Please comment on this:
Take some couple who bought a house in California 30-40 years ago for $50,000. They worked hard, raisin a big family and still somehow managin to make them mortgage payments every damn month.
Now the assessemnt authorites tell them their property is worth $1.5 million, even if it's now a run-down mess, because the lot has value. So the taxes are about 3%, i.e., about $50,000 EVERY year. No 30-year payments plans, neither. So, now what?
Added: Do you have an article you can link to that would give me more background on P13 and it's budgetary issues.
Here's the one advantage to Prop 13: Grandma stays in her house and pays her 1978 property tax levels.
However, it's not like in an anti-Prop 13 world she loses all that money and time she worked for during the last 30 years. She gets to sell the house for $1.5 million and can buy a sweet condo in the same town now that she doesn't need as much space because all her kids have moved out and she can set aside another cool million to go on vacations, pay for her grandkids college education, or leave in wills or anything else she might want to do. She gets all the benefit of her saving and paying off her mortgage.
Alternatively, if she REALLY REALLY doesn't want to leave her home she can engage in less conventional financial arrangements like a reverse mortgage where she gets paid every month to finance her retirement and the house goes to a financial institution after she dies.
The primary benefit of Prop 13 is entirely sentimental. The costs are extremely real and far outweigh the benefit.
It makes all housing prices higher because it decreases liquidity in the housing market. This happens because it provides a massive disincentive for people to move because they lose their tax basis in their old home and have to pay the new higher basis on their new home. This effectively creates a huge tax penalty to changing homes in California, a penalty that only gets larger over time. I'm sure I don't have to do much imagining for you to link the spectre of constantly rising housing prices, in part fuled through the market-limiting mechanisms of prop 13, and the type of assumptions that led to exotic lending for housing in California over the last ten years.
That penalty primarily affects newer people who move to California and young people who have not yet purchased their first house. Lower liquidity in the housing market, in effect, significantly lowers supply because fewer people will move and that increases house prices. This is the primary reason why I'm in the 95th percentile in terms of income in the country and can't afford a house within an hour of where I work.
Simultaneously it significantly caps the amount of money the state can generate from property taxes because the amount of taxes don't increase even as the taxed property radically increases in value. State's gotta get money from somewhere so it has higher income taxes and sales taxes. Net effect: there's an income transfer from the young and working to the old and those who have lived in the same house for many years. I estimate that, in addition to making housing completely unaffordable, Prop. 13 is personally costing me between $4,000 and $7,000 a year. This goes beyond me personally, however. The other people who get really screwed are poor people who will never be able to afford housing. They get none of the benefits of Prop. 13 and absorb all of the costs. Prop. 13, in effect, enriches those who already have on the backs of the young and the have-nots.
This post is getting overly long, but there's all kinds of other problems it creates related to school spending and spending on other public infrastructure, much of which traditionally comes from income tax sources.
