Although I don't want to keep complaining about taxes...

[jmh530]

@bchadwick

It’s not just keeping voters happy. Plenty of homeowners can’t or don’t vote (not citizens). If you are a retiree who bought your home years ago, but a bunch of yuppies move into the neighborhood and drive prices up because it became cool, there is no real reason why that person should have to have to their taxes triple after living there for years and years when they engaged in no transaction themselves. Inflation adjustments so that one can at least count on existing property tax revenue in real terms is something that it is reasonable for cities to be able to expect.

By the way, if property taxes are all 0%, how do you plan to pay for police and fire and local services? Most cities don’t have an income tax and get much of their revenues from property tax. I think cities seem to show a fair amount of restraint by ny trying to milk property booms for every last cent of tax revenue.

I’m not saying taxes should be zero for everything. I think my post clearly advocated a consumption tax. The fact that cities have in the past largely not chosen implement this form of tax is not relevant to my point about what they should optimally do, except to the extent that we can consider what factors are preventing them from changing policies now (which I assert is largely driven by political pressures from current residents).

I think your argument about the new resident illustrates many flaws to property taxes.

If a previously unfavorable area now is experiencing migration that is causing housing prices to rise, then there must be some factors driving this increase. People are valuing living in that area more. That area is providing a larger (potentially non-monetary) value to everyone living in the area (such as a lower crime rate than it had previously experienced or better access to jobs). The new migrants are clearly paying a premium to achieve these benefits. The old inhabitants, assuming their tax rates are held down to be lower, receive these benefits and don’t pay more in additional taxes. The fact that they are not participating in the transactions that drove up the prices doesn’t mean that they are not participating in the community that people think is becoming better.

Further, what if these new migrants demand a higher quality of public services. The benefits of those improved public services go to everyone, not just the new migrants. Why should the old inhabitants not also have to pay for the better services if they also receive the beneifts?

What it comes down to is that the economic reasoning behind having lower property taxes for old inhabitants compared to new migrants is rather weak. Nevertheless, the political choice explanation makes perfect sense to me. It’s not just about making policies between the old inhabitants and the new migrants. It’s also about the potential migrants who aren’t there yet. If a politician has the opportunity to generate an equal amount of revenue from changing property tax policies for core constituency or potential migrants who can’t even vote yet, I think that would be an easy choice.

[higgmond]

@whatsyourgovt

What’s the groups take on rent stablisation? I personally hate it because all my neighbors pay literally 5% of what I am paying in rent just because they have been there for decades. I also think, it would help decrease some of the overbearing rent costs in nyc. Sorry if this goes in another direction - i’ll create another page if you think this will dilute the prop tax discussion but I think its along the same lines.

I recall reading a pretty compelling paper about 12 years ago that demonstrated that rent control actually results in higher overall housing costs due to the additional costs people incur hiring agents to try to find rent controlled apartments before they hit the market, kick-backs to existing tenants, etc.

[1recho]

@ohai

I actually like the idea of local property taxes to pay for local services. …However, for stuff like schools, local tax sounds pretty appropriate.

You elitist, that means that schools in Beverly Hills would be better than schools in Downey. That’s discrimination against the poor. BChad, please revoke ohai’s party card forthwith.

The sad fact is that unlike states’ rights enshrined in the constitution; local governments are a creation of the state and have no rights whatsoever. If Sacramento wants to take all money from all municipalities and give it to, say, San Francisco, they can damn well do it. Your property taxes don’t have to pay for local services alone. That’s why (until a few years ago, I don’t know how it is now but) the towns collect local taxes, hand them over to the state, then the state gives them back to the towns. Of course the whole process was (is?) rife with corruption, horse trading and abuse.

As to the taxes in California:

9.3% (10.3% for 1M+) income tax per year

8% sales tax (+1% depending on where you are)

36c per gallon gas tax (jumps to 39.5c on July 1)

1…2% property tax on your house, not counting Mello-Roos

Various surcharges added by utilities to pay to the state for various bond measures

Assuming your house is about 6x your annual salary with a tax of 1.33% (so comparable to sales tax), and your marginal Federal tax (including SS and Medicare) is about 35%, and you drive about 205K miles per year in a car that averages 25 mpg,

you get to keep about (1-0.35)(1-9.3)(1-.08) = 54.3 cents per dollar, out of which you pay $360 in gas taxes (not gas) to the state. Call it an even 54%. And this is for an ordinary middle-class person.

I so fucking hate Milton Friedman and his idea of paycheck withholding. We should go back to the days when you ha to write one big check to Uncle Sam and to the state at the end of the year. You will see a lot of converts to the Taxes Are Too Damn High party.

[rawraw]

I don’t even drive 205K miles a year and I travel for work.

