Prop 13 Is Stupid
The Tribune had an article today about some people who’ve decided to advocate for a Utah version of Proposition 13. Here are 3 quick reasons why Prop 13 is a stupid idea for Utah…then I’ve got to get to bed:
1. Utah’s “Truth in Taxation” law works. “In the twenty years since Truth-in-Taxation, property tax revenues have grown at a 5.4% rate, equal to the combined inflation and population growth rate of 5.4%”(UTA). For more information on Truth-in-Taxation Check out UTA’s blog (yes…from time to time they do take a break from their relentless voucher blogging to advocate for things that are actually useful!)
2. Prop 13 would create the most inequitable distribution of the property tax burden possible. Growing families would be penalized with a much more substantial share of the tax burden than would be fair. It is bad policy to stick the largest share of the tax burden with those who are typically least able to pay.
3. Utah is a non-disclosure state and is likely to stay that way. Realtors benefit from the fact that market data on the sale of real property is not tracked by government. Utah’s non-disclosure law in essence grants Realtors a monopoly on real property sales data and they won’t easily give that up (Realtors practically own our legislature). Without disclosure of sales data to government there isn’t a way for a prop 13 like law to work. (In the near future the topic of Utah’s non-disclosure status will be covered in much more detail on this blog)
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Prop 13 basically hamstrung California’s ability to raise any kind of meaningful revenue. In addition to the cap on property taxes, it also requires 2/3 majorities for every other kind of tax increase. This sounds all fine and dandy… until you realize that most folks got around a 60% cut in property taxes right out of the gate and the only way to make up the loss was to cut spending appropriately. Most of those cuts came from core services like transportation and education. It also choked off local tax revenues, making cities and counties dependent on state funding to survive. It also ended up providing larger cuts to areas with higher home values.
As much as I don’t like taxes, I couldn’t agree more that California’s Prop 13 ended up being a knee-jerk overreaction and a disaster for the state.
Comment by Jesse Harris — August 28, 2007 @ 8:08 am
Prop 13 in Utah would likely go hand-in-hand with the proposed voucher referendum, and not in a good way.
Comment by Anonymous — August 28, 2007 @ 10:54 am
People in Utah do not deserve Prop 13, judging from these comments. Wait until Utah is overrun with illegals wanting freebies from the taxpayers and your property taxes explode - then you will realize what Californians figured out long ago: the ability of politicians to raise your taxes to buy votes is unlimited - Prop 13 put a limit on politician’s greed. When enough taxeaters arrive in Utah, taxpayers will be bled dry to pay for building new schools for everyone from Mexico who wants free tuition and welfare. Enjoy!
Comment by WL — May 18, 2008 @ 12:27 pm
WL,
Prop 13 prevents illegal immigration? Thanks for the insight.
Comment by Jeremy Manning — May 18, 2008 @ 8:18 pm
Prop 13 does not prevent illegal immigration - but it does limit the bureaucrats from taxing me to pay for it. If you feel like paying more and more every year for freebies for illegals, pay those taxes! Not me - Prop 13 is the wall of protection for my wallet.
Comment by WL — July 18, 2008 @ 10:47 am
WL,
If you live in CA prop 13 isn’t helping you at all in limiting the bureaucrats. The government just finds other methods besides the property tax to pay for their programs.
Prop 13 is a scam meant to place the property tax burden onto the young and poor while letting the rich and the old get a free ride. Sorry WL…you couldn’t be more wrong.
Comment by Jeremy Manning — July 19, 2008 @ 1:05 pm
You must be a government employee or a politician - CA homeowners love Prop 13. I have a friend from Dallas whose Dad had to sell his house because he couldn’t afford $13000 per year Taxus property taxes. Prop 13 limited ALL CA property taxes to 1% of the purchase price - for more info, check out www.hjta.org.
