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P.S. Most people I've known who left California did so because of the high living costs... the desirable parts of CA are uber expensive because, well, you get what you pay for overall. Some people can't hack it, so they run off to cheaper places like Idaho & Arkansas - or back to wherever they came from originally. As a nearly 30-year resident, I've seen many people leave for this reason, whereas you rarely hear of somebody leaving "because it's gone to hell." It's almost always about the money, bottom line.
I guess you could say we left because of money/cost.....Private school was to expensive and I wasn't about to said a blond haired blue eyed 6 yr old kid to school in East side SJ!!! Best move we ever made!!!!
Hah -- proposition 13 is very likely the only thing keeping many taxpayers in California. Start hiking their property taxes to absurd levels and see how many taxpayers you're going to lose.
I don't see how the people paying Jimmy Carter-era taxes are really "Taxpayers" to begin with. It makes no sense at all to be fearful of driving away the cohort that obviously isn't pulling its weight.
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Originally Posted by TrapperJohn
Actually it's see how far down property values fall.
I can see how, for you, that's a bad thing. (If I remember correctly, you derive income from California property?)
But for the state of California that's a good thing. Overpriced, overcapitalized land is a surefire way to drive away productive investment in labor. California is slowly starving itself to death.
Last edited by Cletus Awreetus-Awrightus; 04-24-2012 at 09:15 AM..
It's a bad thing for everyone. It effectively turns everyone into permanent renters with the government as the landlord. My property taxes are about $8,600 a year. With the house paid, I still have a monthly "rent" payment of over $700.
The problem with Prop 13 is that if it was repealed, tax rates would not go down for some and up for others. They would just go up. The counties would grab the money and waste it.
If the population of a given area makes $100k per year on average, and they want to buy the median priced home in the area, then the supply/demand formula would indicate that the median house payment would be about $28,000 a year at current lending ratios. This is after 20% down. We can back into what the median house price should be using a little algebra.
The total payment would be $2333 per month including taxes and interest. The property taxes and insurance are fixed. The variables are p and i.
At ~1.25% of the assessed value and a homeowner policy of $1250 annual, the median price should be around $400,000 at 5%.
The problem results when house prices rise at 8% a year but income doesn't. Assume you only earn a raise of 3% a year. In ten years your home is worth more than twice as much. Your property taxes have increased by $566 a month while your income has increased by $2800. The effective tax rate is huge relative to salary. The tax increase consumed 20% of your raise. Taxes now consume 10% of your gross income as compared to 5% ten years earlier. In 20 years its even worse: Your $2300 house payment is now $4500 and you never moved.
If your income doesn't keep up, you are forced out of your home. If your income keeps up but you don't save enough for retirement, you are forced out of your home even though you might own it outright.
As a property owner, I simply pass the cost onto the renter. This is why rent prices in some areas don't track with comparable housing costs. If I own a rental unit for 20 years, I can afford to rent below what a new development can rent at because my taxes are fixed with a small increase which I pass onto the renter. The market in a given area is comprised of a pool of renters in a given income range.
This stifles competition resulting in decreased supply and actually increases rents as the developer is competing against me and the government. The government always wins.
What happens is old guys like me sit back and collect tons of free cash every month because our properties are 100% full. Our rental properties are paid, taxes are low, but market conditions keep prices high because nobody can afford to build. Good for me, bad for you.
When state legislators have to have a degree in economics and finance, things might change. Until then it's business as usual until we hit the terminal payment point and implode.
TrapperJohn---Best post I've read on this board in AGES!!!!!
Democrats will indeed never stop howling about Prop. 13, but when the tax structure in this state severely punishes the wealthy titans of Silicon Valley and the middle class citizens throughout the state to the point where they cannot expand in this state because rampant environmental practices have made land in this state extremely expensive, which accounts for our nosebleed-inducing housing prices, the state becomes less tolerable for residents and potential new residents.
Small wonder that southern states are doing much better, and especially given the influx on automakers over the past twenty years, which the thriving new VW plant in Chattanooga being the latest example.
TrapperJohn---Best post I've read on this board in AGES!!!!!
Democrats will indeed never stop howling about Prop. 13, but when the tax structure in this state severely punishes the wealthy titans of Silicon Valley and the middle class citizens throughout the state to the point where they cannot expand in this state because rampant environmental practices have made land in this state extremely expensive, which accounts for our nosebleed-inducing housing prices, the state becomes less tolerable for residents and potential new residents.
Small wonder that southern states are doing much better, and especially given the influx on automakers over the past twenty years, which the thriving new VW plant in Chattanooga being the latest example.
Many conservative states in the US, including some of those Southern states that you refer to, have very high property taxes and lower or nonexistent income or sales taxes. I.e.exactly the opposite of California. This makes for a more sustainable fiscal structure.
Texas' high property taxes shielded it from the real estate bubble.
LOL okay whatever you say. Maryland is another Dem state being run into the ground. So I have first hand experience. How can folks enjoy the beautiful weather in California if there are no jobs?
No jobs? Really? Have you ever been there?
Again with the jealousy. It cracks me up how California is the new whipping boy for Conservative types that live in these hellholes where it's always cold and the sun doesn't shine.
It's a bad thing for everyone. It effectively turns everyone into permanent renters with the government as the landlord.
Falling R/E prices turn everyone into permanent renters? I'm not following your logic here.
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The problem with Prop 13 is that if it was repealed, tax rates would not go down for some and up for others. They would just go up.
And you base this belief on what, exactly?
We seem to manage revenue-neutral property taxation pretty well here in North Carolina, it's not rocket science. I don't see why California is in capable of it.
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The counties would grab the money and waste it.
