patrick.net

Simple - illegals.
The CA politicians in DC have been, in general, some of the post pro-immigration and anti-border-enforcement politicos in the country. Well, now you have what you aksed for. Illegals driving up costs for government at every level - health care, education for their children, prisons, etc. And CA has more than any other state. "</blockquote>

And...more lies!
Yes, there are quite a number of illegals, but there are a lot of illegals in arizona, new mexico, and texas as well. The problem is that we're spending too much money. If an illegal immigrant is getting government benefits, you need to be blaming the people that voted to have those benefits, not the poor migrant workers who are just trying to make a better life for their children.
More than 85% of california's taxes are direct taxes on income and expenditure. We place virtually none of the tax burden on corporations (less than 10% of the total) or wealth (less than 3%) In most states, around half of tax revenue comes from income and expenditure. In other words, we go out of our way to punish working people for the benefit of retirees, the unemployed, and the upper class.
This is because we ignored the good examples set by the rest of the country and don't have a real representative democracy. We let the people vote on everything, and unfortunately the people are too stupid to understand that you have to balance benefits with taxation. You can't have low taxes and still get all the benefits.
As a result, we now have terrible benefits and still pay outrageous taxes. Our cost of living in many areas has gotten so crazy that we have to pay police officers and bus drivers six figure salaries just so that they can live within the city limits. That, in turn, makes everything else more expensive, and drives our property prices through the roof.
The state is completely screwed, but it's not because of 'illegals'.

"The CA and national press are silent on the issue. Damn you all! Your children and grandchildren are being robbed of their birthright by your narcistic-feel-good political correctness that substitutes short term feel good ness for the hard decisions that need to be made. And your greed."

My children are being robbed of 'their birthright' by people who refuse to actually cut spending on crap that the state government has no business providing, but also refuse to pay for it. I'm dumping in excess of $15k a year into state taxes a year and my son is being educated by someone who isn't worth 15 cents. Meanwhile, I can't afford to buy a place because prop 13 has skewed property prices completely out of my reach, and yet this stupid government is spending $100 million to try to boost property prices.
California is going bankrupt and yet people just yell 'illegals!' as if that justifies refusing to cut spending. The only real area where legals clearly add cost to the system are the education of their children, who are citizens. Of course, if we have a decent educational system those children will grow up and become productive members of society and will yield a nice return on that small investment. Too bad people are more concerned with property taxes than they are with real reform.

Social Security has absolutely no impact on the problems that CA is facing. It has its own problems (namely that it isn't solvent in the current funding model), but it's relatively easy to fix it if we can get some rational legislators willing to make the tax / benefit tradeoffs necessary to stay solvent.

Of course, if we don't get competent people in office who are willing to make the politically sensitive decisions, we're all screwed. Sadly for those of us who are nowhere near retirement, the AARP is going to make sure that we get pulled into the 'pay more' bucket.

Krugman just wrote an interesting article on this:

http://www.nytimes.com/2009/05/25/opinion/25krugman.html?ref=patrick.net

MarkInSF,

Exactly. Exaggerating the amount of taxes that people pay has always been a favorite tactic of the anti-tax crowd. Apparently the truth is not good enough to prove their point.

Kevin,

>>This is because we ignored the good examples set by the rest of the country and don’t have a real representative democracy. We let the people vote on everything, and unfortunately the people are too stupid to understand that you have to balance benefits with taxation. You can’t have low taxes and still get all the benefits.

Amen to that, and to the rest of what you wrote as well.

California is chock full of people that think that the reason they are not fabulously wealthy is (a) all them damn illegals using up all the state's money (b) they would be, if only there were no taxes (c) the gubbermint is holding them down and preventing them from realizing their potential.

Yeah, right.

Prop 13 is the most unfair piece of legislation of which I am aware, state or federal.

If you don't like Prop 13 then vote for change. Stop squawking about it and do something. As for me, I don't have a problem with it. I'll vote in favor of it because I don't think it's fair to kick old people out of their houses. But that's just me, you should vote your conscience. If Prop 13 is repealed I can deal with that too. I don't really have a dog in this fight.

>> If you don’t like Prop 13 then vote for change. Stop squawking about it and do something.

If it came to a vote, I would. But, unfortunately, Prop 13 still has popular support. In the meantime, I do what I can to "educate" about the inequities of Prop 13.