Comment by WL — August 16, 2008 @ 12:30 pm
WL,
You must be old and have a home you never plan on selling. Prop 13 and any other aquisition based assessment program benefits only those who’ve had their homes for a long time. It is an incredibly inequitable and unfair system. If you really wanted a system that works you’d try Utah’s Truth in Taxation system. For more info check out: http://theutahhornetsnest.blogspot.com/2008/06/tax-policy-in-utah-1-property-tax.html and http://theutahhornetsnest.blogspot.com/2008/07/utah-republicans-and-prop-13.html
Comment by Jeremy Manning — August 16, 2008 @ 8:34 pm
Using your same logic, mortgages are unfair because if buyer 1 bought a cheaper house years ago and buyer 2 bought the house next door yesterday, the mortgage payments of Buyer 1 and 2 are radically different ergo unfair, since Buyer 1 bought years ago when houses were presumably cheaper and he therefore has a lower mortgage than Buyer 2. The ultimate unfairness of this market based system (per your rationale) is that when Buyer 1 pays off his mortgage before Buyer 2, the Buyer 1 is paying nothing to the bank to live in his own house, while his Buyer 2 is still paying on his mortgage next door. I personally see nothing unfair with this or Prop 13.
The difference between mortgages and taxes is this: Banks can’t arbitrarily raise your mortgage payment; government bureaucrats called Tax Assessors can - except in California due to Prop 13. You are complaining about neighbors paying different amounts in taxes for neighboring houses - why do you not complain about neighbors paying different amounts on their mortgages? Prop 13 is the equivalent of a fixed rate mortgage with a predictable yearly payment - and I love not having a big surprise when I open my property tax bill. If you think Utah’s Truth in Taxation system will protect you when the politicians begin to give away the store when hundreds of thousands of illegals move to Utah and begin demanding freebies from the politicians, paid for by you via property taxes, then I hope you are right (for your sake).
Comment by WL — August 17, 2008 @ 1:17 pm
WL,
Obviously you didn’t understand the reading material I assigned you in the last comment. Truth in Taxation actually goes further in preventing the politicians from giving away the store than Prop 13 ever could. Do a little research. You’ll sound a lot smarter.
If you can’t see the difference between a voluntary transaction like a mortgage and the inequities of property taxes under Prop 13 it is possible that research may not even help. You seem so wedded to your unfair tax scheme that you don’t really want to know the differnce.
There is no reason why two people with homes that have the same market value should have inequitable tax assessments as is so common under the law you’d foist on Utahns. Basic common sense WL.
Comment by Jeremy Manning — August 17, 2008 @ 11:48 pm
Under Prop 13, you the buyer gets to decide how much in taxes he is willing to pay - you multiply 1% times the purchase price and you instantly know the ballpark figure of how much you will pay in property tax as long as you own the house. Can’t afford the tax? Then buy a cheaper house with a lower yearly tax. Under Prop 13, there is no “switch and bait” - you are not fooled into buying a house with a low property tax and then a year or two later, the tax assessor switches your low tax with a much higher one - under Prop 13, your maximum yearly increase is capped at 2%; not the 5.4% average increase in Utah.
And as far as a “acquisition based tax system” being unfair as you say, do you know that you probably pay a tax every day based on that system? It is called a “sales” tax based on the “acquisition price” times the tax percentage equalling the total price at your local store. Prop 13 is a sales tax type of property tax except that it is yearly tax and not a one-time tax. Simple and predictable taxes for as long as you own your home - that’s why I like it; you won’t lose your home when you retire due to skyrocketing property taxes. (Unlike Taxus or New Jersey or New York or the way California was before Prop 13 with retirees losing their homes to huge tax bills)
If you believe Utah’s Truth in Tax plan will protect you from clever politicians the way Prop 13 has protected Californians, maybe you are right. But in 10 years, your property tax will increase (5.6 x 10 or 56%) while my property tax under Prop 13 has only gone up (2 x 10 or 20%;) and my rate is capped and yours could go up even higher if large numbers of illegals move into Utah looking for free medical care, free schooling, and welfare. Good luck!
Comment by WL — August 18, 2008 @ 12:07 pm
WL,
Illegals are another issue. Look to the Feds for a solution to that…not gimmicky property tax schemes.
If I were to buy a house in CA tomorrow identical to your’s on your same street I’d be paying much higher property taxes than you pay. How is that fair if our properties are exactly the same? Do you have a right to pay less for public srevices than your neighbors who haven’t lived there as long as you? Why? Utah’s constitution requires a fair and equitable property tax. Prop 13 is impossible here.
