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Prop 13: The elephant is finally in the room

Original post made on Feb 10, 2012

Calling California's tax system "broken," the head of the Silicon Valley Community Foundation called this week for a re-examination of Proposition 13 and other policies governing revenue that support public services in the state.

Read the full story here Web Link posted Friday, February 10, 2012, 8:18 AM

Comments (97)

Posted by JT, a resident of Crescent Park
on Feb 10, 2012 at 8:48 am

Can we stop using tired chiches like "elephant in the room"? And talk about tired story ideas. Every year politicians (or people in the nonprofit world, which is essentially government) talk about gutting Prop. 13. It never happens because the voters are too smart for such tricks. But here's another lame attempt to get around the law. Tired cliche and tired concept. How about we focus on economic growth rather than higher taxes?


Posted by Bernie, a resident of Midtown
on Feb 10, 2012 at 9:18 am

I'm glad people are talking about this! It might be generations before they fix it, but speaking as one of the many people who moved year during the boom, I would LOVE to see my neighbors pay "fair share!"
It really makes no sense - the people who moved here during the boom are younger and less advanced in their careers, and it takes a much larger chunk of their income to pay this property tax. People who moved here pre-boom, are often more senior and can definitely afford it. Now, I don't think its really equitable to dump a 15K tax bill on an elderly person on a fixed income, but we have to do something. Its totally unfair.
Its the one thing that really gets under my skin about the new library - so, my family is kicking in $400 per year, but my neighbor might be paying only $50.

Although this has been a sacred cow in California for a long time, there may be more support out there to change it than one might at first think!


Posted by Larry Dorr, a resident of Leland Manor/Garland Drive
on Feb 10, 2012 at 9:23 am

Time to eliminate the transfer loopholes for large commercial properties allowed by a flaw in Prop 13.

Do not attempt to modify the residential component - politically not feasible.

The commercial loopholes have changed the entire structure of who pays property taxes in California. Prior to Prop 13, commercial payed 60% of the taxes and residential paid 40%.

It has reversed - now residential pays 60%, commercial pays 40%.

Where's the fairness?

"It's an open secret in California that the biggest properties are bought and sold under a loophole in the Proposition 13 that prevents city's from reassessing them. It's a fairly easy scam, one that almost never happens with lower-priced residential property: Instead of selling, say, a large commercial office building, the owners simply incorporate the building as a limited liability corporation and then sell shares in the LLC. That doesn't count as a property transfer under Proposition 13, so the building is never reassessed.

That means a building that may have sold for $500 million still pays taxes on an earlier assessment, which is often far, far lower.

The California Tax Reform Association, in a May, 2010 report, notes that many of the biggest mergers, acquisitions, and property sales in the state over the past 30 years have taken place with legal tricks that keep property taxes artificially low."






Posted by common sense, a resident of Midtown
on Feb 10, 2012 at 9:53 am

In regards to the commercial vs residential share of property taxes: one underlying cause has been the rezoning/conversion of commerical properties to residential; this conversion increases the residential share while decreasing the commerical total - for example:

* Rickey's Hyatt hotel converted to 189 units of housing (roughly added $250 million to the residential total, which reducing the commerical property taxes).
* East Meadow Circle office buildings converted to 150 units of housing (roughly $135 million in residential property values)
* Loma Verde & W Bayshore - 45 units of housing (roughly $40 million in property values)
* Palo Alto Medical Foundation downtown properties (somewhere in the range of $250 - $300 million).

There are other projects as well.

As a long time resident, my taxes over the years have help to fund the facilities the city has built over the past decades. Why should someone who moves here today get the benefit of all the previous investment that us "old timers" have put in?


Posted by Larry Dorr, a resident of Leland Manor/Garland Drive
on Feb 10, 2012 at 10:02 am

common sense: do you feel commercial properties should have the loophole available to keep properties from being reassessed upon transfer?


Posted by Taxes-Are-Not-Fair-By-Definition, a resident of Another Palo Alto neighborhood
on Feb 10, 2012 at 10:18 am

> The commercial loopholes have changed the entire structure
> of who pays property taxes in California. Prior to Prop 13,
> commercial payed 60% of the taxes and residential paid 40%.
> It has reversed - now residential pays 60%, commercial pays 40%.
> Where's the fairness?

This argument, and poster, appears every time Prop.13 is discussed. [Portion removed due to disrespectful comment or offensive language] There is not now, nor has there ever been, a "fair" tax. Virtually every tax is unfair. Taxes are the way that the powerful subjugate the weak.

Secured property taxes are generated from a combination of residential and commercial properties.

So:

Total_Tax_Generated= Commercial P-Taxes + Residential P_Taxes

Or:

Total_Tax_Generated=

Number_commercial_parcles * property_tax_rate * assessed_value_commercial_properties

+ Number_residential_parcles * property_tax_rate * assessed_value_residential_properties

Every year, the number of parcels of residential property tends to increase, while the number of commercial properties tends to stay about the same, or grow slightly. (Of course, the County Assessor is the best place to get the actual numbers).

The fact that there might have been a 60/40 ratio (commercial to residential) of tax generated prior to Prop.13 was an artifact of the growth of the Silicon Valley at the time. This ratio could have been different, but it happened to be 60/40. To focus on that ratio shows a complete lack of understanding of municipal finance, and an inclination to focus on "quick fixes", rather than understanding the problem to be solved.

People need to remember that commercial enterprises do not pay taxes—they simply collect them as a part of the service/goods they sell. When commercial taxes go up, these government exactions force the corporate tax collections to pass those costs on to their customers.

Trying to create a fixed commercial/residential tax ratio will result in forcing companies out of the area—which is really not good public policy, or good economic policy.



Posted by Taxes-Are-Not-Fair-By-Definition, a resident of Another Palo Alto neighborhood
on Feb 10, 2012 at 10:21 am

> do you feel commercial properties should have the loophole
> available to keep properties from being reassessed upon transfer?

While this loophole is available to residential property owners, is it available also to commercial property owners? Can you show evidence of any companies locally that have used to loophole to transfer ownership without having the property reassessed at current market values?


Posted by Scott, a resident of Menlo Park
on Feb 10, 2012 at 10:44 am

I've never understood why Prop 13 even includes commercial properties, if its original purpose was to keep those on fixed incomes from being forced out of their homes due to rising property valuations. I'm betting the inclusion of commercial properties was a political move to get the support of business in getting Prop 13 passed. Prop 13 reform is long overdue!!


Posted by Taxes-Are-Not-Fair-By-Definition, a resident of Another Palo Alto neighborhood
on Feb 10, 2012 at 10:53 am


> I've never understood why Prop 13 even
> includes commercial properties

History of Prop.13:
Web Link


Posted by Make Disney pay!, a resident of Palo Verde
on Feb 10, 2012 at 10:59 am

I'm in favor of focusing on commercial loopholes, well before residential - and we bought our first house here in 2011 so we are certainly carrying more than our neighbors.

An article in the Orange Cty Register cites numerous examples throughout California of corporations changing control of vast real estate holdings, but retaining the low assessed value:

"If the under-assessed and under-taxed Disney land were brought up to 2002 values, Disneyland would pay Orange County $4,672,217.74 more per year in tax."

Also cited are: Gallo Winery, Mammoth Mtn Resort, JPMorganChase takeover of 2000 WaMu properties, etc.

Web Link


Posted by the_punnisher, a resident of Mountain View
on Feb 10, 2012 at 11:10 am

the_punnisher is a registered user.

Since we are talking about the " Elephant in the room "..why not add the other " elephant " that cost Governor Lamb his career in politics..

And applies here in regard to Prop 13:

From Time magazine archives

Elderly people who are terminally ill "have a duty to die," declared Colorado Governor Richard Lamm, 48, at a meeting of the Colorado Health Lawyers Association last week in Denver. "Like leaves which fall off a tree forming the humus in which other plants can grow, we've got a duty to die and get out of the way with all of our machines and artificial hearts, so that our kids can build a reasonable life."

Read more: Web Link

Think about it....

That WOULD get the Prop 13 problems to " go away "...

Remember, Soylent Green..Now, thanks to Ted Kennedy, available in the new BOURBON flavor...



Posted by Taxes-Are-Not-Fair-By-Definition, a resident of Another Palo Alto neighborhood
on Feb 10, 2012 at 11:21 am

> An article in the Orange Cty Register cites numerous

Thanks for the link. However, the story deals with more than your claim of "loopholes" that allow transfer of property. The example of Disney's property being under-assessed, according to 2010 assessment criteria is very different than you are suggesting. Disney has not transferred its property, it has developed it under the same, continuous ownership. This is not a loophole, it is a predictable result of the way Prop.13 works.

Many people keep claiming that Prop.13 is "loophole ridden". This is not true. The problem is that too many people is both innumerate, and also uneducated, where tax law is concerned.

> Tax loopholes

While the term "tax loophole" is not likely to be found in any of the tax codes for the State, or Federal government—it none-the-less appears in political discussions. Here's one quick point-of-view about what this term means:

Web Link

A tax loophole is an exploitation of a tax law which can reduce or eliminate the tax liabilities of the filer. Quite often the original wording of a tax break is used to justify the use of a tax loophole. Several years ago, for example, a substantial tax break was offered to small companies who invested in SUVs and other heavy vehicles for their transportation fleets. Because the tax law allowed for 50% personal use, small business owners could upgrade their own personal vehicles to SUVs and still receive a tax credit. This exemplifies a tax loophole -- the original intent is not illegal, but the definition can be exploited for personal gain.

Few legislators would ever define a tax code change as a 'tax loophole.' After the changes have been adopted, savvy tax code experts and tax lawyers may discover flaws in the wording of the new law. Sometimes an obvious or potentially costly tax loophole is duly reported to lawmakers and the law is rewritten to close the loop. Other times the tax loophole may exist for years until a federal overseer or IRS agent discovers the mistake or exploitation.

There may be other definitions, but this one will do. Notice that for a "loophole" to exist, there needs to be wording that allows "savvy taxpayers" to take advantage of the language in some portion of the tax code. The example of a business being offered a tax break to buy SUVs is a great example, since no doubt such an inducement came from lobbying from some special interest group—such as an SUV manufacturer, or a labor union. Either way, the tax "break" reduction requires that the filer:

1) Invest in something that the government feels is worthy of investment
2) Typically spend more money than the tax itself would have generate (hence "driving the economy")
3) Follow all obligations pursuant to claiming the "exemption", or "break".

