"Please use the original title, unless it is misleading or linkbait; don't editorialize."
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More taxes are not the answer.
In California, government employees get paid far more there than any other state and vs their private sector counterparts, have enormous pensions and are now the predominant members of the middle class in California. They live off the riches of the tech sector like the Saudis live off oil and benefit massively from prop 13 and other tax breaks. Peter Thiel did a great analysis of this.
Besides, more tax revenue would make California worse. San Francisco
used its huge tech windfall to spend $300 million a year on not that many homeless people. It did create a lot of those sweet government jobs and cost plus contracts though. All these government workers are now reliant on homelessness continuing to be a problem.
Reminds me of Spain. When public workers start to get more than private, bad things will start to happen.
First: a bigger interest in intervention and keeping the system to keep votes.
I know California has had a super strong economy but... if you go down this road it will be a matter of time. Even if it is decades.
The problem with this is that once it starts it makes for a vicious circle that gets bigger and bigger and the ones who pay the increasing bills (private economy) get eventually pissed and leave.
I heard many companies moving to Texas/Florida for having an increase in the tax that corporations pay.
I just thought of something, but it's too late to edit the above comment. In San Francisco they have a sanctioned open air drug market. It doesn't make much sense if you're trying to get these people off drugs, but if you are trying to preserve the homeless people in their current patterns of dysfunction as clients for the bloated city government and provide a jobs program for social workers and government contractors, it makes tons of sense!
And that’s exactly what happens. What could you do if you gave every homeless in SF a cut of the 300MM? They’d all be fed and clothed and able to rend low income housing. But that’s not what happens. Some agency is spun up to manage the funds and sucks 90% of them away to pay for op ex.
How would property taxes deferral work? Let’s say the value goes way up for 15 years, then goes way down again, and you sell your house… are you on the hook for those back taxes even though you didn’t make any money on the sale? If you are, then you are screwed… if you aren’t, then it seems more like a sales tax than a property tax.
This is why, I think, property taxes should not be based on the "full cash value" of a property but instead be based on the rental value. The market selling price that we used today is a lot more volatile than rental value because it is based not only on the rental value but also factors in the current interest rate, a speculative premium on future returns, and holding costs such as the property tax itself. Think about how rents have changed over the past few years versus home sale prices, particularly with interest rates being a roller coaster these past few years. If county assessors instead kept track of the rental price of comparable properties, the assessment would be a lot less volatile. This policy would also lead to homeowners having their interests more aligned with renters: keep property taxes stable by keeping rents stable.
>Think about how rents have changed over the past few years versus home sale prices
In my area, rents have gone up concurrent with house prices - but aren't falling now that sales inventory is falling, because those owners still want to cover the mortgage.
> property taxes should not be based on the "full cash value" of a property
That's not quite how property taxes are calculated, at least not in the two states where I sell real estate. In fact, even after a house has recently sold and there is a new market value established, the property tax basis doesn't increase up to that new market price. I just went through this with an out-of-area buyer, where I took the houses I sold last year that were comps to the one they wanted to buy and showed them the new tax assessment for this year. Yes each had increased, but nowhere near the market value (in fact, the tax assessed value was between 50-60% of the market prices).
My comment was more about California, specifically, as that's what the original post was about. The state constitution uses the term "full cash value". I dislike the term "Assessed value" because so many people assume it's the same as "appraised value" which is a term that buyers, sellers, lenders, and real estate agents are usually more familiar with. I very much agree with the OP in that I think we should be explicit about the subsidies and/or exemptions that we give instead of hiding them in the way that taxes are assessed.
> property taxes should not be based on the "full cash value" of a property but instead be based on the rental value.
Look at how rents are calculated - over a long period they usually are somewhere near costs, of which the largest costs by far is the mortgage, which depends on the mortgage rate. Property owners are often speculating on the capital gain. Commercial property is different again.
You also need to consider what behaviour that would incentivise.
Finally, the property value in some markets is entirely dependent on rents (especially commercial) so you are not necessarily gaining anything.
Given that the float is so small, I think the asking price for rent is getting increasingly out of touch with what people are really paying, especially with rent control.
To make it less volatile they might as well just pick a number every year, the annual tax for a median house, then scale it in a relative sense based on relative house prices between taxpayers. They would more or less do that in a roundabout way anyway by tweaking the percentages every year.
that’s called the income valuation method and is used extensively for commercial property valuation (along with the comparative approach). in residential, it’s usually a combo of cost approach (replacement value of house plus value of land) and comparative. that’s because in many less dense areas, both rental and property comps are hard to come by (to the level of statistical significance).