>> As for me, I don’t have a problem with it. I’ll vote in favor of it because I don’t think it’s fair to kick old people out of their houses.

That is the justification given by many to keep Prop 13. But the problem is that the law is so overbroad, it does much more than just "keep old people in their houses." It also subsidizes (in increasing order of unfairness, IMO): (1) younger people who could afford to pay higher property taxes, (2) younger people who receive their homes via inheritance, (3) individuals who rent out their homes to tenants, and (4) commercial property owners.

Property taxes help pay for local services, like police, fire, schools, etc. When somebody in a $1 million house pays $1,000 a year in property taxes, while neighbors pay 10 or more times that, for the same services, that is grossly unfair.

And as to the "keep old people in their houses" argument, if you believe that to be a noble cause, then there are ways to repeal Prop 13 but help such people out. For example, you could charge them reduced taxes, but any accumulated tax shortfall must be paid at the time of sale, inheritance, etc., of the house.

NJ,

>>but any accumulated tax shortfall must be paid at the time of sale, inheritance, etc., of the house.

Exactly, It would be interesting to see how many seniors would suddenly decide a move would be more prudent once the taxes started accumulating.

http://finance.yahoo.com/news/Borrowers-with-good-credit-apf-15376981.html/print

"The mortgage crisis is spreading and hitting new heights:
Borrowers with good credit now make up the largest share of foreclosures as
job losses and pay cuts exact their toll.

A record 12 percent of homeowners with a mortgage were behind on their
payments in the first quarter, the Mortgage Bankers Association said
Thursday. And the trend is predicted to continue until the end of next year,
about six months after unemployment is expected to peak."

I am really not surprised. Propertyshark really opens my eyes to how these neighbors and people around me can afford $1.8M, $2M dollar homes on an average worker bee salary. Basically if you see someone carrying a mortgage larger than $1M, you can safely assume that he does not have that money, because you lose all tax advantages beyond the first $1M.

For example, there was a recent murder in Cupertino, the homeowner bought a $2M home (wife accountant, not partner, just accountant, husband hardware engineer with no prior IPO ticket), and tried to be cheap with the gardener, who popped and gave the wife a fatal stab. Why? Because the family took on far more loan than they could afford ($1.xM mortgage), and the wife was trying to pinch pennies in other areas. It turned out that the gardener was an illegal alien, and the wife tried to turn him in AFTER he did all these jobs so that she could skimp. Now I am pretty sure that home will go into foreclosure with the wife gone.

It is just amazing how these $200K, $250K income families suddenly thought they were all rich, and step up to the lifestyle of the rich and famous. Now we all know who are swimming naked.

OO,

Interesting to see if forclosures and sane credit standards will cause the formerly $2m homes to fall in price enough to actually affordable by a family with a $200k annual salary.

Willy: "I’ll vote in favor of it because I don’t think it’s fair to kick old people out of their houses."

Ug. Please.

First off, how does that justify a *corporation*, which never dies, having their property tax fade to 0 over time (does not keep up with inflation)? Or landlords for that matter. If I wanted to compete in the rental housing business, I'm put an extreme disadvantage to those that have held property for 30 years. Free market zealots *love* prop 13, but actually they are complete hypocrites, because what they really love is the the preferential tax treatment, and barriers to entry in their business.

And kicking old people out of their homes? ABSURD. We could just freeze property taxes for primary residences of those over 60. Problem solved. Or the tax difference could be assessed at the sale of the home.

Why are repeating complete nonsense? Or have you really never even thought about it?

>> If you don’t like Prop 13 then vote for change. Stop squawking about it and do something.

Uh, those of us opposed to it do vote that way. WTF are you talking about?

I voted against everything in the special election (except limiting pay for state employees) because I want to end the completely unfair burden of taxation that is placed on working people (raising income and sales taxes harm working people the most).

>> As for me, I don’t have a problem with it. I’ll vote in favor of it because I don’t think it’s fair to kick old people out of their houses.

Bullshit! Prop 13 doesn't benefit old people, because people don't live very long past retirement age anyway. Is it 'fair' for a 20 or 30 something to inherit a million dollar house and not pay any taxes on it? Is it 'fair' for multi billion dollar corporations to buy millions of dollars worth of land and never pay their fair share? In states that don't have such idiotic laws, old people don't lose their homes because their mortgages are paid off. If they didn't save anything, they downsize their huge houses and retire comfortably. There is NOTHING unfair or wrong about this.