The key issues here are:

1) "Tax Loopholes" are legal.
2) "Tax Loopholes" have been created by "government".

Another key concept buried inside "loophole" is tax "reduction" or "evasion". This idea must necessarily extend to "exemptions". If the thinking is that anyone who uses the tax code to reduce his/her/its tax liability (via a "loophole") than this thinking has to be extended to every exemption found in the code. Additionally, those creating/approving the code into law also need to be seen as contributors of this "wrong doing".

While exemptions are generally thought to be "open" and "loopholes" are thought to be "buried", either way—the use of the tax code to reduce ones taxes has to be seen in the same light.

The issue that needs some research is: How many commercial properties are there in California that are grandfathered in under the initial Prop.13 assessment? And how much money would be generated if these properties were reassessed at 2012 assessment rules?

As one poster has point out above, a number of significant properties have converted from pre-Prop.13 assessments to market value assessments over the years. This information is available, on-line, from the Santa Clara County Assessor's Office (although not as easily as it could be).

Before people start making all sorts of claims about taxing commercial properties, it would be better to find out how many there are that are still in that pre-Prop.13 assessment zone. What's being played out here is a lot of anti-business rhetoric.


Posted by Paul, a resident of Barron Park
on Feb 10, 2012 at 11:25 am

Someone pays $2 million for a house near mine - so what? Why should that affect my taxes? I couldn't afford to buy that house. In theory my house is worth more - but it's not for sale. I don't benefit from the theoretical value.
Prop. 13 sets a rational way to determine residential property values - base the value on what the owner paid for it, not what someone else paid for some other property at some other time.
Commercial property is different. It generates income (or at least it should.) A rational way to tax commercial property would base it on the income produced by the property.


Posted by KB, a resident of Barron Park
on Feb 10, 2012 at 11:27 am

common sense says:
> As a long time resident, my taxes over the years have help to fund the facilities the city has built over the past decades. Why should someone who moves here today get the benefit of all the previous investment that us "old timers" have put in?

That is quite a ridiculous argument. You paid taxes to run the city and pay down bond measures that built those facilities. However, you also received the benefits of using those facilities at the same time. And since most facilities are paid for using 30 year bonds, you received the benefit of the facility up to 30 years before it was completely paid for. In fact someone who moved here last year is paying taxes that cover bonds that built those facilities you've been enjoying for so long.

I also wholeheartedly agree that commercial properties should not be covered by Prop 13. I can't really think of any good reason why they are covered. A commercial enterprise should be able to pay its own way, including taxes. If you can't, you should raise your rents.

Prop 13 is a sledgehammer solution taken to a nail problem. It works but the unintended consequences are severe. We really need revise it, and replace parts of it with targeted rebates to seniors, if giving financial stability to people on fixed incomes is its real purpose.

And I believe it has serious negative environmental impacts also. Consider the situation where someone gets a new job that is a 60 minute commute away from their house, but buying a home close to work would raise their taxes by $20,000 per year (because they bought their current home 15 years ago). Are they going to move (and pay $5K moving costs, plus big bucks for a real estate commission)? No, they're going to stay put and suck up the long commute. With the result that we burn more gas, pollute the environment, and have to build more freeways.

And what about all the seniors who are 'stuck' in 4 and 5 bedroom houses because it's financially insane for them to downsize and take 8-10x increase in their tax bills? Now they're heating and cooling a huge house they don't need. Plus they're preventing a younger family with kids from buying that house, so that family has to build a new, large house (contributing to urban sprawl), or add on to a smaller house.

There are probably other effects that I haven't thought of yet. It's a wonder the Sierra Club doesn't push to revise Prop 13.


Posted by Jill of All Trades, a resident of Woodside
on Feb 10, 2012 at 11:29 am

Through extremely hard work, taking large risks over the years, and still working hard maintaining property as I approach 70, I own a number of residential rentals, which are my "retirement" (if I ever do!)
A "split tax roll" as it is now proposed, would include my rental houses as "commercial property", reassessed yearly. I will be forced to either pass costs on to tenants, which will probably not be fully possible, or sell (to folks who want to owner/occupy) thereby reducing the rental stock in the Bay Area (I'm sure others are in my position).
If I sell, I will probably invest in commercial property outside of Calif.....I've had it.


Posted by member, a resident of another community
on Feb 10, 2012 at 11:32 am

I voted for Proposition 13 in the late 70's because government was out of control. The State government needs to be reformed and live within a budget. I get tired of the government constantly blamming Proposition 13 for everything. If the government is unable to live within the budget constraits that voters insist they should leave office and let other citizens assume the task.


Posted by Taxes-Are-Not-Fair-By-Definition, a resident of Another Palo Alto neighborhood
on Feb 10, 2012 at 11:34 am

> A rational way to tax commercial property would base it
> on the income produced by the property.

The State and the Federal Government do exactly that--it's called a Corporate Income Tax--which lops off about 35% of a company's income.

> Someone pays $2 million for a house near mine - so what?
> Why should that affect my taxes?

Very strange point-of-view. Assessing property values is somewhat of a mystical art. However, commercial property assessment is based on a number of things that include the average price of the properties in the immediate neighborhood. So, when property prices increase--all boats rise; and accordingly, when they decrease, all boats sink.

If the person who wants to buy this poster's property pointed out that he only paid 20K for in sometime before 1976, so it is only worth a little bit more now--this poster will point to his neighbor's house which costs $1M+ and say: "my house is bigger, so it must be work more than $1M+.

The argument about tax assessment is interlinked with the market value assessment, whether we want to admit that, or not.




Posted by Taxes-Are-Not-Fair-By-Definition, a resident of Another Palo Alto neighborhood
on Feb 10, 2012 at 11:36 am

> commercial property assessment ..

Should have been: residential property assessment


Posted by Former Resident of PA, a resident of another community
on Feb 10, 2012 at 11:36 am

Eliminating the loopholes in Prop. 13 will go a long way to solving the problem -- without affecting current homeowners (as tempting as that might be; I'd love to be able to afford new German cars every year like my neighbors who don't pay the same rate).

Here's a loophole for you: currently family members can bequeath properties to other family members AND RETAIN THE ORIGINAL TAX RATE. This does not apply solely to primary residences, it applies to ALL PROPERTY. My father has owned rental properties in California (including Palo Alto) since long before 1978. When he dies, my siblings and I, as long as we maintain ownership of those properties, will be taxed at the same pre-1978 tax rate. Where's the fairness in that? Think about how many of your friends are living in houses their late parents owned -- it's not nostalgia, it's the incredible tax advantage.


Posted by KB, a resident of Barron Park
on Feb 10, 2012 at 11:37 am

Jill of All Trades, why would passing on the additional costs to your tenants not be possible? Every other landlord will be in the same situation, so rents will rise across the board. It's not like your rental properties will suddenly be less competitive than others. Where are the renters going to go? Sure, some renters will decide that buying a house is now a better deal, but given the very high prices around here, I don't think that's a realistic option for many. Right now, you're essentially freeloading on everyone who has lived here a shorter time than you. And since you're probably charging market rents, but your taxes are lower than the average landlord, you're reaping extra unearned profits simply because you've been around longer. From the city's point of view, (as well as your neighbors'), you're consuming the same services and not offering any additional value to the community, so why shouldn't you pay the same taxes as a landlord who bought their property last year? Please tell me why you deserve to pay lower taxes than anyone else. Having lived here a long time doesn't strike me as a valid answer.


Posted by JL, a resident of Woodside
on Feb 10, 2012 at 11:37 am

Property values have zoomed through the roof over the last 30 years in California. Every time a house is sold, the property tax increases by a lot. Therefore the government income from property taxes must have gone up by lot also. What happened to all this money? The state government used to run on a lot less money than it does today.

This was a very nice benefit the state enjoyed. They got large revenue increases due to property value increases without raising nominal tax rates.

Now after decades of increases, property values go down by much less than they have gone up, and we have a crisis? Why is this? And why is the solution to increase taxes even more?


Posted by Long time owner, a resident of Barron Park
on Feb 10, 2012 at 11:39 am

Three quick points -

1. Prop 13 happened because people were being taxed out of their homes. Any reform MUST preserve that goal of preventing confiscatory taxation.

2. Companies and corporations were never supposed to be the beneficiaries of Prop 13. They are however major beneficiaries now because they can afford the hoards of lawyers and tax professionals to "game" the system.

3. Mr. Carson, according to non-profit public records (IRS form 990 for 2009) was paid over $600,000 by the SVCF and received a half a million dollar "affordable housing" loan. That's a pretty high perch from which to shout "Let's remove the protection of the retired, the fixed incomed and the just plain recession-poor that Prop 13 provides."

We're all for fairness, neighbor-to-neighbor. So let's close the corporate loopholes and reduce the highly-taxed neighbor's property tax bill. Prop 13th's purpose fulfilled, and the corporations finally fund their fair share of bill.


Posted by Nayeli, a resident of Midtown
on Feb 10, 2012 at 11:55 am

California ALREADY taxes residents more than any other state! With so many creative taxes, fees, tolls, CRVs, etc... -- we have to ask just WHY they want even MORE of our money!

Yes, our state is in terrible debt. However, this is more from overspending than it is reflective of true need.

Personally, I would rather throw out the spendthrift politicians and replace them with others that are more careful with our money.


Posted by David Pepperdine, a resident of Another Palo Alto neighborhood
on Feb 10, 2012 at 12:15 pm

We don't need to "fix" this.

The rules are the same for all and everyone eventually benefits from lower taxes over time. If you tend to trade real estate frequently, you end up paying more but so does everyone else who moves often. Eventually people move (or move on) and homes sell, so the system is self-correcting albeit with somewhat longer time-frames sometimes.

The only exception to this are commercial properties wherein there may not be any transaction for a hundred years or more. I can see the motivation to fix that.

Just my personal opinion.


Posted by original goal of prop 13? , a resident of Crescent Park
on Feb 10, 2012 at 12:19 pm

I've never understood why Prop 13 even includes properties that don't have a home-owners exemption registered.