As long as we limit the payable tax to the sale price of the home, then you're not screwed. It would suck to have all the money disappear, but if you didn't pay your mortgage then you would also owe the entire amount of the sale price too.
I’m never a fan of any form of capital gains tax. When I earn money I’m liable for tax, but what if I lose money? I’d be responsible for the whole amount loss.
Rich people have assets which sit there and appreciate, and when they sell them they usually get more cash out that they put in. I strongly believe that those capital gains should be taxed.
Yes: if you invest in something the value can go down, but I don't think the government should compensate you for that. You should just be careful where you invest your money.
It works the exact same way as any other lien. It becomes due as soon as the property is transferred for any reason. If the sale is not enough to cover the liens, it’s the lien-holders who get screwed, not the seller.
The article is intentionally being arch by using "welfare", a word that's usually used to refer to programs that give to the poor to refer to one giving money to the rich. It's making the point that "government handouts" are reviled when they go the poor, and accepted relatively uncritically when they go to the rich
There is no qualification that a handout must come from someone that you have not, are not, and will not ever pay money to. A handout from your landlord is still a handout.
Also, New Zealand's population is less than that of SF Bay Area and one of the lowest density states in the world (hence more per capita access to resources).
There will be similar sized patches in the US with similar levels of low corruption.
And you also send the same "mugger" to evict people from property you own, to reclaim debts you are contractually owed, and to tax people who use your intellectual property.
Does that imply that any amount of money received came from the government, because the government had the ability to take more but decided not to pursue taking more?
> I'd hardly call a reduction in "money we take from you" a "handout".
This always ends up being a metaphysical debate. It’s all relative.
Suppose I make $100,000 and after taxes $80,000 is left. After a new law is passed, I now take home $81,000 after taxes on the same income.
Does it really matter if the government gave me an untaxed $1,000 “handout” check or if they “reduced the money they take from me” by cutting my taxes by $1,000?
Politicians play this game all the time, implementing social spending as tax credits and rewarding the wealthy with tax breaks.
> Does it really matter if the government gave me an untaxed $1,000 “handout” check or if they “reduced the money they take from me” by cutting my taxes by $1,000?
Yes, it matters.
First, reducing what they take is more efficient than inventing new bureaucracy to send out checks.
Second, I cannot rely on a random bonus but I can rely on the taxation tables therefore I am more likely to plan on doing something useful with reduction.
Actually sending money directly to the poor is a very efficient form of government program.
It's the exact contrary of bureaucracy. Bureaucracy is deciding for the poor what they are allowed to do with the money on the wrong assumption that they wouldn't know better than you what to do with it. In fact the less money you have, the more careful you are with it. Obviously. And at the extreme end of the spectrum, if you are rich like Elon Musk, you spend 44 billions on something dumb.
>First, reducing what they take is more efficient than inventing new bureaucracy to send out checks.
No, this depends on the specifics. If they are sending every tax filer an extra 1000 then that would be very efficient (setting aside those people who do not file federal taxes). If the tax reduction is complex, requires knowledge of complicated eligibility criteria, going in person to a local SS office or for a notary public, it's very inefficient.
In the GGP's example, the tax rate dropped from 20% to 19%. It requires changing 1 number. Everyone already had to file taxes using whatever number the government provides.
If we send every person a check it requires, at the very least, envelopes and postage.
My first claim is not about the efficiency of how the money is used by the beneficiaries. My claim is about the efficiency of getting the money gets into people's hands in the first place.
My father worked for the SSA for most of his working life and he strongly believed in its mission. I don't think he would call it a particularly efficient way to cut checks.
I understand the joke, but it's really bad choice of title.
California also probably runs one of the largest most efficient welfare programs in a literal sense, and if I hadn't seen these comments that's what I would have assumed this article was about.
California's Proposition 13 law (https://en.wikipedia.org/wiki/1978_California_Proposition_13) "locks in" property taxes on homes at the time you purchase it. Most other states do not do this, the value of your home is re-assessed annually, and your property taxes are based on the current value of your home.
In general, home values have consistently increased, year-over-year, in California. This means that many people pay less property taxes than they would if California didn't have its unique Prop 13.
Many people feel that this is an unfair law, as it largely benefits people who are _already_ financially established.
This article satirizes the situation, by framing the law as an intentional 'welfare program', rather than a tax break with unintended consequences. Part of the humor is that this 'welfare program' benefits the wealthy at the expense of the poor, contrary to how we typically think of philanthropy.
Many localities apportion property tax out of the budget, so if everyone’s property doubled in price but the budget only went up 2% - property taxes would increase 2%.
In fact, we had a reappraisal recently and my value went up and total tax went down.