OO,

I had not seen the details about the motives for the murder in the paper -- is this public information?

MarkInSF and Kevin,

Right on!

"Is it ‘fair’ for multi billion dollar corporations to buy millions of dollars worth of land and never pay their fair share?"

Reminds me of the dozen years and dozens of Property Tax filings I filed and payments not only for real property taxes but also personal property taxes to the state. For every computer, servers, cubicle and lease hold improvements, manufacturing equipment and automotive property your employer puchases each year it is taxed at historial cost until disposed of. Please never say Corporations do not pay property taxes... They bleed billions into California each year....

Great article OO, thats what is happening with SV on the whole. Think of not only layoffs but the surge in M&A.. cant have two CEO, CFE and VPs. They get the axe and have little chance of getting similar jobs due to declining number of new startups and public companies. Oracle itself put out thousands of high paying workers via M&A.

That Cupertino home I bet was really worth not more than 400K as many were, pre-tech bubble years.

"In the meantime, I do what I can to “educate” about the inequities of Prop 13."

There are no inequities! There were fools who overpaid by 200-300% compared to their next door neighbor. You call the inequities ?

" I can’t afford to buy a place because prop 13 has skewed property prices completely out of my reach"

Prop 13 came out in late 70s but did not influence or stop price declines in early 80s, early 90s and today.

"Nobody will admit it, but I believe that 90% of California’s troubles comes from Prop 13. There are other states which are just as profligate as California (New York, Illinois to name a few), but they still have lower taxes, and they are not insolvent. The main difference is Prop. 13."

Really now... 90% of the problems comes from liberal social programs which isnt being paid for.

Why is it all the complaints regarding Prop 13 come from migrants from other states.. mainly the liberal east coast ? Let me remind you back inthe late 70s when California was populated mainly by native born.. it passed by huge majority... 70% infavor with 80% participating.

Zetabeos,

>>For every computer, servers, cubicle and lease hold improvements, manufacturing equipment and automotive property your employer puchases each year it is taxed at historial cost until disposed of/.

I have never heard of any such tax, Are you sure you are not thinking about something else, namely the rule that capital good purchases cannot be charged fully as a pre-tax expense in the year of purchase, but rather that the expense has to be divided (amortized is the technical term) across the useful lifetime of the item?

Zetabeos,

>>Prop 13 came out in late 70s but did not influence or stop price declines in early 80s, early 90s and today.

That is rather a bold statement. A large number of people would say instead that prop 13 caused contraction in supply of homes for sale because homeowners had a very strong economic incentive to stay put.

At the very least, that would be a factor in driving the prices up before the declines, and likely also in reducing the declines

justme,

the paper published that the victim was having monetary dispute with the gardener over payment on his job. The details were obtained from the grapevine. The job and financial situation of the victim couple is all over the Chinese media which I am not sure is translated into English.

The victim's friends were trying to raise fund for the family because now they become one-income. But the proposal was met with doubt and distrust because many people questioned why a homeowner of $2M "mansion" need to raise fund from people who live in far inferior homes.

zetabeos,

it is a newly constructed home, the builder sold the lot (8000 sq ft) for about $1.1M, and built a McMansion on top for another $1M or so. Of course nowadays you can build the same home for 2/3 the cost, and buy a tear-down in Los Altos Hills on an acre for $1.3M.

What amazed me is not the fact that someone would buy such a house at such an inflated value. What amazed me is why an accountant and a mediocre engineer believe that they can afford the ongoing tax burden of $24K after tax on their house? Do they think they are CEOs? That is about 1/6 of their after tax income, and I personally am much more concerned about ongoing tax liability than just the upfront cost. I know quite a few people who have won IPO lottos that didn't get into multi-million-dollar homes which they could easily buy with cash, precisely because of the ongoing tax burden.

"There are no inequities! There were fools who overpaid by 200-300% compared to their next door neighbor. You call the inequities ?"

Hilarious. Have you heard of inflation? Prop 13 limits property tax increases to *BELOW* historic inflation. So even if housing were to do nothing more than keep up with historic inflation, long-time owners would still get an unfair tax break over time.

In other words, while "overpaying" for a house could net you higher taxes, even getting a "good deal" today could leave you paying 10x the taxes of your next door neighbor who has lived in the home for 30 years.

Basically, as time goes on, Prop 13 becomes more and more unfair.