Posted by mo, a resident of Menlo Park
on Feb 10, 2012 at 12:31 pm

Prop 13 needs to go, including the residential provisions, which any rational observer can see. It doesn't make any sense to keep the taxes of people who have made millions on property appreciation artificially low. You have an asset worth millions; you can afford to pay your property taxes. This issue is driving people out of the bay area and out of the state. It is an issue that I feel passionately about, and I won't vote for any tax increases that don't include Prop 13 reform.


Posted by Hallelujah, a resident of Midtown
on Feb 10, 2012 at 12:38 pm

Good for mayor Villaraigosa and Mr Emmett Carson for the courage to challenge this sacred cow. Everything should be on the table for consideration and as a resident who grew up under Prop 13 and saw the decline in funding for education and the rise in disparity favoring the old over the young.


Posted by Taxes-Are-Not-Fair-By-Definition, a resident of Another Palo Alto neighborhood
on Feb 10, 2012 at 12:49 pm

> It doesn't make any sense to keep the taxes of people who have
> made millions on property appreciation artificially low.

This is not a rational argument.

Someone who bought a house in the 1970s for $20K-$30K now finds the property assessed at $1M-$3M because that's the going rate in the neighborhood, and that means that their property taxes will be now fifty times more than when these folks bought the house. Basing taxes on market value of the home means that the owners have to have a cash flow that will sustain such taxation.

While Prop.13 sets the tax rate at 1%, what will it be once Prop.13 is overturned? Clearly raising both the assessments, and the tax rates, will increase the revenue to the government. So, what's to keep the property assessments from being market value, reassessed yearly, and tax rates from 1% to 5%? Once Prop.13 falls, any thing is possible.

Oh, and if you are wondering, 5% of $1M is $50K a year in property taxes. Think long and hard before claiming that Prop.13 needs to "go away".


Posted by mo, a resident of Menlo Park
on Feb 10, 2012 at 1:08 pm

>Someone who bought a house in the 1970s for $20K-$30K now finds the >property assessed at $1M-$3M because that's the going rate in the >neighborhood, and that means that their property taxes will be now >fifty times more than when these folks bought the house. Basing taxes >on market value of the home means that the owners have to have a cash >flow that will sustain such taxation.

If you are not willing or able to pay taxes on the appreciated asset, then you should not get the benefits of appreciation. If you are paying taxes on the home as if it were worth a fraction of its true value, then you should not be able to sell it for $1-2m. Of course, there are many approaches that make more sense - I'd be fine with having a tax credit or deduction based on income; I'm fine assessing some of the taxes when the home is sold or transferred; People could take money out of their homes to pay their taxes (it is worth millions, after all!). What I'm not fine with is millionaires not paying taxes that their neighbors have to.


Posted by KB, a resident of Barron Park
on Feb 10, 2012 at 1:28 pm

> Someone who bought a house in the 1970s for $20K-$30K now finds the property assessed at $1M-$3M because that's the going rate in the neighborhood, and that means that their property taxes will be now fifty times more than when these folks bought the house. Basing taxes on market value of the home means that the owners have to have a cash flow that will sustain such taxation.

The goal is to set taxes so that they reflect both the consumption of services and the ability to pay. Assessed value is method of approximating that. It's certainly not perfect. But the current situation is far worse. My neighbors pay under $3000 per year, which certainly does not reflect their fair share of services.

If everyone pays their fair share, than the overall property tax rate won't have to be so darn high.

In any case, the proper way to handle the situation you describe is to provide targeted rebates for seniors and other exceptions, and to limit yearly tax rate increases, not provide blanket discounts to people and corporations who don't need them. This would probably involve some combination of limiting tax rate increases, rebates to low and middle income seniors, and limiting yearly assessment increases (but at a higher limit than today, perhaps linked to the CPI). Prop 13 isn't a bad idea overall, it's just terrible in the details.

> California ALREADY taxes residents more than any other state!

That's not true at all and 5 seconds on Google would have told you so. We are however in the top ten (#6 as a percentage of per capita income). I don't think anyone on this forum is advocating raising taxes overall anyway. We're talking about shifting the burden and doing away with ridiculously unfair loopholes. But have fun trolling anyway.


Posted by cresent park resident, a resident of Crescent Park
on Feb 10, 2012 at 1:30 pm

As a resident who lives around the corner from a "social media" giant who can afford to pay my taxes and those of quite a few more, there is no wonder that social media organizations are backing more taxes. The repeal of prop 13 is untenable because it discriminates against the elderly, for one. (I'm not elderly, but there are many folks who bought into our neighborhood in the 70's 80's and 90's who are). I don't agree with the poster who says it's harder on the young. They can choose to live somewhere affordable rather than above their means. What is this sense of entitlement the young are brought up with these days? Those who bought in years ago should be able to benefit from being here before the boom and stay in their houses, rather than be driven from them by unaffordable property taxes. What is this, the politics of envy that we have to make everyone pay as much as we've chosen to just because we are buying an overpriced home in an expensive neighborhood? That is truly unfair and will cause social upheaval.


Posted by Penny, a resident of Another Palo Alto neighborhood
on Feb 10, 2012 at 2:04 pm

There is a rational way to protect people of all ages from regressive effects of property tax increases.

1). Ditch Prop 13--It is an ageist policy providing tax forgiveness based on length of time in a property rather than financial need.(Many other states provide tax relief based on financial need.) We have plenty of seniors in this state who can afford to pay the full shot, and they should. (Warren Buffett reports that he is one of them.)Admittedly, there are many seniors (and young people, too) who may need tax relief based on financial need and their need should be addressed in any change that is made.

2). Remove the loopholes that protect long-term property owners like corporations.

3). Remove the loopholes that allow greedy landlords to rent to young families (who add children into the school district) at outrageous prices and then also benefit from Prop 13 tax relief. These landlords are parasites on the school district and they should be forced to pay a fair share of their profits to the district that adds so much value to their properties.

Gradual rollback of Prop 13 with financial-need based relief for people of any age who need it makes sense. Gradual rollback would minimize any "shock" to real estate markets of a sudden large-scale change in tax structure.

The current system puts undue burden on young families and gives too much to some seniors who are perfectly capable of paying their fair share. By the way, I am 50+ years old and a beneficiary of Prop 13. I support change. It is the right thing to do.


Posted by Kate, a resident of Duveneck/St. Francis
on Feb 10, 2012 at 2:28 pm

To Taxes are not fair by definition"

Certainly you have heard about Prop 90!!! - or .......You didn't?????


Posted by daniel, a resident of Embarcadero Oaks/Leland
on Feb 10, 2012 at 2:56 pm

Prop 13 was flawed from the get go because it was/is a regressive taxation system. Instead of using mean testing to determine property taxes, it lumped all home owners together, multi-millioners and those who genuinely needed a limit on their property tax increase. In this country, a progressive tax system is ridiculously equated with "Socialism", which enables extremely wealthy people to pay lower tax rates than their secretaries or drivers. Prop 13 is an inherently unjust and regressive taxation system which hurts new, young home owners and gives all the breaks to older ones, regardless of their ability to pay.


Posted by David Pepperdine, a resident of Another Palo Alto neighborhood
on Feb 10, 2012 at 3:03 pm

> If you are not willing or able to pay taxes on the appreciated asset, then you should not get the benefits of appreciation.

I don't get the "benefits" of appreciation until I sell. So how do I come up with the dough to pay the higher taxes while I'm living in the property, just because some newly rich type paid 10X what I paid 20 years ago?

> Ditch Prop 13--It is an ageist policy providing tax forgiveness based on length of time in a property...

All tax strategies are "something"-ist if you're on the opposing side. That's just a label. The suggested alternatives to Prop. 13 can be labeled as wealth-ist, appreciation-ist, etc.

> These landlords are parasites on the school district...

Really? In the same way that all other property owners are parasites on the school district, right? What is wrong with a landlord who invested in property here playing by the same rules as homeowners? Or are you just jealous that they own investment property here? What if a family lived in a house and then rented it out for a couple of years (like professors do on sabbatical)? You would raise their taxes? Would they pay the higher tax when they moved back home? It's more complicated, eh? In hindsight, Prop 13 may not be all that bad.
Granted it forces some fiscal discipline on local governments and they don't like that. But isn't that a GOOD thing? Have we forgotten the runaway spending and tax increases by local governments pre-Prop 13?


Posted by daniel, a resident of Embarcadero Oaks/Leland
on Feb 10, 2012 at 3:14 pm

A person I know is a retired businessman who is worth about $40,000,000. He purchased his house around 1952 and is paying less than a thousand dollars a year in property taxes, while his neighbors, a young family, are paying about 12 times more. This should be enough to convince every sane person that Prop 13 needs to be reformed and turned into a progressive, means testing based taxation system.


Posted by Taxes-Are-Not-Fair-By-Definition, a resident of Another Palo Alto neighborhood
on Feb 10, 2012 at 3:16 pm

> Ditch Prop 13--It is an ageist policy providing tax forgiveness
> based on length of time in a property rather than financial need.

Don't think this is even close to being true.

1) No definition of "ageist" in terms of extant tax code.

2) Provides Tax Forgiveness .. Not even close again. The premise of this statement is based on some imaginary tax code that exists (maybe) in the mind of the poster. Prop.13 is the tax code. It is legal, it is straightforward, and there are one (possibly two) points that might be considered as "unfair" inside the logic of Prop.13.

Most people don't understand Prop.13 very well. The tax liability goes up with the length of time that you hold your property in a non-linear way. So, the taxes paid in the first ten years are less than the taxes paid in the next ten years, and so on. The following table hopefully points out how much you would pay in taxes over a forty-year ownership:

Taxes Paid on a $1M
(Initial Assessment) Home
-----+-------
Years Taxes
-----+--------
-10--$109,497
-20--$133,476
-20--$162,707
-40--$198,339
--------------
Total: $604,020

In this case, the total base tax paid over forty years is about $600K.

Now .. add in parcel taxes, and other add-ons (say, $2,000 per year), and this adds almost another $100K to the total tax bill—making the 40-year bill come to about $700K. The 40-year average then comes to about $17.5K/year.

