If you were mayor or cali governor how would you fix LA (Los Angeles: renters, assessor)
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I agree with the principle of prop 13 that says your property tax shouldn't go up and up without limit just because your house is worth more. That "worth" is an unrealized gain and puts no cash in your pocket. At the same time, is a crock of sh**t that one house can pay 10x as much tax as the identical one 5 houses away just because the first one was purchased 20 years later.
There needs to be limits on the total tax burden but that burden needs to be carried more evenly. I think limiting the tax basis to 2% annual increases is a big part of the problem. 2% doesn't cover inflation most of the time and over decades, that shortfall really adds up. If they just changed that annual increase to match the general level of inflation it would help a lot. People wouldn't get taxed out of their houses if its market value doubled in 2 years and the schools wouldn't get starved for revenue.
If I were mayor of LA, I would create a "Vice Zone". In this zone, gambling, prostitution, and anything else that has a social stigma to it, but is not federally illegal would be allowed. Some cities call this their red light district, but I think Vice Zone sounds much cooler. I have no doubt that these types of activities would generate ridiculous amounts of revenue (see Vegas) and would in turn create additional service type businesses in the area as well (think hotels, check cashing centers, pawn shops, etc...).
Anyways, the zone would have to be in a completely industrial area, as no one would want this type of business anywhere near where they live. Somewhere near the LA River would probably be ideal. The city would make a killing from the taxes the businesses within the zone would pay. With this money, they could balance the budget and also afford to heavily regulate the perimeter of the zone as well as fund a heavy poice presence.
i disagree. rent control is an intrusion in the market relationship between a private lessor and lessee...a merchant and a customer, if you will, who should be allowed to decide for themselves the price of their exchange.
prop 13 is a limitation on the power of government to extract a higher tax from a property owner unless or until he does something to trigger a reassessment; it does not interfere with private market transactions. it means that people who wisely sit on their equity to supplement their retirement don't find themselves taxed out of their fully paid-off homes the next time there's a housing bubble.
Love ya Katenik! And for the record, I am completely against rent control for a variety of reasons.
While I agree with your analysis of the intent behind each concept, both have very similar outcomes -- an artificial ceiling on the cost of housing.
But I'm going to disagree further -- Prop 13 also artificially keeps home prices at a higher level by distorting supply. I would argue that the housing bubble would have been kept in check in CA (like many other states w/o a prop 13-like tax law which didn't bubble nearly as high) by putting an appropriate balance on supply. In other words, folks stay in their homes because the tax basis is "so low." Funny -- that reminds me a lot of folks that keep apartments because their rent is locked in "so low..."
Love ya Katenik! And for the record, I am completely against rent control for a variety of reasons.
While I agree with your analysis of the intent behind each concept, both have very similar outcomes -- an artificial ceiling on the cost of housing.
But I'm going to disagree further -- Prop 13 also artificially keeps home prices at a higher level by distorting supply. I would argue that the housing bubble would have been kept in check in CA (like many other states w/o a prop 13-like tax law which didn't bubble nearly as high) by putting an appropriate balance on supply. In other words, folks stay in their homes because the tax basis is "so low." Funny -- that reminds me a lot of folks that keep apartments because their rent is locked in "so low..."
i saw a lot of people trading up to more expensive homes and greater tax liability during the boom, so my observations do not support your claim that people stay in their homes to retain the prop 13 benefits. (however, i will concede that a fair number of (particularly older) folks who plan to stay in their homes avoid making major improvements for that reason.) i also don't agree that prop 13 places a ceiling on the price of housing, as the price always remains what the market will bear; it's only the tax rate on the asset that is static/limited. the key distinction for me is this: while i take issue with the notion that every neighborhood should be attainable by anyone who wants to live in it, i don't believe that once a person buys into the neighborhood of his choice, he should be in danger of being taxed out of it merely because he had the 'misfortune' to choose a neighborhod on the rise. like rent control, oppressive taxation offends my sense of justice and fair play...and i say this as a renter, who will probably never benefit from prop 13, as i don't intend to buy property here.
that said, i realize that every piece of legislation has unintended (sometimes undesirable) consequences, so i bookmarked your link for future reading. do i need an account to access the full article?
(we should probably beg pardon of the OP for hijacking his thread. DM me if you want to discuss further.)
I can see the appeal of Prop 13, but it allows select people to play both sides, to enjoy the appreciation without bearing the appropriate tax burden. Why would they be taxed out of their homes? They have increased equity-- they would be paying money on gains they have already made. Paying their fair share is a very small percentage that should never jeopardize property ownership.