That has nothing to do with Prop 13. Government still generates revenue under Prop 13, and (assuming it is your belief that gov't spending is waste), they still waste it under Prop 13. The only difference prop 13 makes is that new people pay astronomical tax rates, while established people do not.
Quote:
If the population of a given area makes $100k per year on average, and they want to buy the median priced home in the area, then the supply/demand formula would indicate that the median house payment would be about $28,000 a year at current lending ratios. This is after 20% down. We can back into what the median house price should be using a little algebra.
The total payment would be $2333 per month including taxes and interest. The property taxes and insurance are fixed. The variables are p and i.
At ~1.25% of the assessed value and a homeowner policy of $1250 annual, the median price should be around $400,000 at 5%.
Assuming 20% down is a little off if you ask me, given ZIRP, high unemployment, and FHA loans.. but ok, I'm still with you here..
Quote:
The problem results when house prices rise at 8% a year but income doesn't. Assume you only earn a raise of 3% a year. In ten years your home is worth more than twice as much. Your property taxes have increased by $566 a month while your income has increased by $2800. The effective tax rate is huge relative to salary. The tax increase consumed 20% of your raise. Taxes now consume 10% of your gross income as compared to 5% ten years earlier. In 20 years its even worse: Your $2300 house payment is now $4500 and you never moved.
Right, if you live in a county that didn't adjust its tax rate downward, then you'd have that problem, sure. In that sort of system you described, tax revenue would double in 10 years. But it doesn't have to work that way.
In a revenue-neutral system, when your tax assessment goes up, your rate goes down. There's nothing unique about California that would preclude it from adopting a revenue neutral system.
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If your income doesn't keep up, you are forced out of your home. If your income keeps up but you don't save enough for retirement, you are forced out of your home even though you might own it outright.
Even in this hypothetical dysfunctional system that won't adjust the rate and doubles the total tax revenues in 10 years, you're still trying to spin it as if the person with the extra $1 million in home equity is somehow a "victim."
Quote:
As a property owner, I simply pass the cost onto the renter. This is why rent prices in some areas don't track with comparable housing costs. If I own a rental unit for 20 years, I can afford to rent below what a new development can rent at because my taxes are fixed with a small increase which I pass onto the renter. The market in a given area is comprised of a pool of renters in a given income range.
This stifles competition resulting in decreased supply and actually increases rents as the developer is competing against me and the government. The government always wins.
This isn't just caused by tax rates, you know. It's just the basic time value of money. This holds true in states that do, and do not have laws like Prop 13.
Quote:
What happens is old guys like me sit back and collect tons of free cash every month because our properties are 100% full. Our rental properties are paid, taxes are low, but market conditions keep prices high because nobody can afford to build. Good for me, bad for you.
No kidding! That's what I'm saying. You spent a post arguing with me, only to come to the exact same conclusion: Prop 13 just serves the entrenched interests who bought in, early. That's a big reason why I have ruled out Florida and California as places to settle down.
It's funny how there are supposedly NO jobs in California and how California sucks sooooo bad.
Meanwhile, my husband receives nothing BUT job offers from there and my relatives who live in Sacramento and San Diego absolutely love it. I'm confused....what gives?
Is California really that horrible of a place to live?
John Paul Stevens predicted that Prop 13 would create a permanent rentier aristocracy of property owners in CA.
The opponents of Prop 13 predicted that it would destroy the state's school system, cause public services to decline, cause massive increases in crime and gang activity, and damage neighborhoods, and it would turn California into an economic basket case. No one else predicted that.
It's a bad thing for everyone. It effectively turns everyone into permanent renters with the government as the landlord. My property taxes are about $8,600 a year. With the house paid, I still have a monthly "rent" payment of over $700.
The problem with Prop 13 is that if it was repealed, tax rates would not go down for some and up for others. They would just go up. The counties would grab the money and waste it.
If the population of a given area makes $100k per year on average, and they want to buy the median priced home in the area, then the supply/demand formula would indicate that the median house payment would be about $28,000 a year at current lending ratios. This is after 20% down. We can back into what the median house price should be using a little algebra.
The total payment would be $2333 per month including taxes and interest. The property taxes and insurance are fixed. The variables are p and i.
At ~1.25% of the assessed value and a homeowner policy of $1250 annual, the median price should be around $400,000 at 5%.
The problem results when house prices rise at 8% a year but income doesn't. Assume you only earn a raise of 3% a year. In ten years your home is worth more than twice as much. Your property taxes have increased by $566 a month while your income has increased by $2800. The effective tax rate is huge relative to salary. The tax increase consumed 20% of your raise. Taxes now consume 10% of your gross income as compared to 5% ten years earlier. In 20 years its even worse: Your $2300 house payment is now $4500 and you never moved.
If your income doesn't keep up, you are forced out of your home. If your income keeps up but you don't save enough for retirement, you are forced out of your home even though you might own it outright.
As a property owner, I simply pass the cost onto the renter. This is why rent prices in some areas don't track with comparable housing costs. If I own a rental unit for 20 years, I can afford to rent below what a new development can rent at because my taxes are fixed with a small increase which I pass onto the renter. The market in a given area is comprised of a pool of renters in a given income range.
This stifles competition resulting in decreased supply and actually increases rents as the developer is competing against me and the government. The government always wins.
What happens is old guys like me sit back and collect tons of free cash every month because our properties are 100% full. Our rental properties are paid, taxes are low, but market conditions keep prices high because nobody can afford to build. Good for me, bad for you.
When state legislators have to have a degree in economics and finance, things might change. Until then it's business as usual until we hit the terminal payment point and implode.
But prices would not go up at 8% with high property taxes, and for that matter with lending reform. Look at Texas. It has both.
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