Retirees aren’t losing there homes in Utah…nor will they be. Taxing entities don’t get any windfall from increasing property values in Utah. There also aren’t any crazy inequities that favor long time property owners over new buyers who are generally just starting off in life. Acquisition value based property tax schemes are anathema to any state that looks forward to positive future residential growth.
Comment by Jeremy Manning — August 18, 2008 @ 12:20 pm
1. Unfortunately, illegals and public employee unions are source of the pressure to force up taxes to pay for their freebies and benefits. Looking to the Feds will not save the homeowner when his taxes go sky high, since the unofficial Fed motto is “Privatize the benefits; socialize the cost” which is why there is no real effort to deport illegals. (Rep. Cannon of Utah was the local Utah posterboy for a Federal amnesty on this issue) This means that businesses hire cheap illegal labor and dump the health, medical, and schooling costs on the local homeowner, and put the enormous profits from not hiring US workers in their own pocket. Prop 13 is no gimmick; it helps ensure homeowners do not lose their homes from the costs of businesses hiring illegals that would otherwise be passed on in their property tax bill.
2d - My house in Santee cost $218,000 in 1998. Housing prices have plummeted 26% so far from the peak per an article on www.patrick.com today. My guess is that in two years you will be able to buy a house in Santee at the same price I paid. The real issue isn’t old buyers vs. young buyers; it is buying low when California goes through its regular boom / bust cycle. Prop 13 benefits those who save their money (as I did) and buy prudently after another of California’s real estate busts. There will be cheap houses galore in a year or so at the foreclosure auctions.
Perhaps retirees aren’t losing their homes in Utah now - but since the Truth in Taxes law in Utah apparently uses population growth (illegals) plus CPI (inflation - gas prices are up from $2 per gallon when Bush was elected to $3.77 in San Diego now) or almost doubling, I would say higher inflation (and higher Utah property taxes) are on their way!. Utah’s truth in taxes law is not a wall of protection when you compare Prop 13’s hard cap of 2% a year to Utah’s variable current 5.6%.
I assume you are not a long time Utah resident since you denounce the “crazy inequities” that favor keeping long time residents in their homes under Prop 13 type laws - the illegals and foreigners who move to Utah will no doubt be grateful to you as they turn your peaceful neighborhoods into violent gangbanging ghettos like those in L.A. or Compton. If you wish to avoid this fate, you need only build dozens of expensive prisons like California and use a “3 strikes law” to lock up the illegal alien gangbangers for life - not cheap! I predict that your wishes will come true: future residential growth (and property tax growth) will be yours if you continue to tax long time Utah residents with almost 6% a year increase to pay for the freebies for your new immigrants! Take all the illegals and gangbangers you want into Utah - the cost of welfare, free schools and free medical care has bankrupted California to the tune of a $16 billion deficit. But as long as Prop 13 shields me from being taxed out of my house by the freeloading illegals, the politicians, and the tax assessors, I will continue to defend it.
Who knows, in 10 years, if you own a home and start having heart attacks when you open your yearly property tax bill (with a 56% increase fover today’s bill) like Californian homeowners used to do, maybe you will reconsider the benefits of protecting yourself and your house against the tax raising politicians with a Prop 13.
Comment by WL — August 18, 2008 @ 8:01 pm
WL,
You really don’t even try to understand (or apparently even read) anything that you’ve decided to disagree with do you?
Property taxes haven’t increased 5% per year in Utah. In fact our property taxes have been maintained at a reasonable level since Truth in Taxation was implemented a couple decades ago.
In order to raise property taxes in Utah the politicians have to publicly announce they are raising taxes and hold a public hearing to discuss the increase. Politicians who do this are routinely relieved of their offices (ask the outgoing commissioner in Davis County Utah and his former colleagues). Home value increases alone don’t increase government revenue at all. We don’t have a mechanism in place to allow property taxes to keep up with inflation.