When you go to sell your property, you will find that it has increased in value (maybe), so what then does the tax liability become in terms of property price increase? The following table answers that question:

Total Percent of Sale Price Paid
in CA Property Taxes
----------------------
Sale Price Tax %
------------+-----
$1,000,000------70%
$2,000,000------35%
$3,000,000------23%
$4,000,000------18%
$5,000,000------14%

And then there is capital gains tax of (who knows in the future) of anywhere from 15% to 25%, and also a very onerous death tax of maybe 50% (and again, who knows in the future?)

So .. assuming that the $1M house appreciates to between $2M-$3M over the time you hold it, the pre-sales taxes paid on the property will be between 25% and 35% of the sale price after some number of years.

Total taxes on the house? Hard to say precisely, but you are looking at maybe $700K (over the years of ownership) + $500K-$750K at sale time, if you don't "roll it over" quickly. And if you do, then there is that Death Tax that will gobble up most of your life's assets if you don't "have a plan".

All-in-all, property taxes seem pretty high—particularly if you don't have kids in school.


Posted by Taxes-Are-Not-Fair-By-Definition, a resident of Another Palo Alto neighborhood
on Feb 10, 2012 at 3:59 pm

> Certainly you have heard about Prop 90!!!

Yes .. of course. However, having requested information from the Santa Clara County Assessor's Office about the number of properties that have sought exemptions under Prop.90, it turns out that very few people have filed for this exemption. Can't say about other counties, but given the choice of moving to some other county, or out-of-state, it's hard not to see why so many people are leaving California for some place else.


Posted by The landlord problem, a resident of Another Palo Alto neighborhood
on Feb 10, 2012 at 4:24 pm

Landlords hold properties for longer periods of time than individual families, accruing Prop 13 benefits over longer periods of time, as corporations do.

A single family homeowner will put their 2.5 children through the district and then generally hold on to their home for a few decades, contributing revenues to the district but no children--essentially, "paying back". This is the social contract. During the same period of ownership the landlord will cycle multiple families through their home--constantly sucking value from the district, and never "paying back." It would help if they paid their fair share of taxes.

I live on a single family street with 17 houses. Four of them are rentals (with families constantly cycling through. You don't see this kind of mix anywhere in the country except California because of Prop 13.

Long-time property owners are living large on the backs of young families--many of whom are struggling to make ends meet. The system is broken.


Posted by Carl, a resident of Midtown
on Feb 10, 2012 at 4:40 pm

There is no elephant in the room. Prop 13 was designed to prevent confiscatory taxation of those taxpyers who had bought into the system. It is still doing it. Both commercial and residential property owners are paying 2% more per year. That is enough! The local governments need to live within their means.

The new purchasers are forgetting something, as they complain: The seller, while relying on market forces, nevertheless can offer the property at a relatively lower price, given that the net gain has not been eroded by previous tax burdens, and understanding that the new buyer will have a heavier tax burden.

Commercial properties are the last ones we should want to lean on. These properties are the geese that lay the golden eggs of jobs and opportunities.

This entire discussion is just the same old saw: "Don't tax me, tax the guy behind the tree."

Nothing new, here.


Posted by Jennifer Bestor, a resident of Menlo Park
on Feb 10, 2012 at 4:48 pm

I got curious about this five years ago – how can we live in one of the wealthiest areas in the nation, pay higher dollar taxes than in other states, and yet spend less per child? Rather than opining, I actually bought the Menlo Park assessment rolls from 2009, 2010, and 1985. I analyzed them, parcel by parcel, to discover, unexpectedly, just how bad Prop 13 has been for the business environment in California.

(1) Half of all residential AND commercial property owners carry the lion's share of the burden – 70+% -- having bought since 2000. Meanwhile, one owner in five (20%) is getting an enormous tax subsidy due to a pre-Prop 13 assessment basis.
(2) Property owners who bought in the last decade get 75 cents on their property tax dollar. They backfill those who can claim a pre-1978 basis and get a full dollar of services for the 20 cents they contribute.
(3) Commercial property's contribution has fallen dramatically compared to residential since 1985 (earliest electronic records). Half of the drop is due to the (much) longer holding times of commercial property AND the ability to transfer ownership without 'changing ownership' of record. The other half was due to net conversions to residential and the drop in the relative value of the $7000 homeowners exemption. Extrapolating to Santa Clara and San Mateo Counties, the net loss due to commercial ownership behavior is a sizable 17% of our total tax rolls – the other 17% is due to conversions and the HO exemption diminution.
(4) Residential commercial apartments enjoy the largest percentage of pre-Prop 13 bases (30%+) and the highest percentage of inherited bases.
(5) Total lease costs – based on public commercial rental sites like Loopnet and Costar, including both lease and tax expenses – are statistically indistinguishable between old and recently purchased property. Landlords charge what the market will bear – though heritage landlords clearly have more flexibility than new owners who have to pay both more towards our local services and more to service acquisition costs.
(6) However, older assessment year properties rarely are substantially improved, while almost any property that changes hands is almost always substantially improved. Prop 13 appears to have decreased landlord investment in existing property -- probably for fear of triggering reassessment.
(7) Commercial property owners of the most are rarely business owners any more – now they are the heirs of former business owners, impenetrable LLCs, real-estate partnerships, and real-estate holding companies.

As a result of this analysis, I concluded that reassessing commercial property every 20 years, if it hadn't sold in the interim, would be both more fair to homeowners AND much better for business.

Prop 13 is terrible for our business environment – it discourages new or growing businesses. It encourages heirs to hang onto 'cheap' commercial property in hopes of a tenant who'll swallow the needed improvements (contributing to urban sprawl). It results in school systems that spend much less per student than entire other states (Massachusetts, New Jersey, New York, Maine, etc.), discouraging engineers and skilled employees from settling here – and businesses from taking on the expense of persuading them.


Posted by Jennifer Bestor, a resident of Menlo Park
on Feb 10, 2012 at 5:19 pm

JT, Prop 13 discourages new owners – people moving for jobs, businesses seeking to settle or expand – so how are we supposed to get economic growth? Charging the dynamic forces in our local economy more while subsidizing the sclerotic ones is socialism. Why should socialism work for us when it didn't work for the Eastern Bloc?

"common sense," yes, as long-time residents, our taxes have paid for improvements, but so did our predecessors'. Meanwhile, if you have a 1975 basis, you are paying less now, adjusted for inflation, than you did then (and often less in absolute dollars). But, in the years since Prop 13 passed, we've been here – why haven't we controlled pension costs? union pay? fees and other taxes? That's right – because we could just go in to the Council, the school district, and other agencies -- demanding more services, since OUR taxes wouldn't increase. We've just lived off the new owners, like a Ponzi scheme.

Taxes-Are-Not-Fair-By-Definition, while a fixed commercial/residential ratio would make no sense, neither does the current system. Markets – not costs – determine prices. We have created a system where a small proportion of owners is highly advantaged. They live under the cost umbrella of the majority – enjoying more flexibility for no good economic reason. Taxes can be more or less fair – we've chosen less.

An excellent article on commercial loopholes and the difficulty tracking them is here in the January 4th SF Weekly on "Prop 13: The Building-sized Loopholes Corporations Exploit":
Web Link


Posted by member, a resident of another community
on Feb 10, 2012 at 7:37 pm

During the last fourty years the state governments have made it extremely difficult for business to operate within the state of California. The business and residence have had a lot of fees and taxes, and have basically forced businesses and employees to leave the State of California. Mid size business have complained for years about the extra cost the State and Local governments have inserted the daily and yearly operations. I see little by local cities to actually reform and try to provide the necessary services within the state. What I do see as a tax payer is simple, pass this special tax and we will reform the system. For years tax payers, including myself, passes the taxes but little if any reform came. Today, I'm tired of hearing the same old story from the State, and little is actually done to improve the services and provide the services we require. What I do see, are thousand of state employees retiring and getting pentions well into the 80 plus thousand dollars per year. States throughout the country operate more effectively at a lower cost and provide better services to the citizens. If your going to increse corporate taxes then expect more business to leave the state. California needs to learn how to work with business, instead of working against businesses.


Posted by common sense, a resident of Midtown
on Feb 10, 2012 at 10:35 pm

Jennifer Bestor writes "Prop 13 is terrible for our business environment – it discourages new or growing businesses. It encourages heirs to hang onto 'cheap' commercial property in hopes of a tenant who'll swallow the needed improvements (contributing to urban sprawl). It results in school systems that spend much less per student than entire other states (Massachusetts, New Jersey, New York, Maine, etc.), discouraging engineers and skilled employees from settling here – and businesses from taking on the expense of persuading them"

Plenty of new businesses have been established: Ebay, Facebook, Google, etc; and if you believe the ABAG projections, there will be plenty of growth.

New Jersey & New York spend more per pupil, but to what results? Much of the increases in budget for government entities are going to the increasing costs of pensions & benefits that our elected officials have agreed to with the unions (who contribute these very same elected official's campaigns). Throwning out prop 13 would only make the situation worse. Until there is fundamental pension & benefit reform, and education reform, spending more money won't solve anything - it'll just go to bigger salaries, bigger pension benefits for the government unions.

Palo Alto has a budget that on average has increased twice the rate of inflation over the past decade. Most of the money has gone to fund an increase in pension benefits that the council approved in 2006, not to provide to new services.


Posted by A Noun Ea Mus, a resident of Professorville
on Feb 11, 2012 at 1:58 am

"I've never understood why Prop 13 even includes commercial properties, if its original purpose was to keep those on fixed incomes from being forced out of their homes due to rising property valuations."

it's original purported purpose was to keep the fixed income people from being forced out of their homes---and indeed some reigning in of taxation during a real estate bubble-fest may be in order. And more so perhaps if the other end is worked---when property values drop the taxes then don't also sink to match.

But it's real purpose was part of the "Starve the Beast" mantra. You see these folks aren't really even nationalistic anymore---though they rely on the most rabid xenophobic "America is the Greatest Nation on Earth" supporters and various other Frankenstein creations from the cultural arena. What the IMF has imposed on numerous other countries they will be quite happy to impose on the USA, they are quite content to poop where they eat.

As regards getting rid of Prop 13-- another addition might be to not use property taxation to fund LOCAL schools, fire, police, etc., but rather to state-wide or even nationally pool a mix of property taxes AND truly progressive income taxation. Kind of PIE for the nation (remember how people who supported PIE over local school fund-raising then went ballistic when the state attempted to make things more equal state-wide?).

