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Revising Prop 13 – Benefit Actual Owners

By Peter P   Follow   Mon, 25 Feb 2008, 4:41pm   5,264 views   227 comments
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We all know the problems caused by the Jarvis-Gann ‘Prop 13’ tax revolt CA constitutional amendment. It was sold to the voters as a measure to “keep granny in her family home”, but in reality the prime beneficiaries have been major corporations, whose campuses pay inordinately low property taxes, and those boomers who never seem to move.

Let’s say that the US Supreme Court strikes down Prop 13 as being an infringement of the 14th Amendment “equal protection” clause. How could we replace it and still keep granny in her home?

I have a fiendish idea. Let any owner-occupied residential property be FULLY EXEMPT from all property taxes IF the home is owned free and clear. But if there is a mortgage, trust deed, HELOC, MEW withdrawal, or any other suchlike activity, then the owner must pay his or her fair share of property tax.

Granny in the paid-off family home would thus be exempt. So would responsible homeowners who bought a house compatible with their income and who paid it off.

Irresponsible home “owners” who either bought more house than they could afford or who kept withdrawing from the home ATM would get stuck paying property tax. Hey, you guys get a mortgage-interest deduction: just roll those tax-savings over into your property tax bill!

To me most of the “unintentional consequences” of this plan are positive. What are your thoughts about this reform?

-DennisN

Most Liked Comments

1. Peter P Follow Befriend (4) 117 threads 17,655 comments Premium

   1   5:38pm Mon 25 Feb 2008   Share   Quote   Permalink   Like (2)   Dislike   Well, Dennis, I like your plan. It is going to be a tough sell though. Paying off a mortgage is "unsophisticated" and is to be compared with stuffing money under one's mattress. :)

2. e Follow Befriend 3 threads 1,170 comments

   2   1:01am Wed 27 Feb 2008   Share   Quote   Permalink   Like (2)   Dislike   RE: MBA I'm perplexed... why would having an MBA hurt your chances of getting a job. Or, what jobs were looking for that having an MBA hurt?

3. Peter P Follow Befriend (4) 117 threads 17,655 comments Premium

   3   4:48pm Mon 25 Feb 2008   Share   Quote   Permalink   Like (1)   Dislike   What about reverse mortgages?

4. Peter P Follow Befriend (4) 117 threads 17,655 comments Premium

   4   5:17pm Mon 25 Feb 2008   Share   Quote   Permalink   Like (1)   Dislike   I think if we privatize enough of the local government (and education), property tax can be close to zero.

5. justme Follow Befriend (2) 33 threads 3,464 comments

   5   5:21pm Mon 25 Feb 2008   Share   Quote   Permalink   Like (1)   Dislike   I'm worried about the unintended consequences here. Such as rich old people paying no taxes and poor old people paying lots of taxes. I'd be in favor of re-jiggering the property tax system so that everyone pays the same percentage of market value, NO EXCEPTIONS, with the percentage being such that the total property tax revenue for the state would be flat for 2007. Fluctuations in market value would then index the total tax to asset inflation levels.

6. DennisN Follow Befriend 4 threads 1,056 comments Boise, ID

   6   5:22pm Mon 25 Feb 2008   Share   Quote   Permalink   Like (1)   Dislike   Let the rich pay even FEWER taxes… Well if a wealthy family had an estate in Woodside, they would be exempt too under my plan. This does give me pause. However: 1) estates like that give employment to gardeners, plumbers, and the like 2) estates like that preserve a certain amount of open space and 3) this would mitigate against the "Paris Hilton effect" where naer-do-well heirs do MEWs to support a profligate lifestyle.

7. justme Follow Befriend (2) 33 threads 3,464 comments

   7   5:31pm Mon 25 Feb 2008   Share   Quote   Permalink   Like (1)   Dislike   Peter P, That would be all a matter of how "economically optimal" is defined. I have a feeling that your definition and mine would be very different.

8. DennisN Follow Befriend 4 threads 1,056 comments Boise, ID

   8   5:40pm Mon 25 Feb 2008   Share   Quote   Permalink   Like (1)   Dislike   Where's surfer-x when I need him? :) My plan exempts people who view their home as a place to live. My plan taxes harshly people who view their home - or a home of many - as an investment , e.g. REIC dildos, commercial property owners, specuvestors, flippers, and their ilk. A positive consequence is that this will take Federal tax dollars, via the mortgage interest deduction, and recycle them into state and local coffers.

