The US is middling as a nation in terms of homeownership rates. As much favoritism as homeowners receive here and the rhapsodies we sing in their support, the US has not succeeded in promoting it. The success for home ownership has been a great wealth transfer from renters and new homeowners to incumbent homeowners.
Yes, I would love to see property taxes replaced by a land value tax. Even better, eliminate the vast majority of state and local taxes and replace it with an LVT.
Of course, state governments like California could stop funding illegal aliens, idiotic “high speed rail” projects, jet setting politicians, etc while allowing off shore oil and natural gas projects to increase revenues. Stop wasting tax dollars and keep property taxes low and affordable.
Prop taxes in CA are already quite low if you bought in early enough - would you look favorably on prop 13 repeal if it resulted in a lower average tax bill for more recent home buyers?
Most homes have a mortgage, and property taxes are part of the mortgage payment, so most homeowners pay their property taxes as part of their mortgage payment and don’t have a balloon payment once or twice a year.
Maybe a permanent lock on value isn't great, but protecting people from insane swings in the real estate market is a noble aim.
I would be interested to know what percentage of Californians have been holding on to their homes since Jimmy Carter, and exactly how much revenue the state is losing out on here. My gut instinct is that there is more than enough churn in that market to keep taxable values mostly pretty high and it isn't nearly as much lost revenue as is being portrayed here.
However, the land value tax sounds workable, and much more fair. Iirc, it was highly popular when Henry George promoted it 150 years ago. Has any municipality in all that time tried an LVT out?
At the low end, we're talking tens of billions of dollars.
A few years ago, we contemplated nixing prop 13 protections specifically just for (a) commercial properties with (b) worth more than $3million. It didn't pass the requisite statewide plebiscite, but The Legislative Analysts Office estimated the state would collect an add'l $6.5 - $11.5 Billion dollars per annum.
Even if someone isn't using an actual 1978 assessment, having bought in 10+ years ago can mean a lot. It's not uncommon for there to be 10-20x differences in tax bill for otherwise similar properties.
Part of the problem is the use of trusts to avoid reassessment. The owner places the property under the trust and instead of ever selling the property (which would trigger an updated assessment) they simply transfer control of the trust. Commercial property owners have adopted this over the years and even some individual owners, although follow on legislation made it possible for homeowners to bequeath their tax treatment to their heirs, creating the beginnings of a hereditary landowning class.
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As for protecting people from wild swings in property values, there are certainly ways to go about that. As mentioned, tax deferral programs exist and are easy enough to implement. Also, an lvt would even act as a counterweight to speculative land bubbles. Leveraging up to park money in land (which you assume will only increase in value because everyone else is doing the same thing) stops making sense when all that nominal increase in value immediately gets taxed away. In fact, theory suggests a sufficiently aggressive LVT makes something like the housing bubble that popped in '08 impossible.
The US is middling as a nation in terms of homeownership rates. As much favoritism as homeowners receive here and the rhapsodies we sing in their support, the US has not succeeded in promoting it. The success for home ownership has been a great wealth transfer from renters and new homeowners to incumbent homeowners.
Yes, I would love to see property taxes replaced by a land value tax. Even better, eliminate the vast majority of state and local taxes and replace it with an LVT.
This is so good! A complicated topic - broken down into very simple terms.
I knew you were going to go Henry George on us. I agree.
I'd prefer a war on the income tax.
Another phrase for MAGA is I, Me, Mine.
Of course, state governments like California could stop funding illegal aliens, idiotic “high speed rail” projects, jet setting politicians, etc while allowing off shore oil and natural gas projects to increase revenues. Stop wasting tax dollars and keep property taxes low and affordable.
Prop taxes in CA are already quite low if you bought in early enough - would you look favorably on prop 13 repeal if it resulted in a lower average tax bill for more recent home buyers?
It’s not the taxes that are the problem. It’s the spending. Politicians never have enough money.
I will make a quibble here.
Most homes have a mortgage, and property taxes are part of the mortgage payment, so most homeowners pay their property taxes as part of their mortgage payment and don’t have a balloon payment once or twice a year.
Maybe a permanent lock on value isn't great, but protecting people from insane swings in the real estate market is a noble aim.
I would be interested to know what percentage of Californians have been holding on to their homes since Jimmy Carter, and exactly how much revenue the state is losing out on here. My gut instinct is that there is more than enough churn in that market to keep taxable values mostly pretty high and it isn't nearly as much lost revenue as is being portrayed here.
However, the land value tax sounds workable, and much more fair. Iirc, it was highly popular when Henry George promoted it 150 years ago. Has any municipality in all that time tried an LVT out?
At the low end, we're talking tens of billions of dollars.
A few years ago, we contemplated nixing prop 13 protections specifically just for (a) commercial properties with (b) worth more than $3million. It didn't pass the requisite statewide plebiscite, but The Legislative Analysts Office estimated the state would collect an add'l $6.5 - $11.5 Billion dollars per annum.
https://lao.ca.gov/BallotAnalysis/Proposition?number=15&year=2020
Even if someone isn't using an actual 1978 assessment, having bought in 10+ years ago can mean a lot. It's not uncommon for there to be 10-20x differences in tax bill for otherwise similar properties.
Part of the problem is the use of trusts to avoid reassessment. The owner places the property under the trust and instead of ever selling the property (which would trigger an updated assessment) they simply transfer control of the trust. Commercial property owners have adopted this over the years and even some individual owners, although follow on legislation made it possible for homeowners to bequeath their tax treatment to their heirs, creating the beginnings of a hereditary landowning class.
...
As for protecting people from wild swings in property values, there are certainly ways to go about that. As mentioned, tax deferral programs exist and are easy enough to implement. Also, an lvt would even act as a counterweight to speculative land bubbles. Leveraging up to park money in land (which you assume will only increase in value because everyone else is doing the same thing) stops making sense when all that nominal increase in value immediately gets taxed away. In fact, theory suggests a sufficiently aggressive LVT makes something like the housing bubble that popped in '08 impossible.
Is your assumption that basic services like roads and sewage treatment are fundable w/o prop taxes or an LVT based equivalent?
So you’d be on board with an LVT shift that *reduced* the tax burden on homeowners?
Anytime someone thinks everything can be paid for by cutting “fraud and abuse” you know they are not serious