Unaffordable cities today: your view?

[Jonesy55]

Originally Posted by dave8721

I surprised Texas isn't more like Florida (another no income tax state). Here your property taxes on a primary residence pretty much get set at the time of purchase and can only increase a small % after that (capped at like 3% per year even when the property is gaining like 25% real value per year). Long time homeowners pay basically nothing in taxes. When you buy a new house your taxes get set at that new higher level (artificially high to make up for all the freeeloading long time owners). Some one could have bought a house in 2008 for like $250k that is worth $700k now but they still pay taxes as if it was worth $250k. I'm surprised such a conservative state government like Texas would allow a city like Austin to be basically drowning in tax revenue.

That seems highly unfair to me, so you get two people living in identical homes next to each other and one only has to pay a fraction of the taxes that the other does?

Also if long term residents are subsidised like this doesn't that just mean that everybody else has to pay higher rates than they would otherwise have to in order to make up the same amount of overall tax income for the state?

It must also be a big disincentive for people to move home making the whole real estate market less efficient.

[mhays]

It's certainly discriminatory.

[Pedestrian]

Originally Posted by Jonesy55

That seems highly unfair to me, so you get two people living in identical homes next to each other and one only has to pay a fraction of the taxes that the other does?

Also if long term residents are subsidised like this doesn't that just mean that everybody else has to pay higher rates than they would otherwise have to in order to make up the same amount of overall tax income for the state?

It must also be a big disincentive for people to move home making the whole real estate market less efficient.

This works pretty much as California's Prop. 13 does and has done since the 1970s. The idea was to keep from driving out long-time residents, now often retired on fixed incomes, who cannot afford the ever-climbing taxes based on a percentage of inflated property values. The law allows taxes to climb about 2.5% per year but no more. Conceptually, with re-assessment on sale/purchase/transfer of the property, new purchasers who can afford those higher valuations can also afford the higher taxes that go with them.

It would be a disincentive to move however the law allows you to transfer a capped tax rate to a new property as long as that property is worth the same or less than the one you are leaving. Again, the concept is that if you can afford to move up in home value, you can also afford to pay higher taxes but if you are just shifting within a price range of to a lower priced property, you may not be and should keep the benefit of the cap.

Does everyone else have to pay higher taxes? Well, everyone else eventually benefits from the law if they don't keep moving to higher priced homes. But it also acts as a cap on government spending and especially to the extent that government benefits from sharply inflating home values. Do you think it's a good thing for government spending to rise based on inflation of property prices?

[Pedestrian]

Originally Posted by mhays

It's certainly discriminatory.

Since in California, at least, it was voted in by referendum (the politicans hate it because it limits the amount of other peoples' money they have to spend) and by every poll that's ever been done is still quite popular after 4 decades, it may be discriminatory but the voting majority don't object. The best its opponents can do is attempt to take commercial property out from under Prop. 13 protections which is something even I favor.

[dave8721]

Originally Posted by Jonesy55

That seems highly unfair to me, so you get two people living in identical homes next to each other and one only has to pay a fraction of the taxes that the other does?

Also if long term residents are subsidised like this doesn't that just mean that everybody else has to pay higher rates than they would otherwise have to in order to make up the same amount of overall tax income for the state?

It must also be a big disincentive for people to move home making the whole real estate market less efficient.

Yes it is unfair and pretty discriminatory (Supreme Court had to decide that it wasn't legally discriminatory). I recently bought a home a yes I do pay twice the taxes that my neighbor pays for their identical home. In Florida you cannot transfer your savings from one house to the next. In my old home we were paying half the taxes of new arrivals there.
In reality in Florida you have tons of 2nd homes and homes owned by non-residents. These properties are not protected and their taxes can rise wildly from year to year with the change in real estate values. They pay our taxes. Of course renters end up getting stuck the with the also as a home or condo that is rented out is not protected either and those costs get shifted to renters. Its a pretty bad law but cities need to get revenue somewhere in states where the state governments purposely attempt to starve them of revenue at all costs.

[Khantilever]

Originally Posted by Pedestrian

This works pretty much as California's Prop. 13 does and has done since the 1970s. The idea was to keep from driving out long-time residents, now often retired on fixed incomes, who cannot afford the ever-climbing taxes based on a percentage of inflated property values. The law allows taxes to climb about 2.5% per year but no more. Conceptually, with re-assessment on sale/purchase/transfer of the property, new purchasers who can afford those higher valuations can also afford the higher taxes that go with them.

