Why is CA broke after having very high taxes (excpt Property)? (credit, home)

[Lovehound]

Originally Posted by smokingGun

Probably Texas gets a lot of steady revenue from the oil industry, which we don't have here in Cali. Ideally, we could expand gaming laws to allow for resort casinos to boost tourism & revenue, but I'm sure there are practical considerations why this will never happen.

Yep, the lottery will save us, Indian gaming will save us. We can put the burden of the entire state on the backs of willing gamblers.

What planet do you hail from?

[silverkris]

Originally Posted by SoCal35

The BIGGEST problem in the California budget process is two fold in my opnion:

1. A two-thirds vote is required in the state legislature to pass a budget;
2. A two-thirds vote is required in the state to pass any tax increases;

Point number one dates back many decades and is unfortunately written into our state's extremely outdated and in need of reform state constitution. I do NOT think there is any other state with such a crazy requirement.

Point number TWO is directly an outcome of Prop. 13 and REQUIRES a 2/3's vote for any tax increase.

Very hard to govern when you have tied the hands of the legislators in such a way. I am NOT saying we need to RAISE taxes. But I am saying let the pols we send to Sacramento have all the tools at their disposal. The voters can decide if they went to vote them back in or kick them out. But handcuffing them and crying foul everytime there is a budget impasse is just pointless.

Not to mention that all those citizens' initiatives that the voters have passed have also taken away a lot of actual money in the budget that the legislature can control.

The other effect are term limits, which voters passed in yet another initiative. This has resulted in a lot of legislators who don't have a lot of experience, and don't have long-standing relationships with other legislators - which one often needs to strike balances/compromises to pass legislation, especially the budget. So in more recent years the state has more polarized politics, and with term limits, law makers who have less incentive to cooperate with each other, particularly those of a different political party. This has also given more influence to lobbyists who AREN'T term-limited on legislation.

[Curmudgeon]

Originally Posted by jtamay3

What are taxes like in California/LA? Specifically, income tax, sales tax and property tax. Anyone got the percentages?

CA Taxes:

Sales Taxes
State Sales Tax: 8.25% (food and prescription drugs exempt. Tax varies according to locality. Can be as high as 10.50%)
Gasoline Tax: * 46.6 cents/gallon
Diesel Fuel Tax: * 46.6 cents/gallon
Cigarette Tax: 37 cents/pack of 20 plus an additional surcharge of 50 cents per pack, bringing the total to 87 cents.

Personal Income Taxes
Tax Rate Range: Low - 1.25%; High - 10.55%. For 2010 the state has enacted a 0.25 percentage point increase in each of the state's income tax brackets. A tax credit for dependents was reduced from $309 to $98.
Income Brackets: ** Lowest - $7,168; Highest - $1,000,000
Number of Brackets: 6

Property Taxes
Property is assessed at 100% of full cash value*. The maximum amount of tax on real estate is limited to 1% of the full cash value. Under the homestead program, the first $7,000 of the full value of a homeowner's dwelling is exempt.

* Think in terms of a $400,000 home. Property tax will be at least $3,930 ($327.50 a month). Add Mello-Roos charges, if applicable, as well as home owners association dues, a 30-year fixed loan payment of $1,500+ with 20% ($80,000) down and you're probably looking at a monthly payment and costs right about or more than $2,500-$2,800 a month for a cookie-cutter home in a development where you have a postage stamp lot and have to pull your shoulders in to walk between your house and your neighbor's.

[revelated]

California depends on the wrong types of taxes. That's why.

IMO we need to do one of the following:

- FairTax - a tax on consumption ONLY. This flushes out extra money from tax evaders like Wesley Snipes and Ron Isley by collecting money from them when they buy their expensive goods. It also negates the impact of tax shelters; people have to spend money, period.

- Repeal (or amend) Prop 13 and start leveraging property taxes at a higher percentage. It should be comparable to what other states charge for the same properties. Some would complain this would skyrocket home prices beyond what's reasonable, but they're already there, even in this economy, which means there's a big problem. It also would start to quell the rush of home flippers who are part and parcel to the reason the bubble popped in the first place.

[Lovehound]

Originally Posted by revelated

- Repeal (or amend) Prop 13 and start leveraging property taxes at a higher percentage.

How much of the state's revenue comes from property taxes? Five percent? Fifty percent? One percent?

We need to understand the size of this camel before we can judge the effect of its sticking its nose into our tent.

[revelated]

Originally Posted by Lovehound

How much of the state's revenue comes from property taxes? Five percent? Fifty percent? One percent?

We need to understand the size of this camel before we can judge the effect of its sticking its nose into our tent.

Counterquestion: Does that matter?

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Using Colorado as a safe example, they do three things which I find brilliant in this economy:

1. Assess the current property value as a percentage of the actual value. We know property prices are inflated, and home values are in the toilet. That means that an increase using this metric would not have a substantial negative impact on those who own and are paying for their homes without a problem today, yet would bring in more revenue without taking money before we even touch it.
2. Calculate an assessed percentage against the assessed value to determine the total tax rate and amount. Instead of a flat percentage that never changes even when our budget and economy are constantly fluctuating, we have a changing percentage from which to derive income. Cap it at a reasonable maximum - say, 50% of actual value - to keep it from spiraling out of control, but allow it to morph with the rest of the economy. Set this percentage based on volume of homes assessed.
   