9. Malcolm Follow Befriend 2,842 comments Carlsbad, CA Malcolm's website

   9   5:51pm Mon 25 Feb 2008   Share   Quote   Permalink   Like (1)   Dislike   Headset, that sort of thinking just won't fly here. The idea of making getting rich easier so that more people can get rich is surprisingly a tough sell for many who have it engrained in their minds that they will always be poor.

10. HARM Follow Befriend (1) 119 threads 4,785 comments HARM's website

    10   6:06pm Mon 25 Feb 2008   Share   Quote   Permalink   Like (1)   Dislike   Prop-13 was an amendment to the state constitution, adopted by a referendum of California voters. Yup, and the "third rail" of CA politics. Gotta love the Tyranny of the Selfish and Greedy.

11. Peter P Follow Befriend (4) 117 threads 17,655 comments Premium

    11   6:06pm Mon 25 Feb 2008   Share   Quote   Permalink   Like (1)   Dislike   Well, I guess Idaho is a no-nonsense state.

12. Malcolm Follow Befriend 2,842 comments Carlsbad, CA Malcolm's website

    12   6:06pm Mon 25 Feb 2008   Share   Quote   Permalink   Like (1)   Dislike   Isn't a looter someone who takes money? I'm not sure I follow how not paying taxes is somehow looting. It's sort of like calling a homeowner a squatter, I don't quite follow the definitions being tossed out here.

13. DennisN Follow Befriend 4 threads 1,056 comments Boise, ID

    13   6:14pm Mon 25 Feb 2008   Share   Quote   Permalink   Like (2)   Dislike (1)   Well shoot, that's why I prefaced my fantasy with the US Supreme Court striking down Prop 13. ;)

14. HARM Follow Befriend (1) 119 threads 4,785 comments HARM's website

    14   6:16pm Mon 25 Feb 2008   Share   Quote   Permalink   Like (1)   Dislike   Note: I would support Prop. 13 if I got the same 1979 + 2% tax basis as every (Medicare-provided) Viagra-taking, bong-hitting, oversexed, narcisstic CA Boomer. Unfortunately, being from a much later generation, I get to pay full-market-rate tax basis.

15. Peter P Follow Befriend (4) 117 threads 17,655 comments Premium

    15   6:18pm Mon 25 Feb 2008   Share   Quote   Permalink   Like (1)   Dislike   Let’s get vouchers into the school system, eliminate all entitlements, and I will personally do some transfers here and there as to have my house totally reassed at the new market value. Screw it, I’ll just buy a new house, it’s time to move up anyway. Yes. Welfare should be replaced by charity. Voucher is the way to go.

16. HARM Follow Befriend (1) 119 threads 4,785 comments HARM's website

    16   6:20pm Mon 25 Feb 2008   Share   Quote   Permalink   Like (1)   Dislike   ;-) Hey, now that X rarely posts these days, someone has to tow the line.

17. HARM Follow Befriend (1) 119 threads 4,785 comments HARM's website

    17   6:30pm Mon 25 Feb 2008   Share   Quote   Permalink   Like (1)   Dislike   @sybrib, No, haven't capitulated (yet). Btw, I think you meant LILLL, not SQT. @DennisN, Thanks for the correction. Yet another eggcorn to add to the collection.

18. B.A.C.A.H. Follow Befriend (6) 5 threads 2,359 comments

    18   6:47pm Mon 25 Feb 2008   Share   Quote   Permalink   Like (1)   Dislike   OK, I have to admit, I do very much like your idea of doing away with the deductions from the federal income tax, for mortgage interest and for property tax. This might also help with other challenges on the federal budget.

19. Malcolm Follow Befriend 2,842 comments Carlsbad, CA Malcolm's website

    19   9:55pm Mon 25 Feb 2008   Share   Quote   Permalink   Like (1)   Dislike   sybrib Says: February 25th, 2008 at 6:47 pm "OK, I have to admit, I do very much like your idea of doing away with the deductions from the federal income tax, for mortgage interest and for property tax." So basically people get to pay tax on tax, yikes!

20. DinOR Follow Befriend 1 threads 6,749 comments Premium

    20   7:59am Tue 26 Feb 2008   Share   Quote   Permalink   Like (2)   Dislike (1)   DennisN, Loved it! Are there some loopholes that are bound to be exploited? Sure. Is it healthier than what we currently have? You bet.