It would be a disincentive to move however the law allows you to transfer a capped tax rate to a new property as long as that property is worth the same or less than the one you are leaving. Again, the concept is that if you can afford to move up in home value, you can also afford to pay higher taxes but if you are just shifting within a price range of to a lower priced property, you may not be and should keep the benefit of the cap.

Does everyone else have to pay higher taxes? Well, everyone else eventually benefits from the law if they don't keep moving to higher priced homes. But it also acts as a cap on government spending and especially to the extent that government benefits from sharply inflating home values. Do you think it's a good thing for government spending to rise based on inflation of property prices?

If you’re worried about runaway spending then cut the tax rate as the base increases in value. Such a huge disincentive to moving makes the housing market more illiquid and penalizes new housing. Do you not think that making households more immobile has ramifications for productivity and growth?

And the fact that a household which has stayed in the same place hasn’t yet realized the appreciation in the value of their home doesn’t mean that they don’t benefit from it. The option to sell and realize that gain has real value, and provides then with access to more credit and likely affects many of their spending and saving decisions.

What social purpose is achieved by making it artificially cheap for retirees to live in homes they can’t actually afford anymore? We have large families who are paying an arm and a leg for housing in some of these areas, but apparently it’s more important that granny keeps the huge house which has quadrupled in value.

[mhays]

I'm shocked that there's no law about equitable taxation.

Someone will bring up graduated income tax rates, but that's no similar at all. Income tax rates (not including exemptions etc.) apply to everyone with the same rules. CA's system creates a special class that has different rules, with massive consequences for everyone else. As a property owner in another state, I'd be appalled if we did something similar.

[austlar1]

Originally Posted by dave8721

The point I was trying to make is that Florida like many Conservative state governments restrict the revenue cities can bring in to punish them for existing. Not allowing taxes to surge on existing properties that gain in value is one of those ways.

Here is a link that details the revenue stream for the budget of the state government of Texas. As you can see, the state derives no income from property taxes, and I suspect that this is the main reason that they are not particularly concerned (beyond capping overall property tax rates at present levels) with interfering with tax revenue for Texas cities and towns. The federal government, interestingly, is a huge source of revenue for the state government.

https://comptroller.texas.gov/transp...nue-by-source/

[Pedestrian]

Originally Posted by Khantilever

If you’re worried about runaway spending then cut the tax rate as the base increases in value. Such a huge disincentive to moving makes the housing market more illiquid and penalizes new housing. Do you not think that making households more immobile has ramifications for productivity and growth?

And the fact that a household which has stayed in the same place hasn’t yet realized the appreciation in the value of their home doesn’t mean that they don’t benefit from it. The option to sell and realize that gain has real value, and provides then with access to more credit and likely affects many of their spending and saving decisions.

What social purpose is achieved by making it artificially cheap for retirees to live in homes they can’t actually afford anymore? We have large families who are paying an arm and a leg for housing in some of these areas, but apparently it’s more important that granny keeps the huge house which has quadrupled in value.

It's always fun to see how outsiders trash California. If there are "huge disincentives" making housiong illiquid and penalizing new housing (whatever that means), why are home values some of the highest in the country and the cities where one finds those values (like San Francisco) growing dramatically?

What social value is there in not forcing long-time residents out of their homes because of escalating taxes? If you have to ask, you'll never understand and I won't bother trying.

[Pedestrian]

Originally Posted by mhays

CA's system creates a special class that has different rules

That everyone is in as soon as they buy a property.

[mhays]

No, because the system hurts you until you've owned for a very long time.

And surely even you would admit that California's policies are directly related to scarce housing which results in high prices.

[pdxtex]

Originally Posted by CaliNative

I'm a progressive, even liberal on many issues. I have a special problem with liberals who live in NIMBY enclaves and do all they can to keep zoning laws strict to keep out homeless housing and affordable housing for the hoi polloi who make the cities work. Either raise wages for the working poor, or subsidize affordable housing they can afford. Build Build Build.

Liberal NIMBY Poster Child #1: Marin County California. Liberal NIMBY Poster Child #2: Santa Monica California. Liberal NIMBY Poster Child #3: San Francisco California.

so what you are really saying, is rich, big city democrats are really, illiberal, classist jerks. i agree! also, yes i agree. we need to build lots! build lots of housing types for lots of income brackets. this will require some more loose zoning codes in most places so those conversations should be interesting.

[pizzaguy]

Originally Posted by Pedestrian

What social value is there in not forcing long-time residents out of their homes because of escalating taxes? If you have to ask, you'll never understand and I won't bother trying.

That value is not worth having the state be perpetually broke. Not even close.

[mhays]

It's important to subsidize people whose assets have skyrocketed in value. How can you not see that?!