Some may blame unions, and especially public sector unions are being targeted in the big Republican over-reach. It's not really going so well and you've kind of woken up a lot of sleeping giants. Scott Walker and others should be tossed out soon.


Posted by Taxes-Are-Not-Fair-By-Definition, a resident of Another Palo Alto neighborhood
on Feb 11, 2012 at 9:34 am

> I actually bought the Menlo Park assessment rolls
> Half of all residential AND commercial property owners carry the lion's share of the burden – 70+%

Performed the same exercise for Palo Alto, about the same time, with about the same results.

However, don't have the same interpretations about the "terrible impacts" that the Menlo Park Poster does. We need to remember that during the years Prop.13 has been in effect that California, as a state, has developed an economy so robust that it was the 6th largest in the world, until recently when economic growth in other parts of the world has seen an increase in GDPs of countries like India and China. It's difficult to believe that people are not willing to start businesses in California because of low property taxes.

The details of the Palo Alto property tax analysis might be interesting to share. There are two taxing authorities in Palo Alto—the City Government and the PAUSD (the school district). The PAUSD is a Basic Aid school district, so it gets about 46% of ever property tax dollar, and the City gets about 9%. This allocation is driven by AB8, which was passed after Prop.13 became law. The remaining 46% of each property tax dollar goes to the County/State.

The PAUSD's jurisdiction is comprised of Palo Alto, the near side of Los Altos Hills, and Stanford. Stanford has three main tax generation components—the main campus, which enjoys a 4+B property tax exemption, the Business Park, where the businesses pay property taxes on the parcels they lease, and the staff housing, where the individuals pay property taxes on the property where their homes are located.

The combined Palo Alto/PAUSD analysis shows that:

1) Property owners in Los Altos Hills pay the highest average amout.
2) Palo Alto pays less than LAH (on average)
3) People living in the staff areas of Stanford pay the least (on average).

Trying to look at business property taxes is a little more difficult, since Palo Alto has thousands of bome-based businesses, which more often than not are generating only so-much money, and whose owners are already paying property tax on their homes. The larger businesses may be grandfathered in under Prop.13, but one-by-one these properties are turning over. HP may well end up being sold, or going bankrupt one of these days—at which time it's properties will undergo some sort of reassessment. Anyone who wants to take the time to look at the company tax records for Santa Clara County can do so—as the assessments, and tax collection information is on-line. While the data can not be downloaded as a "set", individual company records (by address or parcel number) can be assessed easily. If one takes the time to review some of this data, one will see that there are not that many companies sitting on huge parcels of land that have not been reassessed since 1976 (initial Prop.13 assessment date).

What is interesting, however, is to look at the large number of tax-exempt properties in Palo Alto. Housing "non-profits" like Channing House, Webster Woods, Stevenson House, Lytton Gardens, and many, many, more, plus Stanford, generate no base property taxes. Then, if one looks at all of the government-owned property (primarily the City of Palo Alto and PAUSD)—as much as 25-30% of the parcels in Palo Alto are not subject to property taxes. Huge parcels—like those where the golf course and the air port are located, with about $1B between the two—are not being taxed, and so the people utilizing these "services" are recipients of the benefits of the tax code (although not Prop.13).

Before people focus on Prop.13 as "the elephant in the room", folks really need to look at the expenditures of government at every level—and then think about how to finance these expenditures with a "new" tax code that imposes taxes equally on everyone who is benefiting from these expenditures.


Posted by Larry Dorr, a resident of Leland Manor/Garland Drive
on Feb 11, 2012 at 9:47 am

"The business and residence have had a lot of fees and taxes, and have basically forced businesses and employees to leave the State of California."

FORCED business to leave?? Not true. California's large core businesses are growing and expanding in state. Jobs to Texas is mostly a Rick Perry myth, filled with anecdotal "evidence" from the OCR and other conservative rags.

Show the data, not the anecdotes about a fast food restaurant moving to Texas.

"If you compile anecdotes and look only at the folks who leave, it is easy to buy the 'business is fleeing' mantra. But the Public Policy Institute of California reports that from 1992 to 2006, business relocations to other states accounted for just 1.7% of California's job losses. Nationally, an average of about 2% of job loss in states was due to businesses moving out."

They evenhandedly break it all down: California has lost a lot of manufacturing jobs, but so have many other states, some even more than California – and they are mainly lost to other countries, not other states.... "



Posted by Taxes-Are-Not-Fair-By-Definition, a resident of Another Palo Alto neighborhood
on Feb 11, 2012 at 9:55 am

> and they are mainly lost to other countries, not other states..

One has to look at the deindustrialization of the US in terms of decades. Between 1945 and say, 1980, the Northeast (ie -- the Rust Belt) lost most of its jobs to the "Sun Belt". However, as Korea/China/India/Mexico/others began to industrialize, these jobs began to move off-shore. In virtually all cases, labor costs were the driving factor. But "Business Climate" has become increasingly an issue--with increasing taxes (at all levels) and "regulations" have made it increasingly difficult for companies to thrive in many states.




Posted by Larry Dorr, a resident of Leland Manor/Garland Drive
on Feb 11, 2012 at 11:05 am

"with increasing taxes (at all levels) "

Again, another tea bag canard (aka "a far right lie") or at best, a disingenuous blanket statement.

Just a simple example: when have taxes on the middle and upper class of income earners *ever* been lower than under President Obama? 75 years ago? maybe 80 or 90 years ago?

Under Reagan? Either Bush? Nixon? Clinton? Kennedy? Eisenhower? Nope.

Reagan raised taxes 7 times, including doubling the payroll tax on middle income class wage earners. If we went back to Reagan era tax rates, the deficit would evaporate overnight. Same with Clinton era tax rates.

President Obama signed multiple bills with huge tax cuts: the Bush cuts expired, Obama re-instituted them, half the Stimulus was middle class tax cuts totaling $350 Billion, etc.. arguably, no President has cut more taxes than Obama.

So to recap - your statement is a canard, as written. I ask: when was the last time income taxes been lower?

Or capital gains taxes?

The overall tax structure on those of us doing well is amazing, in a historical sense. As for state taxes (which is probably your next argument,) if you don't like it, move to Texas.


Posted by daniel, a resident of Embarcadero Oaks/Leland
on Feb 11, 2012 at 11:30 am

"member"a resident of another community:every single point you made in your post contradicts the facts and can't be backed up since it's pulled out of thin air. I suppose it's a tea party strategy to repeat misinformation often enough till some perceive it as the truth.


Posted by Taxes-Are-Not-Fair-By-Definition, a resident of Another Palo Alto neighborhood
on Feb 11, 2012 at 11:41 am

> So to recap - your statement is a canard, as written. I ask: when
> was the last time income taxes been lower?

Hmm .. this poster seems to be more interested in flinging invective (and hollow invective at that) that to engage in open and honest debate.

There were no income taxes in the US from 1783 until 1862, and then there was a short-lived 3% (for most people) income tax. It wasn't until around 1913 that a Federal Income Tax became constitutional (via amendment), and since then, the rates have gone up from 0% to a top of 92% in 1952-53 (Korean War Timeframe). Since then they have come down to roughly 35% (top marginal). They were about 28% at the end of the Regan years.

The following link points to the historical tax rate since 1913:

Web Link

By the way, it took about 2 minutes of "googling" to find this historical tax data—which clarifies the question about top Federal Tax rates, rather than the posting that rambles around doing little but trying to vilify people whose views are different than the poster's.


Posted by Larry Dorr, a resident of Leland Manor/Garland Drive
on Feb 11, 2012 at 12:30 pm

I wasn't asking you to Google it - you already knew the answer but fibbed about it anyway. Web Link

I asked the question (that you didn't answer) - when was the last time income taxes been significantly lower?

Primarily to get you to admit your previous statement is false: "with increasing taxes (at all levels) "

False.
A canard.
A myth.
Not true.
A lie.

Can not be substantiated with facts.

Facts. Or as you call them: "flinging invective"

Funny that.

Taxes haven't been significantly lower in our lifetime. The top tier hasn't been raised in almost 20 years, with other components widely lower (cap gains, etc...)

Your statement "with increasing taxes (at all levels) "

A lie.

You can have your own opinions, but you can't make up your own facts.

Too "invective" for you?


Posted by regular folks, a resident of Old Palo Alto
on Feb 12, 2012 at 8:36 am

The people in favor of this are all wealthy so they don't care what their property taxes are. The Silicon Valley Community Foundation is a donor pool for wealthy people. Regular people on a fixed or 99%er income need Prop 13 so they will not be driven from the homes they have worked so hard to have, as real estate prices continue to spiral over time in California. Prop 13 was enacted for a reason and it still makes sense.


Posted by Dan, a resident of Southgate
on Feb 12, 2012 at 9:01 am

Long time homeowners who benefit from Prop 13 are for it.
Recent home buyers who are hurt by Prop 13 are against it.
Commercial owners want homeowners to pay more taxes.
Homeowners want commercial owners to pay more.
Is there any chance the electorate and their elected officials could think with maturity and wisdom? Have the moral courage to ask yourself what's fairest for all, without regard to how if affects you as an individual. Otherwise, drop the sanctimony and be honest: "I'm for/against Prop 13 because its good/bad for ME."


Posted by J Hand, a resident of Adobe-Meadows
on Feb 12, 2012 at 9:59 am

Everyone is ignoring the corporate welfare aspect of moving the burden from commercial to residential, from 60/40 to 40/60.


Commercial landowners and businesses require more infrastrucure and government than residential .......theyb should pay a fair share, not an ever decreasing share.


Posted by homeowner, a resident of Midtown
on Feb 12, 2012 at 11:17 am

It's not true that recent homebuyers are against it. We pay the assessed value regardless, but at least we get some certainty going forward as to what the property taxes will be assuming our incomes are not going to go up, up up. If you're angry at retirees, then you can wait for them to die and get reassessed, rather than forcing them from the homes they've worked for. The Silicon Valley Community Foundation only speaks for the rich people who use it to make their donations, they are no way representative of California. Why they want to pick on the majority of Californians who need Prop 13 to keep their homes is beyond me. Very Palo Alto.


