home for the same price elsewhere in the state. The longer you have owned your home, the worse the tax increase becomes.
It's kind of crazy that the people who bought their homes a long time ago, and therefore have realized the most return on investment, pay the least taxes. Meanwhile, people who bought their homes this year, and have made little to no investment return, pay the most taxes of anyone.
Someone has to pay the taxes. It is difficult to see a good argument that having been a landholder for a long time gives some sort of moral right to be supported by others.
The fallacy of the argument for tax breaks to homeowners is that the problem of rising prices is entirely orthogonal to homeownership. Renters face the exact same challenge of affording to live in an increasingly popular place, except without the cushion of an appreciating asset and without any tax relief under Proposition 13. If renters and homeowners face the exact same problem, then clearly subsidies to property owners is not the solution.
The finances of homeownership should be decomposed into two parts: 1) the rental cost of the property, and 2) what fraction of the rent goes to the government in property taxation.
The remedy for rising rents is obvious: more construction of housing and rental subsidies to the poor. This is how to address the underlying problem for homeowners and especially for renters. Temporary rent controls and tax caps can also be helpful to provide relief for people who were caught off guard by the rapid changes. Note that the solution should help all those who are affected by the problem, not only the ones who own more assets.
When property values are rising, this is not an excuse to enact regressive tax breaks for property owners; that just makes inequality worse without solving the underlying problem of lack of housing, which then becomes worse for renters and future homeowners. Property taxation is the most progressive form of taxation available to local governments, and if anything tax rates should be increased when there is a property value boom in order to reduce the incentive to speculate on land prices and to raise money to solve the problems associated with inequality such as homelessness. Basically, when I bought a house in San Francisco, I paid a windfall of a few hundred thousand dollars to the previous owner, who took that money out to a different county. It would have been better for the city to collect that money and use it to incentivize housing construction and subsidize the poor in the city, rather than to let it be lottery winnings to the person who left.
Among other things, this method of taxation tightly couples school funding to local home values. Areas with expensive homes have the best schools. (And areas with cheap homes have bad schools, which is not really what you want if you are trying to do something about inter-generational poverty.) This is self-reinforcing because now parents compete with each other to buy homes that are located in the best school districts, which drives up prices even more.
When home values drop, such as they did in 2008, property tax revenue drops too (Prop 13 is not a one-way ratchet, you can get re-appraised and lower your taxes, and 2008-2009 was a pretty convenient time to do that).
It doesn't seem like a good idea to base city revenue on something that is so undependable, especially something that is so often treated as a speculative investment.
What I would rather do is come up with a system where a simple tax is paid per parcel, perhaps a flat tax or one based on the size of the parcel, and which is not based on the market value of the parcel.
The rest of city funding can be covered by income tax -- unlike the current system, at least that has a chance of being progressive. No old people will be priced out of their homes by tax increases, and school funding would be distributed somewhat more evenly because not all high earners live in the most expensive areas. And if you are worried about an influx of high earners flooding into your area and driving up the prices, a local income tax would certainly discourage them.
If ownership transfer didn't reset the rates, it would be a slightly different story.
Edit: In that, it'd still be something that makes an economist cringe, and it'd still be "unfair" but in fewer ways.
It’s as simple as that.
It wasn’t designed this way. There was a complaint that elderly were being driven from their homes by high property taxes.
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If my tax bill is X, the rates are as follows, for nearly identical houses, all valued nearly the same on Zillow/Redfin:
2.3X
0.4X
1.0X
0.1X
2.0X
The rest of us have kids roughly the same age.
So basically the people who just moved in are subsidizing the rest of us significantly.
It's completely unfair.
> and they should thank you for your share of the taxes that you paid over the years to keep community in good shape.
After four years, I'd already paid more in lifetime taxes than my neighbors. After eight years, I've paid more than they will ever pay in their lifetime.
After twelve years, my new neighbor will have paid more than my lifetime tax bill.
It's completely out of line.
Somebody call the waaahmbulance.
No CA homeowner should be surprised by this. Guess what you probably paid a higher price than them - voluntarily!!!
Also, I'm not sure how what I paid is at all relevant to a tax that is based on current value.
When you register a car, which is also taxed on current value, it has nothing to do with what you paid. If you got a good deal you don't save on your registration fee. Even in the first year.
Not as much as the ratio of property taxes would make you think; given Prop. 13’s other provisions, like the limit on nominal rates, much of the revenue functions that are served by ad valorem property taxes in places that aren't crippled by Prop 13 are, in California, served by a combination of:
(1) Mello-Roos fees (per-parcel assessments that are weighted by value and so aren't affected by the Prop 13 assessment increase discrepancy),
(2) state and local income taxes,
(3) state and local sales taxes.
Comparing same model houses only (same as mine), tax rates are in the range of 5K to 8K. But just a couple of the same model houses are shown as $800 to $900! If I didn't know this neighborhood I would jump to the conclusion that those houses have been owned for so long that their taxes are so low and curse prop13.
But, I've been in this neighborhood since it was built so I know the tax was never below 2K even on the first year of constructed.
So either these outliers are just errors in the published records, or is there some tax exemption program in CA for people who qualify to some criteria?
In any case, it does give the impression that the tax range for this model house is $800 to $8K (10x) when that is not true. It is really 5K to 8K.
There are exemptions which allow some people (seniors and people with disabilities I think) to be "portable" with their property taxes. I.e they can buy a new property and the taxes of their old property transfer over to the new one..
Edit: found this https://www.boe.ca.gov/proptaxes/prop60-90_55over.htm
Might just be errors in the reported data.
I'm not especially inclined to link to it because it falsely claims that no other state has non-mark-to-market property taxes, and for residences that is simply untrue.
No one should be surprised by this since it’s public information. Plus if you hang around long enough your taxes also stay frozen
Revisionist History A GOOD WALK SPOILED SEASON 2 - EP1 http://revisionisthistory.com/episodes/11-a-good-walk-spoile...
Thank you for conceding this exception.