3. Track a separate levy from which to derive the actual property tax owed. This is the key. So #2 is like a tax bracket, #3 is adjusted based on the area the home is located, the current budget health, and forecasted money on hand. Cap it at 5%.

Sample calculation:

Home is worth $750,000. Under Prop 13, they're paying what...$7500?

Under a potential increase as offered above, assessed value at 27% is $202,500, levy at 5% is $10,125.

I raised the annual tax burden of that individual by $2625 - a whopping $218.75 per month. I also increased the amount they can deduct come tax time. Multiply that for every homeowner and the increase in the coffers is substantial.

What California does is say, "the home is worth $1 million...welp, we only need 1%, so just cut us a check for $10k and we'll call it a day!!" That doesn't work anymore. To the detractors of such an increase, property taxes are and likely will always be deductible come tax time.

To me that seems a better plan than an EXTREMELY low fixed percentage for eternity.

[bluenoter]

I'll bet more movies are filmed in Louisiana nowadays than are filmed in California.

[SoCal35]

Originally Posted by Lovehound

How much of the state's revenue comes from property taxes? Five percent? Fifty percent? One percent?

We need to understand the size of this camel before we can judge the effect of its sticking its nose into our tent.

That is somewhat complicated to answer since Property Taxes are really a "local tax"....they are not "counted" in the state's "general fund" (which includes revenues from income tax, sales tax, and business taxes, etc).

Also, recall that Prop. 98 (passed in 1988) REQUIRES the State Budget to allocate 40% of the state budget is spent on EDUCATION. Since passage of Prop. 13, the state has increasingly KEPT more of the local property tax for funding the state budget.

According to the California Budget Project the "GENERAL FUND" in the 2009-10 California Budget broke down as follow:
http://www.cbp.org/pdfs/2009/0902_Ca...Tax_System.pdf

2009-2010
CALIFORNIA GENERAL FUND (% of Tax Collections)
Income Tax: 49.1%
Sales Tax: 34.6%
Corp. Tax: 10.7%
Other Rev.: 2.7%
Alcohol Tx: 1.0%
Insurance Tax: 1.8%
Cigarette Tax: 0.1%
Total: 100%

Property taxes are taken from cities and counties based on a complicated formula to ensure that 40% of TOTAL state budget goes to k-12 education.

The Legislative Analysts Office (LAO) says that in 09-10 approx. $50 billion was set aside for state spending on Education: Of that $15 Billion in property taxes went to education. The remaining $35 Billion in education funding came from the various General Fund revenues noted above.

[SoCal35]

Originally Posted by ashguy77

All I know is one thing...Taxes are so much higher here than in TX and yet still it looks like the State has no money.

I read on a few links that
* 1) LA county has 1 in 5 people on welfare

*2) CA has 12% of people in USA but 35% of TNAID (Don't know the right Abbrv, temporary aid programme for in need families)

1) I'd like to see the source for that and what you (or your source) is calling welfare.

2) TANF = Temporary Assistance for Needy Families. This is what is usually referred to as "welfare" and was reformed nationally in 1996. The stat you quote MIGHT be true but the following is definitely TRUE:

i) The "welfare" (or TANF) caseload in California has decreased from a historic peak of about 2.7 million people in 1995 to a low of about 1.1 million people in 2007 (the peak of the last economic cycle). It is TRUE that California trimmed it's welfare roles more slowly than other states from the start of welfare reform (1996) through 2007. So our "share" of the national welfare pool went up....even as our TOTAL number of cases went DOWN. Also, benefit levels have been CUT in Calif. the last few years.

A good source for this is the Calif. Budget Project here:
http://www.ppic.org/content/pubs/jtf...aseloadJTF.pdf

The bottom line is that TANF funds are about half federal and half state funds. In 2008-2009, TANF funds were about $6.6 billion in California. The federal govt picked up 56% of that amount. The balance (or $2.9 billion) was funded by state taxpayers. I don't have the exact TOTAL budget number for that year but we currently have a state budget of about $100 Billion.

I would be weary of any politician who claims he/she can balance the state budget by cutting welfare or going after welfare cheats. Yes, reform the system....every able bodied adult should get a job or start training for a job. But let's not kid oursleves that welfare is the core of the state's fiscal problem.

[Lovehound]

Originally Posted by SoCal35

That is somewhat complicated to answer since Property Taxes are really a "local tax"....they are not "counted" in the state's "general fund" (which includes revenues from income tax, sales tax, and business taxes, etc).

... ... ...

Property taxes are taken from cities and counties based on a complicated formula to ensure that 40% of TOTAL state budget goes to k-12 education.

The Legislative Analysts Office (LAO) says that in 09-10 approx. $50 billion was set aside for state spending on Education: Of that $15 Billion in property taxes went to education. The remaining $35 Billion in education funding came from the various General Fund revenues noted above.

I'd still like to know what part of California's revenue comes from property taxes, the part that's affected by Prop 13. In this topic we are discussing why California is broke. If property tax is a big part of state revenue, say 20 percent or 30 percent, then we may discuss what affect Prop 13 has on that. If property tax is just a few percent of state revenue then I don't see what the big deal is.

Also keep in mind that Prop 13 does not affect 100% of everybody's property taxes. Every time a property is sold the property taxes get reset to an amount based upon the selling price. Prop 13 slows down revenue from property taxes but the constant turnover means that many properties are paying taxes based upon the current selling price or a recent selling price.