patrick.net

What about reverse mortgages?

Thanks Dennis, I'd be happy to not owe any tax at all on my house :)

Okay, let me put on my evil hat again...

Why is it the government's responsibility to keep granny in her family home?

We should eliminate capital gains tax though. This way, granny will be able to retire somewhere nice with lots of cash.

Let the rich pay even FEWER taxes...

Genius!

It should not be the government's responsibility to redistribute wealth. It is, however, important for the government to incentivize production and investment through tax policies.

Peter P,

The main reason old folks get reverse mortgages is to pay their property taxes.

If they really are that destitute, they should sell out and find someplace cheaper to live.

I think if we privatize enough of the local government (and education), property tax can be close to zero.

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.

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.

Pay taxes on an appraisal done every x number of years, capping at a certain % for each year?

With as much desire to keep Granny in her house, I also want her out to ensure a neighborhood balance, i.e. kid-friendly. We live on a beautiful street (renters), but would I want to buy here? There's no other kids for our kid to play with because young families can't afford it. One reason being, old people never move out! (nothing personal against old people)

I’d be in favor of re-jiggering the property tax system so that everyone pays the same percentage of market value

Market value?

Fair rental value makes more sense.

I’m worried about the unintended consequences here. Such as rich old people paying no taxes and poor old people paying lots of taxes.

When we have an economically-optimal tax policy, all unintended consequences should be seen as acceptable.

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.

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.

Optimal rate of production.

Maybe I need to state that I intended to set a "lifetime goal" for those people buying homes to live in. That goal is to 1) buy only what you can afford and 2) pay it off. Once you do that, you get out from under the burden of property tax. This would help people in all income levels.

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. :)

Wow, it's amazing how Prop. 13 keeps popping up over and over again. Anyone recall my *solution* to the Prop. 13 cancer from ~3 years ago?:

http://patrick.net/wp/?p=48#comment-6222

HARM Says:
July 30th, 2005 at 7:18 pm

This one’s for all of us out there who feel Prop. 13 and existing Urban Boundary Limit (UBL) laws are a “good start”, but haven’t gone nearly far enough in redistributing the tax burden from old to young, and keeping housing costs high by artificially limiting the supply of housing in California.

The time has come to finish what Howard Jarvis and Paul Gann have started. I give you “Propostion GREED”:

Generational
Redistribution of
Expenses to
Exploitable
Descendants

So what is Propostion GREED all about and why should I vote for it? Let me explain:

Whereas Prop. 13 caps property tax for existing homeowners at 1% of your home’s assessed value, Prop. GREED eliminates property tax altogether. That’s right –ZERO! As of the day the initiative passes, current owners will pay ZERO taxes. Of course, to help make up for the loss of tax revenue, people who buy after Prop. GREED passes will unfortunately see their tax rate go up a tad –to around 15%. The rest of the revenue shortfall can be made up by taxing renters.

You might wonder about potential opposition by non-owners to such a measure. This shouldn’t be a problem, as about 60% of California households already own (at least) one home and many of the current non-owners are either low-income, too young to vote, or well… let’s just say “not-too-politically aware”. The best news of all is most of the “opposition” hasn’t even been born yet!

In the unlikely event that the disenfranchised do manage to mount significant resistance, we’ll just label them “jealous bitter renters” (JBRs) and re-frame the debate with emotional (and factually misleading) appeals. We can redefine the opposition in such a way that they seem cruel and stupid even to oppose our initiative.

Examples:
“Prop. GREED is all about helping elderly people on fixed incomes! It’s so unfair that the government can kick grandmothers out of their homes over taxes, don’t you agree? You do like elderly people, don’t you?”
“Oh, so you’re PRO-TAX, are you? You love sending your money to the tax-and-spend politicians in Sacramento, eh? Ok, whatever you say, ‘Comrade’…”

Ok, so maybe you’re still concerned about the potentially price-depressing effects on your house, given the 15% property tax rate for people who buy after it becomes law. Not to worry –we’ve got your back on this one! Prop. GREED also contains a provision that prohibits any new residential construction from being approved after it passes –not even new apartments. It’s sort of like a statewide UBL on steroids! This will cut off housing supply at the knees and virtually guarantee never-ending appreciation for your house! (And of course it will exempt home upgrades for existing owners, just in case you want to add another bedroom or build a guest house.)

So remember to vote early and vote often –for “Proposition GREED”!

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.

haven’t gone nearly far enough in redistributing the tax burden from old to young

My plan doesn't do that. I gives a goal to young people to 1) only buy what they can really afford and 2) pay it off as soon as possible.