The fact that you’d argue people should only buy houses when they are priced low to ensure they aren’t unfairly taxed shows how out of touch your system really is. People in identical houses should be taxed the same no matter when they purchased their house because they are using the same government services and benefits. The fact that you bought low doesn’t entitle you to get a better deal on property taxes than your neighbors who paid more for their homes. Your system promotes harmful inequities…that’s just dumb.
In 10 years I’ll still live in one of the best managed states in the nation (Utah)…and California will still be in the crapper because of dumb tax policy and socialist politicians. Good luck with that.
Comment by Jeremy Manning — August 18, 2008 @ 10:31 pm
I agree with you that California will still be in the crapper due to dumb tax policy (taxing productive people to pay for welfare and freebies for illegals) and socialist politicians (elected by swarms of poverty stricken immigrants looking for freebies). A point I’d like to make is that California was once like Utah - a well managed state until swarms of immigrants started outvoting the long term residents of California. Prop 13 protected the long term residents from being forced out of their homes by the tax raising politicians via the 2/3rd vote requirement to raise taxes - for some reason, Prop 13’s goal of protecting long term residents from being taxed out of their homes seems to bother you.
Also, you seem to have a problem with my philosophy that people should buy things when they are cheap (houses) and not buy them when they are expensive (at the top of the boom), which avoids high mortgage payments and taxes; you feel that it is unfair that some people pay more taxes because they bought at the peak of the real estate boom - this philosophy is called socialism, the politics of envy. I prefer a free market system aka capitalism, which rewards saving and intelligent purchases; losers demand that the government supply cheap houses, mortgages, and taxes and ultimately that the government cover their losses due to their bad economic decisions.
To quote you, “the fact that you bought low doesn’t entitle you to get a better deal on your property taxes than your neighbors who paid more for their houses” Actually, in a free market based system based on a real purchase price, like Prop 13, it does. In a non - free market based system of yearly tax appraisals, government employees can pull numbers out of the air and raise your taxes almost at will every year.
If I buy a shirt on sale, I will pay less taxes than someone who doesn’t. If I buy gas at Thrifty’s Gas station instead of Exxon, I will pay less taxes than someone who doesn’t. And if I buy my house when it is on sale (during a RE bust) I will pay less taxes under Prop 13. To quote Federal Judge Learned Hand, “Anyone may arrange his affairs so that his taxes shall be as low as
possible; he is not bound to choose that pattern which best pays the
treasury. There is not even a patriotic duty to increase one’s taxes.
Over and over again the Courts have said that there is nothing sinister
in so arranging affairs as to keep taxes as low as possible. Everyone
does it, rich and poor alike and all do right, for nobody owes any
public duty to pay more than the law demands.”
You feel it is unfair for me to pay less than my neighbors; I say it is fair because like my home mortgage I voluntarily entered into it and so did my neighbors; I knew what my mortgage payment AND what my property tax were going to be for as long as I owned my home under Prop 13 when I bought and I agreed to it by purchasing with those terms AND so did my neighbors! Again, why do you not complain about neighbors in similar houses paying radically different mortgage payments or (horrors) a long time owner paying nothing to the bank since he has paid off his mortgage unlike his neighbor who is (unfairly per you?) still making payments? Different mortgage payments (or house prices for that matter) for similarly placed houses are no more unfair than property taxes under Prop 13, in a free market based system. I think the alternative to a free market based system was tried in the USSR, and it didn’t work out so well - fyi.
Comment by WL — August 19, 2008 @ 12:49 pm
WL,
Again your arguing what you think my position is instead of what I’ve written or linked to.
I think its great that you paid less for your house than your neighbors…good for you on your fortuitous timing. I don’t begrudge you the financial fortunes you’ve accrued because of your good timing.
I think it is asinine that you’d argue that your good deal entitles you to pay a small percentage of what you neighbor pays for the exact same governmental services.
Property taxes are essentially a rent that property owners have to pay to the government for the “privilege” they have of benefiting from services provided by the government. For one person who uses the same amount or more of those services than his neighbor to pay less for those services simply because they paid less for their home doesn’t make any sense.
A tax system that is based on such blatant inequities causes problems Utah doesn’t need. I’ll stick with my original premise…for Utah Prop 13 is stupid.