> "locks in" property taxes on homes at the time you purchase it.
All real estate whether a 1200 sqft house owned by a 90 year old widow, a foreign owned apartment building, or an oil refinery owned by a multinational.
Note, for historical perspective, California hasn't always been a solid Democratic state, most trace the recent Democrat domination back to a Trump-like nativist politician that pissed enough people off that the Republicans made themselves irrelevant in the state
Property tax is regressive and nobody should be forced out of their own home because of rising property taxes that might only be due to a housing bubble. I don't see the problem.
Capping property tax increases is similar in effect to rent control; it benefits people that were already there at a given point in time and hurts everyone who moves in afterward (proportionally).
Freezing property tax ends up being wealth redistribution from the entire rest of society to landlords as the article walks through. Second order effects also end up locking up the housing market as a whole and pushing prices ever higher making everyone worse off in the long run.
Then read the article. The problem is that in reality the money flows from low income to high income households. So it works the opposite of how you think it does.
One of so many policies with a nice headline. but which falls short of working well due to obvious, quite enormous externalizations. It is truly a paradox that you can buy something, like a normal home, but if home prices rise rapidly you can be out on your rump. A small property tax is effectively a huge wealth tax. People live a long time, one would imagine that 'property' of all things can't be taken from you? Perhaps all taxes should be adjusted for land prices as the ultimate arbiter of inflation?
And more pragmatically, like many states, a single party has dominated the legislature for many decades, and we can see what ensues from that.
They are form of wealth tax which is not nice, but they have pragmatic value for assessing consumption and also luxury consumption. A township might rightly charge more for services which are providing the economic value underpinning the property. And in many places, luxury taxes exist to tax 'non essential' forms of consumption in deference to things like investment, which is actually rational. Aka if your money is invested into value creating enterprise, it's not taxed the same way as your yacht or second mansion. That said, it can get excessive quickly.
It’s always humorous how HN hates a proposition which was basically a conservative backlash to big government growth.
wiki: 71% of Republicans, 55% of Democrats, and 61% of independents; 54% of people age 18 to 34, 52% of people age 35 to 54, and 66% of people 55 and older; 65% of homeowners and 50% of renters.
Everyone in utopia TX would vote for this prop today.
The article is not really satire. It is describing Proposition 13 seriously and accurately. It is Proposition 13 that makes a mockery of welfare programs, and he’s right that everyone in California should learn its regressive design and consequences.
When I talk to my dad about Proposition 13, the one thing he remembers about the ads is that it was supposed to keep widows and single moms from losing their house. In other words, he thinks of it as an entitlement program to help poor residents. But as the article points out, it is a subsidy not for the poor; it is instead a subsidy that regressively targets property owners (including landlords and commercial properties) at the expense of recent buyers and non-property owners (including widows and single moms who do not own an appreciating property).
I agree with you that it is unfortunate that politicians such as AOC conflate economic development incentives with welfare. That has nothing to do with Proposition 13, which is not an incentive program. In fact, the incentives that Proposition 13 does contain (to avoid developing or selling which trigger reassessment) perversely exacerbate the housing scarcity that it was supposed to alleviate.
> Also, why are those against Prop 13 the most silent (usually) on corruption in the state?
Your final question seems to imply that opponents of Proposition 13 are a special interest who are ok with corruption. I disagree. I think an impartial observer can analyze the state’s largest entitlement program and complain about the obvious regressive aspects of it.
> it is instead a subsidy that regressively targets property owners (including landlords and commercial properties) at the expense of recent buyers and non-property owners (including widows and single moms who do not own an appreciating property).
Just because the rich also benefit from X doesn't make X bad. The rich are not automatically evil.
> The loss in tax revenue due to prop 13 is roughly $17bn per year.
I’m not sure where you got your number. I presume that you took the HJTA cumulative tax break from that link ($528 billion) and divided it by 31 years (1978 to 2009)? If so, this is most likely an underestimate because the tax break increases over time for properties that do not change hands. Moreover, HJTA does not explain how they calculated their cumulative tax break number, and it is an old article from 13 years ago.
Your estimate is far lower than the original article’s estimate based on the Census ACS, which is “$68 billion per year, or $5,200 per household”.
> California lost a similar amount just to EDD fraud $31bn (probably every year).
I agree that this was terrible, though I think that was a one-time event due to the relaxed unemployment application process due to COVID-19.
> Let us fix fraud and corruption before raising taxes.
Let’s do both.
Property taxes (particularly the land portion) are not only for raising money. They also reduce inequality, reduce the incentive to speculate on underused land, make it easier for new generations to enter the market, and reduce cyclical price swings (see Henry George, Progress and Poverty).