Posted by palo alto mom, a resident of Duveneck/St. Francis
on Feb 12, 2012 at 12:18 pm

Homeowner - I doubt that the majority of homeowners in California ned Prop 13 in order to keep their homes. There are many ways to prevent people from being forced out of their homes because of property taxes, other states allow senior citizens to defer their taxes until after their death or the until the sale of their homes. I also think that it takes at least 5 years of not paying real estate tax in California before the state does anything, the amounts just remain as a lien against the property.

Commercial property should be reassessed on a fixed, predictable schedule, whether the property has changed ownership or not.

Residential property should be reassessed and be allowed to rise more than a negligible amount per year. For example, in our neighborhood one house pays 1500 per year in tax, and the house next door pays almost 50,000.

In addition, we should be taxing services, etc. not retail sales.


Posted by observer, a resident of Another Palo Alto neighborhood
on Feb 12, 2012 at 12:34 pm

It's been pointed out that the Silicon Valley Community Foundation is a charitable foundation that serves as a vehicle for donations by the very wealthy here in Silicon Valley. While their philanthropy is appreciated, this attack on the working class/99% via Prop 13 is unwarranted and hypocritical. Why don't they focus instead on advocating reform of taxes that benefit the wealthy, like Warren Buffett has done? It's because they believe they deserve all their Mitt Romney type tax advantages, and surely they have unlimited arguments as to why those advantages should continue. SVCF is just a mouthpiece of their own elite base of 1%ers and it shows. The Weekly could do better reporting, but their publisher Bill Johnson is on the board of SVCF, a fact which they conveniently failed to disclose in their article.


Posted by homeowner, a resident of Midtown
on Feb 12, 2012 at 12:42 pm

Palo Alto mom, thanks for making my argument. The idea that someone could go from $1500 to $50K per year in their tax bill is just ridiculous. Someone who can afford $50K in property taxes per year is wealthy -- at 1.25% they paid around $4 million. Sad that people resent their own neighbors. Palo Alto is not reality for California, it's the land of the 1%ers beating up on the 99%.


Posted by palo alto mom, a resident of Duveneck/St. Francis
on Feb 12, 2012 at 12:52 pm

Homeowner - I'm not suggesting that anyone go from $1500 to $50k in one sweep. I don't have a great solution, but there are many ways to prevent people from losing homes due to real estate taxes, yet be much fairer in our taxes from home to home and business to business.

In reforming out taxes, it would also be great if a percentage actually went to the designate location. I believe Texas allocates a percentage of the tax bill to schools, universities, etc. and the state is not allowed to take any of it.


Posted by daniel, a resident of Embarcadero Oaks/Leland
on Feb 12, 2012 at 2:24 pm

Prop 13 is the most outrageously regressive taxation system invented. A person worth nearly 50 million dollars is paying less than a thousand dollars per year in property taxes(a real case right here on the Peninsula, and there are numerous such cases) while his neighbors pay 30 times more for the same type of house next door, because they are young and purchased their house many years after him. The only solution for residential property is means testing. Income and net worth should dictate property taxes per assessed value. That way older people on fixed income and young families working hard to establish a nest egg will not lose their houses and savings, and affluent older people will not pull a Mitt Romney on the 99%.


Posted by Somewhat old timer, a resident of Adobe-Meadows
on Feb 12, 2012 at 7:38 pm

What bothers me is recent home buyers complaining about their property taxes. For god's sake, you knew going in how much you were going to pay for the house and how much in property taxes that would mean for you.

We, who bought our houses long ago, don't resent your wealth even though we could never afford to buy a house here any longer. Why do you resent us for what we have??

We are teachers, retirees, civil servants who are not wealthy. The day you have your way, there will only be wealthy tech types left in Palo Alto. Is this really what you want for yourselves and for your kids? If yes, how narrow-minded...


Posted by Somewhat old timer, a resident of Adobe-Meadows
on Feb 12, 2012 at 7:40 pm

And I agree with Larry Dorr,

Let's increase income taxes before we force people out of their homes in places like Palo Alto.


Posted by Funny, a resident of Adobe-Meadows
on Feb 12, 2012 at 7:59 pm

@Somewhat old timer - what bothers me is people who don't pay their fair share of taxes and complain about people who point that out. Hey, that's sound like you! Wow, you get the same city services as me, own the identical house across the street, but pay a fraction of what I do - nice going. But don't pretend there's anything fair or right about that - you just get a tax break you don't deserve.


Posted by I Love "Taxes are not fair by definition" poster, a resident of Green Acres
on Feb 13, 2012 at 4:48 am

Dear TANFBD: You write clearly and logically. Thank you. Now, if only everyone would read your posts and think a little. Have you considered writing a blog and/or a newspaper column for "taxes"??


Posted by Perspective, a resident of Green Acres
on Feb 13, 2012 at 4:51 am

Dear somewhat old timer:

The hilarious thing is that those who complain about "paying more than their fair share" are going to be the ones the "younguns'" are going to be complaining about in 20 years!! And me, if I am still alive, will be LMAO, while they fret and worry over how they will pay their taxes at quadruple their current rate if the "younguns" get their way...HA!


Posted by Perspective, a resident of Greendell/Walnut Grove
on Feb 13, 2012 at 4:53 am

Daniel: Gosh, why don't we simply do away with all those pesky tax laws, and from each what he can earn, to each what they need? Means test everything!!

Must be rough to be so full of envy all the time


Posted by Perspective , a resident of Green Acres
on Feb 13, 2012 at 4:58 am

To Larry Dorr: Our taxes are the lowest they've been in may years because our GDP is the least its been in many years, we have fewer of those disgusting rich people paying the huge amount of taxes they were paying, we have a LOT fewer middle class paying taxes since we have the fewest percent of employed adults since 1983. Gosh, aren't you all happy our taxes are the lowest they've been in years?

By the way, this is not the same as our tax RATE..which is by far NOT the "lowest" in years. As usual, the more taxes and regulations there are, the less tax-revenue there is at all levels.

But it sure is nice to lower the water level so the whole boat sinks, isn't it? Taking down those with more than we have is certainly the way to go, letting envy dictate economic policy.

But, hey..we have lost everything, we pay nothing now in taxes ( from the millions we did pay) and won't for the rest of our lives, so I have no more skin in the game. Go ahead...destroy more of your tax base!!


Posted by daniel, a resident of Embarcadero Oaks/Leland
on Feb 13, 2012 at 7:45 am

"Daniel: Means test everything"
Exactly, and how much better off our society would be. BTW, since I am a one percenter by virtue of income and net worth, I am not "full of envy all the time".


Posted by newer homeowner, a resident of Ventura
on Feb 13, 2012 at 8:10 am

It's clear that the people complaining are those who are wealthy enough to pay millions for their house here in Palo Alto, and not even care if their own tax bill goes up and up (how rich some must be!), and they begrudge the teacher, firefighter, or whoever the ability to keep their home that they worked for here. For the middle class, and the vast majority of Californians, home ownership is the major investment of one's life. For the very rich to try to take it away from them out of spite is sad. In today's world where so many California homeowners are trying to avoid foreclosure, it is the height of insensitivity for the very wealthy philanthropists at the Silicon Valley Community Foundation to try to increase their burden.

We all have different tax pictures, and no one is begrudging you what you have earned that has landed you in the 1%, and whatever tax benefits you may have. Having bought more recently, at the lower end of the market, we value the security of not getting displaced so we have a place to raise our kids and live comfortably when we retire, without having to fear whether we can keep up with the endlessly escalating property values here. Only the very rich in Palo Alto would not have that worry. Prop 13 makes just as much sense as when it was first passed, and even more so with today's stratospheric real estate prices. The 99% of Californians support it because they know it protects them from losing their homes, while paying property tax at a fair rate associated with what they could afford when they bought their house. Let the elite at the Silicon Valley Community Foundation start paying more taxes of their own volition, like Warren Buffett, if they want to do something positive, rather than attacking the working class and less fortunate whom they purport to serve.


Posted by common sense, a resident of Midtown
on Feb 13, 2012 at 9:30 am

People who want to change Prop 13 fall into 2 categories:

1) Greed - I want my neighbor to pay more, so I can pay less. These people, when they bought their homes all knew what their property taxes would be, and so to now complain about their neighbors is pretty self-serving. If they don't like what their neighbors are paying in property taxes they could have bought a home in another community.

2) Irresponsible fiscal government supporters - it's been pretty well analyzed that the $2 million - $10 million pension & benefits packages that our elected officials have contracted with the unions (who donated to their campaigns) were fiscally irresponsible, and in order to pay for those pensions & benefits they now have to cut government workers; rather than tackle the harder problem of pension & benefits reform, they instead want to raise taxes. Unfortunately, every time taxes are raised, our elected officials just promise bigger pensions & benefits to the unions.


Posted by Monty Bell, a resident of Portola Valley
on Feb 13, 2012 at 10:03 am

Perspective: "By the way, this is not the same as our tax RATE..which is by far NOT the "lowest" in years."

I disagree with that claim. Larry was correct. Name a year it was significantly lower.

At the Federal level, tax rates for the top tier (including cap gains since that's where much of the income is) have not been significantly lower. Since the great depression. Oddly, our two greatest economic calamities were preceded by massive tax cuts for the wealthiest among us.

Your statement is wrong. If you insist, show the data: list the years with the IRS top tier rate and corresponding cap gains that are significantly lower than today. as Larry said, Reagan raised taxes a bunch, at the end of his term he lowered the top tier but it went up almost immediately with Bush (remember "read my lips"?) and had higher cap gains rates at the time, anyway.

Cap gains is crucial - that's why guys like Romney can make $42 million and pay 13%, a lower percentage than a cop, a firefighter, a teacher, a plumber, lower than someone who actually works as opposed to those of us opening account statements by the pool.

back to Prop 13: I also agree with the posters that the easiest fix is to remove the loopphole for the commercial properties that keep them from being reassessed when they change hands. It's only fair to new businesses. Fair to keep the turnaround (60/40 to 40/60) from going further askew against residential owners.


Posted by the_punnisher, a resident of Mountain View
on Feb 13, 2012 at 12:39 pm

the_punnisher is a registered user.