I can't see how buying into an appreciating neighborhood can in any way be called a "misfortune." I would consider myself very fortunate to receive a $200K bonus for simply living in my home. If I could make that $200K and pay 1.9% ($3,800) annually on it OR not receive it and pay nothing, it wouldn't be a hard choice. When you win the lottery, you pay taxes. When you receive an inheritance, you pay taxes. When your house appreciates in value, why should the same logic not apply? Simply leveling the playing field by making every homeowner share the property tax burden proportionate to value would fund much-needed programs. And if everybody paid something closer to a fair share, then the percentage each homeowner paid could go down, while state revenues go up. It's far from perfect, but it's a solution and it's better than raising income or sales taxes that are already the highest in the country or taxing food, which would make it hard for people to feed their families.
Most economists agree that Prop 13 should not have been passed... and repealing it would solve a lot of California's financial woes. (So we really are on topic, after all.)
I can see the appeal of Prop 13, but it allows select people to play both sides, to enjoy the appreciation without bearing the appropriate tax burden. Why would they be taxed out of their homes? They have increased equity-- they would be paying money on gains they have already made. Paying their fair share is a very small percentage that should never jeopardize property ownership.
I can't see how buying into an appreciating neighborhood can in any way be called a "misfortune." I would consider myself very fortunate to receive a $200K bonus for simply living in my home. If I could make that $200K and pay 1.9% ($3,800) annually on it OR not receive it and pay nothing, it wouldn't be a hard choice. When you win the lottery, you pay taxes. When you receive an inheritance, you pay taxes. When your house appreciates in value, why should the same logic not apply? Simply leveling the playing field by making every homeowner share the property tax burden proportionate to value would fund much-needed programs. And if everybody paid something closer to a fair share, then the percentage each homeowner paid could go down, while state revenues go up. It's far from perfect, but it's a solution and it's better than raising income or sales taxes that are already the highest in the country or taxing food, which would make it hard for people to feed their families.
Most economists agree that Prop 13 should not have been passed... and repealing it would solve a lot of California's financial woes. (So we really are on topic, after all.)
How does your house's value doubling put any cash in your pocket until you sell it? It doesn't unless you take out an equity loan but then you're spending even more cash every month servicing that additional debt. Your examples of inheriting money or winning the lottery don't apply because you receive CASH in those situations. That cash is used to pay the tax. When your house's market value goes up, all you get is a bigger tax bill. And yes, people were being taxed out of their houses back in the 70's. Imagine being retired on a fixed income and seeing your property tax bill go up 20% a year just because other people near you were paying more for houses every year.
How does your house's value doubling put any cash in your pocket until you sell it? It doesn't unless you take out an equity loan but then you're spending even more cash every month servicing that additional debt. Your examples of inheriting money or winning the lottery don't apply because you receive CASH in those situations. That cash is used to pay the tax. When your house's market value goes up, all you get is a bigger tax bill. And yes, people were being taxed out of their houses back in the 70's. Imagine being retired on a fixed income and seeing your property tax bill go up 20% a year just because other people near you were paying more for houses every year.
I see your point, but to play devil's advocate, people being taxed out of their houses really isn't their neighbors' problem. That's the way a free market economy works, though I concede that we seem to be abandoning all pretense of that. If people can't shoulder the tax burden, then that's the downside of price appreciation; they can sell the property and reap the upside. While not ideal, it works for all the other states, few of which are in the freefall that CA is.
The problems facing CA aren't unique. Other states have them and other states make the hard choices to fix them. CA could fix its problems simply by addressing the unsustainable drain of its massive entitlement programs; Californians just don't want to do that. So the ship will keep sinking until some of the dead weight is scrapped or the federal government sails to the rescue.
I see your point, but to play devil's advocate, people being taxed out of their houses really isn't their neighbors' problem. That's the way a free market economy works, though I concede that we seem to be abandoning all pretense of that. If people can't shoulder the tax burden, then that's the downside of price appreciation; they can sell the property and reap the upside. While not ideal, it works for all the other states, few of which are in the freefall that CA is.
I guess you think that a "gain" on paper is the same as a realized gain. Its not. And if person sold their house, they'd still have to live somewhere. You don't really get to take advantage of that gain unless you move somewhere cheaper like another state because if your house appreciated to the point of not being able to afford the taxes, so did all the houses around you. I think the tax burden needs to be evened out but prop13 addressed a very big problem. I just think they set the annual increase percentage too low.
I agree with your suggestion giving citizens the right to carry a firearm with a permit. When law abiding people have guns this is an incredible deterrant to crime. I also would support other measures to get tough on crime such as getting more cops on the streets. The schools are failing, and because education is a multilayered bureaucracy it could not be fixed by a mayor working alone, but programs that could help include implementing merit pay for teachers so good performance is rewarded as it is in the private sector and giving principals more authority to fire bad teachers. School choice also could improve educational opportunities by allowing parents to opt out of a failing public school and injecting competition into education.
The number one most important thing in my opinion though is transit. Traffic in the LA area is a nightmare. We need to expand our highway and mass transit systems.
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