Getting a 15 year mortgage means paying property tax for 15 years. Getting a 30 year mortgage means paying property tax for 30 years.

People would realize that they should only buy what they can reasonably afford, and pay it off as soon as possible. The goal should be all people in their early 50's to live property tax free in a paid off house.

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.

I LIKE IT!! People would have a stong incentive to buy a home priced low enough to pay of "early." They would now bargain on price. This plan would reduce the upward pressure on price and thus contribute to truly affordable housing. Don't let the fact that a few rich may benefit detract from such a grand idea. Wouldn't you love to see paid off mortgage as the new black? A true ownership society, like the pre-bubble time when I understand about half the houses in the country had no mortgages.

My case aside, I sort of like the idea of taxing mortgages. The other option, if God forbid you guys want me to pay more into the system, would be to leave prop 13 alone for the most part, but allow the tax to increase at the CPI rate. Maybe the 2% cap would kick in at age 65.

To get it passed, you have to pander to that voting block even more by making hookers and lap dances deductible expenses.

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.

As a matter of practical politics, Proposition 13 should be amended so that all the tax basis should be set to the same year. If it's a new development, the basis should be set to neighboring values. And then index to inflation.

Adjusting the basis on sale is the real looting in Prop. 13.
When everyone pays on the same basis, let's see how far people will support it.

The Howard Jarvis Looters association is simply a bunch of robbers masquerading as reformers.

Dennis,

Prop-13 was an amendment to the state constitution, adopted by a referendum of California voters.

Here's my idea: let's follow what RESIDENTS who are voters decide if about any changes.

And we won't tell Idahoans how they oughta tax themselves.

Actually it was an initiative, not a referendum.

And actually Idaho has a much better plan than Prop 13 to keep granny in her home.

By Idaho law:
1) All property is taxed at about 1% of assessed value.
2) Assesments are made yearly - up and down.
3) All owner-occupied homes have an approximately $100K exemption. You live in a $400K house you own - you pay property taxes on $300K. All others (investors, commercial property owners) pay full retail.
4) Retired people over a certain age pay property tax on a sliding scale. People at the bottom of income pay NO tax. People in the next tier pay more. People who make above a max threshold pay the going rate.

Malcolm,

And one does not have to go all the way to rich, it is plenty fun just to be comfortable financially. The chap who went from poor to lower middle can enjoy life also, and watch his kids go up the next rung.

"Poor" is a relative term also. I remember the fuss when local Welfare checks started requiring a ink thumbprint to cash. Problem was, the recipient had to see the inside teller, and could no longer use the drive thru.

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.

Well, I guess Idaho is a no-nonsense state.

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.

Yep Headset, the slippery slope of those who label some as rich just because they have more than they do soon slides down the scale to where 100K per year is considered rich. Next thing people know is that they look down one day and see the target on their own chest because being comfortably middle class is rich to some liberal activist who is trying to work a bunch of migrants into a frenzy to get elected.

@DennisN,

The thing is, you will *never* get Boomer voters to amend Prop.13 if they feel you are "taking away" some of their special privileges. Appeals to reason and "fairness" will fail --as they have failed before. We're talking about the ME GENERATION here. They will fight tooth and bong against anything that either: a) increases Boomer taxes, or b) extends those same benefits equally to non-Boomers, esp. later generations.

Bully for Idaho.

We need some leadership here. Most of us are too busy working and commuting and that stuff to get involved. But that's not true for retired fatcats who have the time and the resources to make a difference, but they have to be here to make a difference. Otherwise, what is their point?

That said, if I could, I "might" cash out and leave, too. But if I did, I'd probably not be telling the poor slogs that I left behind how they oughta solve their problems.

Well shoot, that's why I prefaced my fantasy with the US Supreme Court striking down Prop 13. ;)

And there's no compromise. If we were allowed to make government efficient, the debate would be moot. If we had a surplus no one would really care. I'll tell you all what:

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.

BTW, some of us are just naturally generous. I give more to charities in any given year than my current prop 13 savings allow, some people just want to see some results for their social contributions.

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.

Oh my goodness....surfer-x has absconded with HARM's login identity.

funny

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.

;-) Hey, now that X rarely posts these days, someone has to tow the line.

That's toe the line.

HARM,

you paying market rate property taxes now? Sounds like besides following surfer-x into superlative, you've followed him (and SQT) into the capitulation. In that case it means that prices aren't near the bottom yet.