First of all, prop 13 is a very powerful political instrument, so you do not just hammer at it head on. I don't know the split of homeowners, but there are tons of business interests behind it who can afford big $$$ lobbying.

How to attack the problem? Start with attacking the smaller, individual homeowners first. The easiest one to start is, attack the inheritance of tax base under prop 13, because it is simply morally WRONG. The inheritance of tax base, as far as I understand it, is only between direct descendants, but not applicable to corporations if a transaction takes place.

People can argue that grandparents need to be kept in their old homes yada yada, but nobody can argue morally that the grandsons need to be kept in grandparents' old homes. There is no moral argument for this, it was just a loophole that got exploited. So closing this loophole is the first step.

Once the tax base cannot be passed on, you immediately free up a bunch of homes, because a lot of these asset-rich cash poor elderly are financially supported by their kids who in return will get the property at a next-to-nothing tax base. Such an amendment will take away incentives from both sides to stay in the old house.

Homeowners will always vote for prop 13, period. In order to win support, you don't attack homeowners as a whole. You attack SOME of the homeowners, uniting the other. For example, if you propose to bring all the old homeowners to a more recently valued property base, say, using neighbor's 1990 valuation as the base instead of 1970's base, that will get a ton more support from newer homeowners like myself who is very envious of the next door neighbor who only pays 1/10 of what I pay. Divide and conquer is the only way of repealing prop 13. Broad repeal will just not happen politically.

In order to win support, you don’t attack homeowners as a whole. You attack SOME of the homeowners, uniting the other.

I agree. Someone once said that the best way to repeal Prop 13 is just to publish everyone's property tax in an easily accessible place.

When the recent buyers see how much more they're paying than their neighbors (10x is quite common) they will definitely have a motive to change things.

BTW, I just added a "quote" link next to every comment to facilitate quoting. In some browsers, including Firefox, you can even select part of the quote and just that piece will get quoted.

BTW, I just added a “quote” link next to every comment to facilitate quoting. In some browsers, including Firefox, you can even select part of the quote and just that piece will get quoted.

It works, just like magic. Cool.

Prop 13 is the reason property is so expensive in California. That is when prices decoupled with reality. Prices would never be so high if people were forced to pay high property tax too.

Yes, just me... corporations pay both the pass through real property taxes put also the personal property tax. Filed under Form 571 annually...

They list out all past active fixed assets and current new purchases which are taxed.

http://www.smcare.org/business/bps571.asp

Lost Cause, prop 13 had very little effect when RE prices fell in early 81-82 not to mention in late 80-early 90s. If Prop 13 was the main reason then why did prices fall and why are they falling even today.

Even before prop 13 RE prices fell back in 1972-74.

Fact is CA prices were not as expensive compared to other states.
More recently post-95 did prices raise well beyond incomes and inflation.

Am I the only native here ?

Prop Tax assesment are available on zillow for free.
IF the fools overpaid for RE and are overpaying for Prop Tax, I shed no tear. They were fools to begin with. The only group interested in doing away with Prop 13 is the Teacher Unions... Its been true since 1978.

"That is rather a bold statement. A large number of people would say instead that prop 13 caused contraction in supply of homes for sale because homeowners had a very strong economic incentive to stay put."

Or was it the local city and county "anti-growth" measures from the early 80s which limited constuction. Many Bay Area counties had that ... and additional fees for land contructions which raised costs. JI do remember all these events very well. Prop 13 wasnt at fault.

Just to let you know you can transfer your property tax base from one CA county to another.

"Proposition 60 of 1986 allows you to transfer the tax base of your property when you sell your home and buy a less expensive one after you reach the age of 55 . Proposition 90 allows you to transfer that tax to other counties if they allow it."

Just to let you know you can transfer your property tax base from one CA county to another.

"Proposition 60 of 1986 allows you to transfer the tax base of your property when you sell your home and buy a less expensive one after you reach the age of 55 . Proposition 90 allows you to transfer that tax to other counties if they allow it."

Here is the Santa Clara web site for Property Tax which Zillow tabs into ..

Look up Property Records
How to view basic information about properties within Santa Clara County.
http://www.scctax.org/

Just to let you know you can transfer your property tax base from one CA county to another.

"Proposition 60 of 1986 allows you to transfer the tax base of your property when you sell your home and buy a less expensive one after you reach the age of 55 . Proposition 90 allows you to transfer that tax to other counties if they allow it."