Comment by Jeremy Manning — August 19, 2008 @ 1:28 pm
Actually, I agree with you that there are even inequities under Prop 13, although much less than in the usual yearly appraisal system like Taxus. The inequity is that property owners who have no children or send their children to public schools are forced to pay 2/3rds more than they should to public schools for services they don’t use, as 2/3rds of the property tax bill in California (and I suspect Utah) are poured into the bottomless black hole of public education. To solve this inequity, each property owner should have a personal tax credit to spend on either a public or private education for his children and retirees and taxpayers without children should not have to support the public schools at all, since they have no children in system. Result: better schools since the schools would have to compete for the money that the parents would direct to the schools that put out a “good” education, like Catholic schools do and no pot of gold for illegals to use for “free” schooling. But I’ll settle for Prop 13 and the “blatant inequity” of not paying my “fair share” for public services like welfare and freebies for all the illegals who decide to move to California to get on the gravy train - which the local public employees are happy to hand out, as they build their little bureaucratic empires on my back. With any luck, the illegals and freeloaders will move to Utah from California when the parasites have finished sucking the state treasury dry - I’m sure the freeloaders will agree with you that Prop 13 is mean and stupid and that Utah taxpayers are generous and pay their fair share!
Comment by WL — August 19, 2008 @ 9:32 pm
Correction: the sentence above should read, “The inequity is that property owners who have no children or send their children to PRIVATE (not public) schools are forced to pay 2/3rds more than they should to public schools for services they don’t use . . . .”
Comment by WL — August 19, 2008 @ 9:36 pm
WL,
You just finished bragging about how Prop 13 makes it so you don’t have to pay as much as others in property taxes…and now you’re bitching about freeloaders? How ironic.
Comment by Jeremy Manning — August 20, 2008 @ 9:43 am
I pay the exact same percentage in property taxes as everyone else in California - and the same 7.75 percent sales tax that everyone else has to pay - that is not freeloading. However, I am frugal - I prefer to buy cars on sale and real estate that is on sale, resulting in a lower sales and property tax; which as Judge Learned Hand said is absolutely proper - “nobody owes any public duty to pay more than the law demands.” - especially since it is being spent by California politicians to buy votes from taxeaters, largely illegals. Since I am paying for my house every month with a mortgage payment monthly and a property tax payment annually and I am not looking to collect welfare, free medical benefits, or free schooling, why should I pay for freebies for Mexicans that even the Government of Mexico refuses to pay for its own citizens?
For some reason, my support of Prop 13 to limit my maximum property tax to support illegals who have moved to California to get taxpayer financed freebies is somehow “grossly inequitable” and now you imply that I am a “freeloader” for not paying the maximum amount of property taxes to support illegals?
To respond to your earlier statement, I am not an old person or a person who plans to never sell my home - I bought my home 10 years ago when I was in my early thirties; and whether I plan to sell my home is not the issue - it is whether I want to be forced by high taxes to sell it and move if Prop 13 is destroyed by tax and spend politicians.
There are two types of people who hate Prop 13, which they see as a tax “loophole” - a tax loophole being a law that allows a taxpayer to keep most of the money he has earned or his home from the tax collector: taxeaters (usually government employees or welfare recipients) or politicians. You didn’t answer my question earlier - are you a taxeater (government employee, or get tax dollars from welfare or grants) or a politician?
Comment by WL — August 22, 2008 @ 12:07 pm
Jeremy, you don’t need to answer my question about where you get your income - I do think you haven’t seen the perspective of Californians who were being hammered by huge property tax increases. Perhaps you should focus your thinking on how to lower property taxes for real Utahns (from 5.4% increases every year) and take up the real challenge: Making dedicated tax deadbeats like the illegals pay their fair share of taxes! My suggestion is that Utah should levy an excise tax equivalent to the local sales tax on all money sent from Utah to Mexico or other foreign countries. As most illegals work under the table, this would force them to pay something into the welfare and medical systems (which are going bankrupt from overuse by freeloaders). Another proposal is to have jeopardy assessments of income tax on illegals, which they would get back by filing an income tax return and declaring their income. Would you approve of some of these ideas?
Comment by WL — August 22, 2008 @ 2:39 pm