I’m guessing that person who flagged this felt misled by the title, since Americans read the phrase “welfare program” as “benefits for the poor”, while this article describes a benefit for homeowners.
If so those users should be flagged for being politically illiterate.
Reframing, satire, and turning the opponent’s talking points around on them are common rhetorical and polemical tools. Does someone who is in favor of welfare for the poor have to be obligated to blindly accept the Reaganite “welfare Queen” angle? Of course not. In fact, why not turn it back on the middle/upper middle class?
Oh fucking hell. I've never read an article that so made me want to slap the author. For having blinders half on, and making me read a story that has a headline about one thing and then completely turns it into another thing.
Dear reader. You have just read a polemical article. A polemical piece is political writing which clearly argues for one side or the other—it does not feign neutrality. In this case, the tell-tale is describing a “welfare program” which is not offically called that in order to juxtapose it with actual welfare programs—the author is implying that it is in effect a welfare program for homeowners, i.e. welfare for the moderate-to-dos.
If you feel that your amygdala has become inflamed, then don’t worry! This is a common response to reading polemics from people that you don’t agree with, since they unabashadly argue for things that you don’t like.
Yes the actual original title should be
'What's Wrong with California?
A defense of the Golden State, and a modest proposal' and it's essentially all about how taxation funds the benefits programs
> ... and it's essentially all about how taxation funds the benefits programs
I suspect that either you didn't read down far enough, or you uncritically accepted the writer's "benefits program" language without thinking about what they're actually referring to.
My grandmother was on welfare. My mother was on welfare, my sister was on welfare.
Sister wanted off welfare, but if she got a job she lost much more from welfare. So no reason to work. Then welfare got limited to 5 years or something. So she got a job as a bus driver. Been doing that for 20 years now.
My dad got my mom off welfare and working.
Welfare definitely was just keeping people in poverty and dependent on the government, and not being productive.
The great thing about California’s welfare program as mentioned in the article is that the amount of welfare received is not dependent on income so it does not disincentivize employment.
That's unrealistic -- some people, by their circumstances, have a more expensive life.
Eg. If you need a wheelchair, that's another set of maintenance, with needed changes to all kinds of your living infrastructure, custom vs what somebody without a wheelchair needs.
Healthcare or disability welfare could be separate, perhaps, but for financial welfare we should never be giving cash handouts dependent on inevitably perverse incentives (staying impoverished).
'California operates the largest, most ambitious social welfare program in the entire country, funded entirely out of its own tax revenue. It costs California $68 billion per year, or $5,200 per household.3 Furthermore, it is unquestionably the most efficient welfare program in existence—the state automatically figures out your eligibility and sends you the exact amount you are entitled to, with 100% accuracy. There are no complicated applications to fill out, no bureaucratic overhead, no waste. The money just automatically flows to deserving Californians that need public financial support.'
If only other states were richer and offered more support for their citizens. California is a magnet for benefits and mild weather seekers, and sadly those suffering from substance abuse dependencies. Equity should define this as a federal nationwide problem IMO but instead the word is out all over the world - if you sit down on the pavement in California and say you are 'homeless' the money starts flowing.
> California is a magnet for benefits and mild weather seekers, and sadly those suffering from substance abuse dependencies. Equity should define this as a federal nationwide problem IMO but instead the word is out all over the world - if you sit down on the pavement in California and say you are 'homeless' the money starts flowing.
The great thing about this article is that you can tell who didn't bother to read it.
'California has a lot of extremely rich people and a high income tax'
The challenge here is that most 'extremely rich' people (including UK PM Rishi Sunak who has a large house in California) have all their money offshore.
In the prooposals at the end:
'Write a software application that matches program beneficiaries with a household (or more likely, a combination of households) that paid an equivalent amount in the same year. For example, our San Francisco homeowner from earlier that received $16,500 might get matched with five middle class families that rent in Fresno who pay $3,300 each in sales taxes each.7 Now we have made it into an “adopt-a-property owner” program. This makes the benefit much more tangible for taxpayers'.
This attempt at equity in a blisteringly expensive state makes more sense when viewed through the prism of the federal HUD 'housing first' laws around where money can be spent. Again it would be far better to have a nationwide match of properties to owners. A friend has calculated the billion+ spent by Cal on the unhoused could buy housing and wrap around services in other parts of the USA for virtually all the people asking for this.
If you want to say what you think is important about an article, that's fine, but do it by adding a comment to the thread. Then your view will be on a level playing field with everyone else's: https://hn.algolia.com/?dateRange=all&page=0&prefix=false&so...