Here is the Santa Clara web site for Property Tax which Zillow tabs into ..

Look up Property Records
How to view basic information about properties within Santa Clara County.
http://www.scctax.org/portal/site/asr/agencychp?path=%2Fv7%2FAssessor%2C%20Office%20of%20the%20%28ELO%29%2FQuick%20Hits%20%28Look%20up%20property%20records%2C%20Dictionary%2C%20Important%20Dates...%29

Just to let you know you can transfer your property tax base from one CA county to another.

"Proposition 60 of 1986 allows you to transfer the tax base of your property when you sell your home and buy a less expensive one after you reach the age of 55 . Proposition 90 allows you to transfer that tax to other counties if they allow it."

Here is the Santa Clara web site for Property Tax which Zillow tabs into ..

Look up Property Records
How to view basic information about properties within Santa Clara County.
http://www.scctax.org/portal/site/asr/agencychp?path=%2Fv7%2FAssessor%2C%20Office%20of%20the%20%28ELO%29%2FQuick%20Hits%20%28Look%20up%20property%20records%2C%20Dictionary%2C%20Important%20Dates...%29

Ignore use this link..http://eservices.sccgov.org/ari/search.do

California Weighs Anti-Sprawl Legislation
Published September 1, 2008

The California Senate approved a bill over the weekend that is being hailed as the most far-reaching urban sprawl bill in the country. The legislation, which is supported by both the Natural Resources Defense Council and the state's largest home builders' lobby, would tie tens of billions of dollars to state and federal transportation funding based on compliance with efforts to reduce sprawl, and by extension, commutes.

Though Gov. Arnold Schwarzenegger has yet to commit to signing the legislation, he has been a major supporter of carbon cutting initiatives in the past. California recently garnered headlines stemming from a lawsuit it filed against the EPA in an effort to enact more rigid emissions standards than those mandated by the federal government. The case is still pending.

Many reasons have been given for why the United States evolved into such a "car culture," and why it's been so reluctant to change its transportation habits in light of rising gas prices and global warming. A recent study found that 68 percent of Americans haven't altered their commutes since the recent price spike began, and that only 7 percent use public transportation.

The simple answer is population density: Of 241 countries measured in a 2004 United Nations study, the US ranked 180th. Americans simply live further away from one another—and their schools, jobs, and malls—making biking, public transportation, and carpooling more difficult than it is in countries like France, England, and Germany.

If California's legislation is successful, it would lead to fewer permits for developments built on cheap, remote pieces of land, and stimulate more affordable housing closer to city centers. Portland, Ore. has received national attention in recent years for its success in fighting sprawl, and the California bill looks to copy several key components from Portland's approach.

http://www.smcare.org/business/bps571.asp

Zetabeos, I stand corrected on the topic of business property tax in California (Form 571).

By the way, I checked the FAQ and it says the rate is 1% and can be up to 1.2% of the assessed value (including special assessments). The assessed value also depreciates (for non-real property) every year, which means that the taxes will decrease as the property ages.

Zetabeos,

On the topic of the relative impact of "Anti-Growth Measures" versus "Prop. 13" on housing prices:

It seems to me that AGM were too late to have any real impact on the amount of land covered by structures in the 5-county central Bay Area. It must have been pretty much all developed by the time the AGM kicked in.

BUT, it may be that AGM limited the construction of multi-storey dwellings based on limitations tied to traffic impact studies or some such.

Here's the real problem:

Californians have always desired their immediate neighborhood to be quiet, low density and traffic free. Mathematically and physically, this is only possible by creating a massive hierarchy of roads with increasing traffic levels. Due to the higher average distance between people in this system, the tranquility at the local street comes at the expense of an enormous roadway infrastructure that never is sufficient.. The local commuters always compete for the limited expressway and freeway space with the remote suburban commuters (who did not fit in the local sprawl and had to move into their own sprawl farther away). The entire system is a gigantic positive fedback loop and will not stop growing until it overheats and burns up (methapohorically speaking).

At the foundation of the system is the ultimate American desire of distancing yourself from your neighbors and the low taxation on oil and petroleum products that acts as the enabler for the sprawl.

All of this could have been avoided by proper laws and regulations, but it is largely unsolvable without a massive do-over that will cost huge amounts of money, energy, resources and CO2. Too bad,