[former_trader]

@ohai

I never said I make a lot of money… people just assume…

You know you’re making serious coin when you voluntarily start interviewing for jobs paying considerably less than your current one. It’s a good position to be in.

[krazykanuck]

@1recho

I so fucking hate Milton Friedman and his idea of paycheck withholding. We should go back to the days when you ha to write one big check to Uncle Sam and to the state at the end of the year. You will see a lot of converts to the Taxes Are Too Damn High party.

That would be really interesting. Its like people are happy when they get a income tax refund and its like, that was your money to begin with that you lent the government interest free all year.

This thread and your California example reminds me why I live in zero state income tax state. F taxes.

[Systematic]

Bump here… I also want to add that Im pissed abou the social security tax break expiring, my paychecks are now $100 smaller… that’s money I could’ve put back into the “local economy” at strip clubs and bars… the gov think’s they’re better than me at redistributing my income? Pleeeaseee…

[Greenman72]

FWIW–I support a total repealment of the the FICA tax. There should be no “employee’s part” and “employer’s part”. The government should just charge income tax and fund social security/medicare out of the income tax.

[1recho]

Greenman, a rose by any other name would smell just as sweet. It doesn’t matter how the government funds SS and medicare as long as they fund it.

You may remember that these motherfuckers started income tax at 1% rate, like introducing a virgin slowly to sex. And then to fund the war effort and what not, now I’ve to give 35c out of every $1 (marginal) to Uncle Sam, and 9.3c to California, and 6.2c to SS, and 1.5c to medicare. Combining it all into one bill would be cold comfort for me. To continue the analogy, now they have opened us wide, they think they can keep using bigger and bigger butt plugs.

The government should (a) not promise benefits beyond basic necessities and catastrophic medical coverage and (b) take in just enough money to fund those. Too late for that.

[Greenman72]

@1recho

Greenman, a rose by any other name would smell just as sweet. It doesn’t matter how the government funds SS and medicare as long as they fund it.

I’m guessing you meant, “it would smell just as sour”, at least in this case. If they got rid of this “employee’s share” and “employer’s share”, then the people would see how much they’re actually paying. I think people have this strange idea that the “employer’s share” is being borne by the employer. It’s not–they would have paid it to me if they didn’t have to pay it to Uncle Sugar.

@1recho

You may remember that these motherfuckers started income tax at 1% rate, like introducing a virgin slowly to sex. And then to fund the war effort and what not, now I’ve to give 35c out of every $1 (marginal) to Uncle Sam, and 9.3c to California, and 6.2c to SS, and 1.5c to medicare. Combining it all into one bill would be cold comfort for me. To continue the analogy, now they have opened us wide, they think they can keep using bigger and bigger butt plugs.

Wrong–you probably have to give 39.6 cents plus another 3.8 cents out of every dollar. Everything else is correct.

Benjamin Franklin was wrong, too. A penny saved is really 3.125 pennies earned. (Assuming that you get to keep 32 cents out of every dollar you earn, 1/.32 = 3.125.)

[Systematic]

Its scary to think how much better our quality of living would be if the tax burden wasn’t so high (esp for us here in CA)… there’d also be more dollars in the economy chasing the same amount of goods, but still.

[bodhisattva]

@bchadwick

I, for one, am happy for Ohai that he’s doing well.

And I think Ohai adds value to the forum with his comments too.

As to the substance of his post, it’s not uncommon for appraisal values to creep up at a fraction of the market value. It’s very wierd how it’s done and probably rife with opportunities for abuse. When I owned in Washington DC, homes would be reappraised for tax value a year or so after they had changed hands. The basic idea was so that people who had lived in the same place a long time wouldn’t suddenly be swamped by an enormous tax bill simply because their neighbors were selling homes at substantially higher prices than they’d bought it at years ago. The value would creep up roughly to cover general inflation, so that tax revenues could keep pace with the city’s exposure to inflation, but only new residents would pay taxes at market prices, and even these were adjusted somewhat so that the jump between taxes on the previous owner and the new owner would not look ridiculous.

How they actually computed these values is kinda strange, but the policy objectives do make some sense.

Where I live property values are assesed by a government agency every year, I actually have a friend with a MS.c in Urban Land Economics that develops valuations for that agency. Essentially, every year the provincial government mails you a notice telling you how much they beleive your property is worth and then the local municipality will tax you based on that assessment. I actually believe it is quite well run because the assessed values are often within 10-15% of what the actual market value of the property would be. In addition, there is also a means tested cap on property taxes to address situations where a long time resident lives in a home that is now worth a few million dollars but does not have the ability to pay property tax based on that assessed value.

I am often shocked at how much better managed the ‘socialist’ government where I live is compared to the United States. I guess it kind of makes up for the comparably shitty weather.

[system]

Fck Taxes!

[former_trader]

You sober bro?