I've waited to see what the response was to the " Elephant in the Room "

I will add what I see is the overall picture and another " Elephant "

FIRST: A DISCLAIMER My parents bought a " fixer upper in Mountain View for ~$25k 40 years ago.. The value before the " bubble " burst was heading toward $1 MILLION! It is now around $500k...

Without Prop 13, they would have had to seriously consider leaving the Golden State and take a loss for all the improvements WE made...

This " argument " ( it has moved away from a discussion and turned into the usual name calling and not a civil discourse ) IS THE SAME ONE THE OCCUPY ( bowel ) MOVEMENT HAS BEEN USING!!!

The only difference is the participants are cleaner and less violent.

That " pay your fair share " is more or less the goal of that ( bowel ) movement.

The other " Elephant ": Your county is known as SANTA CLAUS county for the many FREEBIES that are given to the ILLEGAL ALIENS ( " undocumented if you want to be PC ) by the County and private services.

Note that this is not just a " southern border " problem, Santa Clara county has " Multicultural Undocumented " that get FREE medical care, FREE county services and even FREE food...all within the space of an easy bus ride.

I know because I have personally seen these events when I was doing stroke rehab in Mtn. View /Palo Alto. ( My comments about the REACH program at the Cubberly campus in another comment apply )

Guess what? TANSTAAFL! Someone has to pay for these freebies that are not available or discouraged in other states!

Guess who ends up paying? That is the other " Elephant " that is costing the ( not so Golden ) State $BILLIONS..

When people are taught " The US STOLE THIS PROPERTY FROM MEXICO " in not only Mexican schools but in your LA AREA SCHOOLS, the " south of the border " crowd feel ENTITLED to those benefits.... It doesn't help when we have an Entitlement President that refuses to support laws already on the books.

So, do you think that your " cheap labor pool " is really that cheap?

You get to pay for that " cheap labor " with the skyrocketing taxes that come from everywhere in California.

So, look at the facts from a big picture POV.

Or keep paying for your ( not so ) cheap labor...


Posted by Monty Bell, a resident of Portola Valley
on Feb 13, 2012 at 1:19 pm

"...( it has moved away from a discussion and turned into the usual name calling and not a civil discourse ) IS THE SAME ONE THE OCCUPY ( bowel ) MOVEMENT..."

We have a winner - shames name calling and does it in the same sentence.

Putting "(bowel)" in front of movement! So witty! So intellectual! Took you all day to come up with that? Such an adult debate!

What a joke. Did you think anyone would bother with the rest of your post after that "wit"?


Posted by Question, a resident of Adobe-Meadows
on Feb 13, 2012 at 2:39 pm

Here's a question - if Prop 13 type "tax stabilization" is a good idea, others would imitate it, right? Ok - so have any other states, countries, municipalities, etc., adopted a Prop 13 type approach in the last forty years? Are there any?

I'm familiar with Massachusetts "Prop 2 1/2" which restricts the amount that city budgets can rise without an over-ride vote. That makes sense, but doesn't have anything to do with limiting the assessed value on any one property.




Posted by jim, a resident of Community Center
on Feb 13, 2012 at 3:16 pm

Business and rental properties should be excluded from prop 13, but I think it's right for residences. Think of it this way.

A boat in 1977 sells for $10,000 and sales tax is $850
An identical boat in 1999 sells for $20,000 and sales tax is $1700.

Prop tax is like sales tax except you have to keep paying it over and over every year.

But just as the guy who bought a boat for $10,000 might not be able to afford $20,000, why should anyone expect a guy who pays $300,000 for his house to pay taxes on $1,000,000 just because the market price is now $1,000,000.

You live in your house. It's not an investment and your initial price says how much you can afford to pay. Not only in purchase but in taxes.
Business property or rental homes are investments and taxes should be based on current value because you can actually sell at the higher market price and earn a profit.


Posted by Question, a resident of Adobe-Meadows
on Feb 13, 2012 at 3:30 pm

@Jim - if it is such a good and obvious idea, why don't other jurisdictions adopt it? It has been almost 40 years. Are there any others?


Posted by jb, a resident of Leland Manor/Garland Drive
on Feb 13, 2012 at 6:05 pm

A little bit of history about Prop 13. When it went into effect people were losing their homes because they could no longer pay their taxes. Houses valued at $55,000 were seeing their taxes go up 20% per year. Houses were reassessed every time houses were sold in the neighborhood. Peanuts, you say, but my new husband got a job with his new PhD with the sumptuous salary of $12,000 per year, the same as the salary of the head of the department where he got his Phd. A bag of groceries could be had for $5 and $20 easily fed us for a week. I don't know the multiplier to convert to 2012 dollars, but life then was not cheap. And there was a land rush in Palo Alto even then. We missed houses priced in the $50,000 to $60,000 because people would literally rush into the open house and offer $10,000 more for the home than asking price.

All of this is to make the point that many people were quite relieved that homes would not be reassessed as soon as sales in the neighborhood had been recorded. But the proponents of Prop 13 were, as usual, hiding behind civilians as human shields. They knew that if they got the homeowners on board, they had the votes to pass the law.

What they wanted was to stop the reassessment of commercial property. And they knew that affairs could be arranged so that large commercial buildings could be relieved of significant tax increases in perpetuity. Those properties, shielded by ownership via investment trust, would not ever experience the tax increase that comes with the sale of the property because it would never be sold! It requires a change of a large percentage of the owners of the building to consider it to have been sold. That many investors in a property rarely sell together.

The result is that commercial buildings with 1977 era ownership trusts have really not had a tax increase, and the increase would have been even larger than the difference between homes of newcomers versus homes of seniors. Commercial real estate has been doing very well in California. There are investors in Minnesota, Texas, New York, China, India who have been making out like bandits at the expense of our school districts and Universities.

My own opinion is that residential property could be taxed at a slightly higher rate than it is now, and new purchases could have their rates set at some percentage of the sale price rather than at the exhorbitant price the new owners probably paid. Over a period of years these monster commercial properties could have yearly reassessments to bring them up to a more realistic percentage of their value.


Posted by jim, a resident of Community Center
on Feb 13, 2012 at 8:48 pm

@question, I think California is different that most states in 2 ways. Only 16 states have a direct initiative and referendumm process. And within those states, very few have experienced anything near the large property value increases that drove up taxes on property in California.

Here's a real scenario in Palo Alto with realistic numbers.
You bought an Eichler property in 1970 for $50,000 when you made $15,000 per year and paid $500/year taxes that first year. So you paid 3% of your income for prop tax that year.

Now in 2012, are retired on $24,000/year Social Security and your home is now valued at $1,000,000, your yearly tax would now be $10,000 per year or 42% of your income.
How would pay your tax bill and still live?


Posted by Question, a resident of Adobe-Meadows
on Feb 13, 2012 at 9:01 pm

@Jim - so then the answer is "no" - you don't know of any tax jurisdiction on the planet that has put in a place a system like Prop 13. That tells you something - 40 years and no one has chosen the same path. There are plenty of places where property values have gone up sharply (my home value tripled in 8 years when I lived in Massachusetts) - but no-one ever suggested anything like Prop 13. Makes you think, doesn't it?


Posted by mortgaged, a resident of Barron Park
on Feb 14, 2012 at 7:40 am

Thanks Jim your example is spot-on, and it still applies today to people who bought homes in the 6 figures that are now valued at 7 figures and this will continue in the California housing market. Can't imagine how wealthy someone must be to not worry about how they can afford to live in their home when they retire, but this is Palo Alto, not reality, so this discussion is really just a 1%er rant-fest. In the rest of California people are worried about foreclosure, and paying the bills they now have, not asking for more, so Silicon Valley Community Foundation is preaching to their own wealthy choir, not anyone they purport to serve.


Posted by Question, a resident of Adobe-Meadows
on Feb 14, 2012 at 8:10 am

In Massachusetts, where there has been plenty of housing value growth over recent decades, all homes are taxed at assessed value. If seniors can't afford their taxes, there is a deferral program that postpones their tax payment against future sale of their home (either when they move or pass on). The deferment is means tested. One never (I mean never) hears about seniors thrown out of their homes due to unaffordable taxes, even if their income goes down and their home value multiplies.

Prop 13 is like hitting a nail with a sledge hammer - everyplace else addresses these issues in simpler, more direct ways. Jim is right - only in a state with direct democracy would we end up with a solution as extreme (and un-modifiable) as this one. A good reason to change the state constitution!


Posted by Monty Bell, a resident of Portola Valley
on Feb 14, 2012 at 9:42 am

"Prop 13 is like hitting a nail with a sledge hammer "

A sledgehammer guided by commercial interests that wrote the loopholes.

Loopholes that moved the burden from 60/40 to 40/60 in their favor at the expense of residential property owners.

Perspective: still waiting from you since you claimed Larry was wrong; name the period when federal tax rates (inc. cap gains) were significantly lower than they are under Obama.

Obama essentially has the lowest tax rates under any modern president - Reagan, Bushes, Nixon, etc...


Posted by Somewhat old timer, a resident of Adobe-Meadows
on Feb 14, 2012 at 10:44 am

@ FUNNY

You speak of people paying their "fair share". What do you call "fair share". If I understand you well, you want us to pay based on today's valuation of our houses we bought 20 years ago or more... Well, this "fair share" would do nothing less than drive us out of our homes because we just can't afford it. And you call that "fair"?

We did not buy our houses so that their value would sky-rocket. We bought them so that we could leave in a decent place with reasonable schools and other amenities.

Just beware what you wish. When you have owned your house 20 years or more and it is worth several times what you paid for it, you'll be the first one to demand relief from property taxes. And if you don't, you are truly among the 1%ers and you ought to pay more income taxes before trying to pile it on to the already stretched and sometimes struggling middle class.


Posted by Somewhat old timer, a resident of Adobe-Meadows
on Feb 14, 2012 at 10:46 am

live * (not leave)


Posted by the_punnisher, a resident of Mountain View
on Feb 14, 2012 at 11:08 am

the_punnisher is a registered user.

When the Occupy_______ ( whatever ) defecates everywhere including on police cars, I have made the special diSTINKtion it deserves. Those are facts.

The old saying " if the shoe fits " applies here. or the NEW version, applied in this case: " If the FOO ---ts "...

The answer to a DIRECT DEMOCRACY is more DIRECT DEMOCRACY....

