cbbass1 said:
Unit2Sucks said:
cbbass1 said:
dajo9 said:
A great way to lower real estate prices without destroying the economy would be to raise taxes on the rich.
I agree with you, generally, but I think it's much more productive to stop talking about "the rich" in vague terms, and talk about corporations vs individuals.
Over the last few decades, the contribution of the Corporate Earnings Tax to Federal tax revenue has gone from over 35% to single digits. Specifically, corporations that hire lobbyists have successfully transferred their tax burden to U.S. individuals.
But because we have a progressive tax code for the Individual Income Tax, high-income individuals actually bear a disproportionate share of our overall tax burden.
That said, I think the best way to lower real estate prices is to add a substantial surcharge on property taxes for residential properties that go unoccupied for extended periods of time. The unoccupied properties are getting to be a pretty high percentage of the housing stock.
The surcharge would generate enough revenue so that we could do what we should've done decades ago -- index the Property Tax Homeowner's Exemption to the CPI. In CA, when the $7000 homeowner's exemption was enacted, the average price of a home was in the $20,000 - $30,000 range, and it made a big difference in affordability. Today, the exemption should be $100,000 or more.
I quite like this type of idea but not sure that "unoccupied" is the right lens. If someone has a second home would that be unoccupied?
Perhaps it should be land owned by businesses unless the businesses are currently renting the properties out to residential tenants. Limiting prop 13 to persons has been discussed quite a lot. There was an attempt in 2020 with prop 15 but it was narrowly defeated. I don't think businesses need the same sort of protection as residential owners under prop 13 so would like to see some change there.
If you have a 2nd home that you use for 6 weeks per year, it's occupied 6 weeks per year. It's not "unoccupied."
"Unoccupied" is not occupied, not a rental, no one living there, period.
Agree 100% that Prop 13 should apply to residential properties only. I was extremely disappointed that the ballot proposition failed. There were too many anti-tax zealots calling it a "new tax", when, in reality, it was closing a loophole. It would've created an opportunity to reduce property tax rates for residences.
Also predicable, is the nonsense that somehow the ballot initiatives closed some type of loophole. Prop 13 in its original form was expressly intend to apply to all taxpayers other that utilities, due to runaway taxes by creating uniform rules that protect all property owners from uncertainty of increasing tax levels where property values were appreciating wildly, but at disproportional rates. Assessors were in the business of protecting some types of property, such as the used by favored businesses (such as those that produced sales tax) and residential owners that had more influence with artificially low valuations, while some homeowners and business could no longer afford to be at the same property.
The defeat of the ballot propositions reflected the understanding that regardless of whether businesses own or rent, the measure would make them pay higher property taxes, even if they can't afford in the rent context, since a landlord could find a better suited tenant leading for businesses, in turn, to higher prices for everything we buy, including groceries, gas, restaurant meals, prescriptions, day care and much more that impacts those residential homeowners that think they were somehow insulated for paying for the tax. The let's keep raising taxes crowd seems to forget that voters are not stupid.
Then there was the negative impact on jobs because the view is business would be unimpacted notwithstanding the huge initial impacts n properties with low Prop 13 basis, resulting in large tax increases for commercial and industrial properties that would drive businesses, particular smaller businesses out of business or to another states (there were exceptions for small business property that no one thought would apply in urban areas). When I was a young lawyer I was dealing with what was then considered a large law firm on a transaction that had office in the Embaracadaro. The Embarcadero was originally built in the late 1970s and when they sold for the first time in the late 1990s, it was one of the first commercial property portfolios to be sold for over $1 billion dollars. The law firm that had full floors at the Embarcadero received a new property tax bill, which was over $250,000 per partner. These costs actually caused the firm to go bankrupt, and killed the transaction we were working on. Think of this type of event happening on steroids if a split roll passed.
The ballot initiative also had some other biases. Based on the assessor's opinion of the property's "highest and best use" a subjective system that would allow assessors to set a higher value based on how a property
could be used, rather than simply determining the value based on how it actually
is used, which gets back to old days when favored businesses, which often included donors to campaigns, got tax valuation breaks. By requiring subjective assessments that would be performed by an army of inexperienced new government employees, the initiative would prompt a vast increase in the number of appeals that property owners would have to file to seek fair assessments. Most counties already have large backlogs of appeals already, and this would exacerbate the problem. Additionally, the initiative would make a drastic, anti-taxpayer change in the appeals process. Currently, when a property owner appeals the assessor's estimate of property value, the owner's estimate is deemed to be correct if the appeal is not decided within two years of being filed (see Revenue and Taxation Code Section 1604(c)). This initiative would remove the protection for property owners subject to the new reassessment provisions, and would put the burden on the owner to prove that the property was not properly valued by the assessor, just to give California an even more anti-business slant.
The even more amusing thing about the ballot proposition is it would have exempted all residential housing, including multi-family housing, which in a housing crises you would think it a good thing. But that includes unused housing as well, which seems counter to your desired result as it provides even more incentive for corporate ownership.
Interestingly, when considering the Legislative Analyst's Office indicated two components that suggested the benefit in tax revenues was not overstated other than for increased administration costs. First is that assessor foresaw that values of California business property would drop, which has all sorts of negative consequences including to the State's wealth and lending practices, but one is lower property taxes now based on valuations. The second, which many may think is a good thing due to California's over dependence on income taxes, decreased income tax revenue as a result of increased property tax expenses. Though strangely, because they way the tax system is structured under ballot propositions, this also meant more money would go to local governmental entities, and less would go to schools. There was a third in that the bill provided
an exemption up to $500,000 would be granted for business tangible personal property, which reduced tax revenues.
But the legislation would have caused a massive upheaval that would have unintended consequences not considering by the uninformed. Many loans or bonds secured by commercial property or on business owning commercial property even ancillary to their business, would be in default for breached covenants. Many contracts involving property would trigger huge payments under tax indemnification provisions. The CA real estate market would be in turmoil as tenants got their tax bills like that law firm, and the politicians that supported this measure would run afoul of the usual Chinese proverb be careful what you wish for.
The usual response to let's find a tax wherever and on whatever bothers us crowd is: why don't we raise your taxes instead, rather than it always being other people money? For example, let's put a surcharge on high salary tech and finance workers since they are driving up housing prices in the Bay Area?