If the majority of citizens support a change, THE CITIZEN CAN MAKE THEM!

One thing is certain, California can no longer support the present system.

The GOVERNMENT ( that is supposed to be THE PEOPLE ) have to deal with " The PARTY is OVER " and the bills are due.



Posted by Joseph E. Davis, a resident of Woodside
on Feb 14, 2012 at 4:40 pm

The economically efficient solution is to do away with property and state income tax entirely and raise all needed funds through sales taxes. (Note that *needed* funds do not include paying inflated wages and benefits for gold plated bureaucrats and public union members.)


Posted by JMLW, a resident of another community
on Feb 14, 2012 at 5:12 pm

punnisher

Perhaps you should get your RX's refilled.

Governor Lamm and humus? Elephant in the Room? That " pay your fair share " is more or less the goal of that ( bowel ) movement. Entitlement President?

Seriously, you should take care of your self for awhile. There are people who can help.


Posted by Kate, a resident of Duveneck/St. Francis
on Feb 14, 2012 at 5:53 pm

Prior to 1978 and the advent of Prop 13, EVERYTIME a home sold in a neighborhood, all homes were reassessed. EVERY time someone remodeled which brought in the tax assessor, all the homes were re-valued. At one time Palo Alto had its own tax assessor and the county had its tax assessor, then sometime in the 50's or early 60's the two jurisdictions merged. Those buying the homes in the 50's and 60's were WWII and Koren War Vets. HP was paying engineers $10,000 a year - TEN!!. In the 50-60's Lockheed was paying engineers $2.98 an hour. And taxes in the 70's on a $35K home were at least $900 a year. The assessors were busy- cities, counties, and school districts were spending out of control During these years most school were built, including Gunn. And parks and playing fields and City Hall - and the list goes on. These homeowners, if still here, are in the 70's,80's, and 90's. now to live on Social Security and 'fixed income', and on low fixed interest. But what is more difficult is to live in a city which is now showing its disdain because they didn't die soon enough - and get out of the way. Palo Alto's displeasure toward its senior population is disheartening at the least and disgusting at the most. It's a city where residents rarely fly the American flag or even open a door for a senior. What happened to our city when we were not looking? Are residents so consumed by money that they've forgotten their 'humanity'?


Posted by Anne, a resident of Atherton
on Feb 14, 2012 at 8:11 pm

Consolidate fire departments, school districts and police departments that would save millions. No, the elderly should not be taxed out of their homes! Can you imagine what the Peninsula would be like with just venture capitalists, computer IPO founders, CEOs, doctors and lawyers, etc. What a boring community that would be!


Posted by Jim, a resident of Community Center
on Feb 15, 2012 at 12:22 am

@question
Your argument seems to always come down to "no other state does this".
In any event, it is the law in California and has been validated by the Supreme Court.
'The U.S. Supreme Court declared, in Nordlinger v. Hahn, that Proposition 13 was constitutional. Justice Harry Blackmun, writing the majority opinion, noted that the state had a "legitimate interest in local neighborhood preservation, continuity, and stability" and that it was acceptable to treat owners who have invested for some time in property differently from new owners. If one objected to the rules, they could choose not to buy.[39]'

If you buy a boat today for $40,000 exactly like one that someone else bought in 1970 for $10,000 are you being taken advantage of?
No, because your income has also quadrupled since 1970.
When most people retire in the private sector, their income decreases substantially and can not support property taxes inflated by the inflation of current salaries.


Posted by stephen levy, a resident of University South
on Feb 15, 2012 at 12:45 pm

stephen levy is a registered user.

No one associated with the Joint Venture paper on Prop 13 is proposing repeal. In fact I don't know any substantial effort focused on repealing Prop 13 and especially the provisions that help older homeowners.

So people who have been worrying about that can relax. It is not in the cards.

In addition our paper was not focused on the ongoing debate about the size of government or about public employee retirement benefits and local government finance.

So posters who want to carry on about spending problems and public employee unions can continue to do so if they wish but it is not relevant to the issues we are bringing forth for discussion.

While the issue of residential versus commercial shares of assessed value was raised in the paper that, too, was not the focus of what I wrote and there are no recommendations on this topic although posters seem to have a good grasp of the issues and possibilities for change in this part of Prop 13.

A good description of the issues we are raising is in an opinion piece that appeared on Sunday by Emmett Carson and Russ Hancock.

[Web Link ]

One of the threads on Prop 13 contains some bizarre and false characterizations of Emmett's vision and the focus of the Silicon Valley Community Foundation. Most of their grant funding is focused on the "99%" not the "1%" and most of that on the bottom 50%. Here is a recent grant award for math ed.

[Web Link ]


Posted by stephen levy, a resident of University South
on Feb 15, 2012 at 1:06 pm

stephen levy is a registered user.

In this post I will try to refocus the discussion for readers who are interested in the issues raised in the paper.

After Prop 13 was passed reducing local property taxes by 60%, cities across the state responded with a large array of new and increased taxes—on utilities, hotel occupancy, business licenses and property transactions fees—as well as new and increased development fees.

We exchanged one fairly simple tax structure for a new and more complicated and ever changing tax structure.

For many years after these initial changes property taxes rose from their new low base and the local government tax structure was relatively stable.

Then the housing bubble burst, followed by a deep recession, and a new wave of local government tax increases were approved by voters including increases in hotel and business license taxes but also some parcel taxes and sales tax increases for cities.

Palo Alto adopted a parcel tax for schools as part of a movement that reintroduced higher taxes on homes on other properties that were not prohibited by Prop 13.

The point of the paper is that local governments have a tax base that will almost certainly grow more slowly than the economy or the cost of public services even if substantial reforms in retirement benefits are approved.

Sales taxes have grown more slowly than the economy over the past 30 years as consumers spend more of their income on non taxable services.

And now property tax growth is in the "new normal" of low growth caused by 1) a drop in home prices, which is not expected to be reversed any time soon, 2) a dramatic drop in new construction, also which is not expected to return to peak levels soon and 3) a sharp drop in gains in assessed value from sales of property as a) many 1970s and 1980s purchased homes have been sold once already and 2) many homes now are worth less than the purchase price so future gains on sale will be small or nonexistent.

This is the new normal.

Local governments do not have tax bases that rise with or faster than the economy. We do not tax services including many Internet transactions. And local governments do not benefit directly through taxes on income or capital gains.

The ideal tax system is a broad base with low rates where the tax base keeps pace with the growth of the economy and demand for public services.

Our current tax base fails miserably on these criteria, which is why the paper calls for an examination of whether a different tax structure would be better for the 21st century economy.

If you like the current system where slow growing tax bases prompt frequent rate increases we don't see the world the same way and you are probably not interested in tax reform.

If you think government spending is too high and public employee unions are the cause of the problem, you are also probably not interested in tax reform to improve the efficiency of the current system.

But if you think it is time to rethink local government tax structures, that discussion should not exclude Prop 13 although it should go way beyond considering Prop 13 reforms.

My personal ideas are shared below.


Posted by stephen levy, a resident of University South
on Feb 15, 2012 at 1:51 pm

stephen levy is a registered user.

I think the easiest way to broaden the local government tax base and lower rates is to extend the sales tax to services including Internet purchases and lower the overall sales tax rate. This has nothing to do with Prop 13 but is my first choice in the discussion I hope we will all have.

Another idea is for the state to share income tax revenues to local governments on a per capita basis.

With regard to Prop 13, I think the goal is to preserve property taxes as an important part of the local tax base.

I would consider limiting property tax rate increases to some growth rate tied to the economy, replacing the current 2% limitation on annual increases.

If the property tax system is not carrying its weight in local taxation, other taxes will be raised instead. People who think keeping property taxes low will stop other taxes from rising to make up for the revenue loss are wrong on the facts.

That is why the paper calls for a discussion of the new realities of local government taxation so whatever happens is not haphazard but the result of considered choice.

Remember that there are ways to protect low income or fixed income households from an undue burden-paying back taxes at the time of sale is one way to get around the cash flow problem. And remember that not all older owners live on fixed or low incomes. I do not see why working, more affluent older residents like me should get tax breaks while new businesses and homeowners pay the highest rates.

It is certainly possible to consider a different set of rules for income producing property since you don't have the Prop 13 problem of "throwing granny out of her house". Some kind of more frequent assessment in between sales might be a good idea although there may be implementation challenges.


Posted by Erroll, a resident of Barron Park
on Mar 15, 2012 at 10:34 pm

Prop 13 Is it Fair? why do some people want there neighbors property taxes increased to match there's saying that would be fair? . why not lower there's to match yours? that would be fair. IS IT Fair to ask for 30 year bonds for new roofs, paint and mechanical upgrades deferred maintenance on city and school properties, when it will be needed again before the bonds are paid off, is that fair? Is it a good use of property tax money ? Incurring more debt ?, Is it fair To raise Property taxes on mom and pop businesses small commercial and business property. is it fair When city, state and county managers using closed door NEGOTIATION commit our tax money to employees unions getting retirement pensions in the 80,000-200,000+ a year for life along with medical and dental, cost of living increases, and transfers of benefits to spouses and children. passed onto tax payers,is that fair? Is it fair for city managers and elected officials to use our tax money to further their political career with union endorsements.? Police and fire going out on disability just before retirement, double dippers, is that Fair? If you are a government employee you hit the jackpot And the property owner picks up the tab. City of San Diego pays for more retirees than they have currently employed is that fair to the property tax payer ? City of San Jose uses a 30 year bond for a police substation A 90 MILLION DOLLAR SUBSTATION ! When paid off it will be a 200 MILLION DOLLAR SUBSTATION, And they can not afford to staff it, it sets Vacant! is that fair to the Property Tax Payer ? IT IS NOT A REVENUE PROBLEM, IT IS A SPENDING PROBLEM !


Posted by Pete, a resident of Esther Clark Park
on Aug 21, 2013 at 7:44 pm

A good rule of thumb is to take the opposite position of whatever Antonio Villaraigosa is pushing.


Posted by loopholes, a resident of Barron Park
on Aug 22, 2013 at 10:41 am

The only feasible discussion is to remove the loopholes for COMMERCIAL properties.

Leave residential as it is.

No. I don't currently own a home.


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