What's going on in California (taxes)?

I think these bandaids are silly. Something is going to have to be done structurally about the taxes, clearly they aren't high enough. One start might be modifications to Prop 13 to exempt commercial property.

I don't get taxes in California. I moved here from Washington state, where my real estate taxes were a third of what they were here (and I bought 11 years ago), there was no income tax, and sales taxes were about 8%, compared to about 10% here. Yet the schools suck, the roads suck, etc. I live on the left side of the spectrum, so I don't have the same hostility to taxes that some do, but I admit I really don't know where all that money goes.

"clearly they aren't high enough."

And the flip side of that would be - how about living within the state's budget? Or (gasp!) cutting expenses? What a novel idea. And so simple...

You like the condition of the roads? The condition of the schools? The fact that police presence and fire departments are being cut? If voters weren't so happy to pass unfunded bond measures perhaps we wouldn't be in this predicament, but here we are.

taxes are high enough. spending is out of control.

Take a look at the state employees pension fund. That will show you where all the money went.

The California legislature is helping itself to an interest free loan from it's citizens.

Assuming they actually send returns, rather than IOUs, next year you will get the money back without interest.

WSJ did an editorial about it asking, "What if a company did the same thing?"

Well, they'd get bailed out by the Feds, wouldn't they.

I haven't heard anything about changes in paycheck withholdings, mine is the same. The sales tax in San Francisco is 9.5%

Flygirl, where did you read what you read? If on-line, can you post a link please?

What about those initiatives the voters pass without funding to pay for them. I think it all started with Prop 13 and went downhill from there.

>>I haven't heard anything about changes in paycheck withholdings, mine is the same.<<

It just went into effect November 1st.

http://tinyurl.com/ydrka7m

California's sales tax went up 1% in April 2009, and depending on where you live ranges from 8.25% to 9.75%.

California's income tax rates (for those required to pay taxes) range from 1% to 10.3%

Prior to Prop 13 my grandmother was literally being taxed out of her home. Her tax payments were significantly larger than her house payment had ever been while my grandfather was still alive and working.

If you compare California revenue today to pre-Prop 13, you will find the revenue is enormously larger than it was then, way more than inflation. The problem is, and will remain, a legislature that can't hold itself to any reasonable limit on spending.

If they could even keep spending growth to some semblance of sanity, they would be okay - but they can't, so they won't.

Meanwhile the legislature passes stupid laws to show how sensitive they are, ignores the laws they pass to show how sensitive they are and add cost after cost to employ anyone in the state - then they blame the evil businesses when the unemployment rate goes up.

Einstein said, "Insanity is doing the same thing over and over and expecting different results" (paraphrased from memory).

Maybe they could put a property tax on cemetary plots and tax my grandparents out of their final resting place. Somehow that seems so appropriate for a once great state.

Don't give 'em any ideas, benson!

Wow, I had no idea!

http://www.latimes.com/business/la-fi-state-tax31-2009oct31,0,2028140.story

I don't believe in refund on April 15 - if they don't have money now, they won't have them in 5 months - they will be issuing IOUs like they've been doing for some time.

DRATS!!

Oh, this is what's going on: remember Obama increased our paychecks a little? Now Schwartzenegger is taking it away!

Democrats, rejoice! Republican is robbing us

Drat's is right, Dayenu. I don't think my kids know although I would think employers would advise their employees. Well haven't talked to them today so maybe my son-in-law found out at work yesterday. But it sounds like your employer didn't tell any of you, Dayenu.

Interesting, thanks for the feedback. Why does Proposition 13 cover commercial properties too?

Why does Proposition 13 cover commercial properties too?

Why shouldn't it? If we are going to have an inter-generational income transfer for homeowners, why not the same for owners of commercial real estate?

There was a comment recently by a political pundit that "Californian's like to be taxed like libertarians and spend like socialists."

My state NJ is no better.

Dayenu, You'll be hearing from your human resources department shortly, we just got the word at work yesterday.

ET, California's income tax rates are higher than that...where did you get that informaiton?

I hate this topic and was compelled to open this thread... Arnold is the worst. Can't wait until he's out.

good quote, Ryan.

<<how about living within the state's budget>>

One problem is voters refuse to support tax increases and this has been going on for many years. Meanwhile the population of the state continues to rise, the costs due to inflation rise, state employees continue to demand raises, etc.
It's about time California's realize it's time to raise taxes to support what the people in this state demand.

but why does California stand out in this...... other states must have population rising and fluctuating. Are Californians particularly stingy or are they just fed up with a high tax rate/structure? How does the state income tax and sales tax compare with others?

A lot of it is the proposition process. Once we took control of what laws we wanted passed we passed a lot that were unfunded and so that money came out of the general fund. California also loves bonds, and for every one dollar that's borrowed, it takes two to pay back. That money also comes out of the general fund. I think that's about 60% of the problem right there. The rest is probably due to some loopholes in Prop 13 like the fact that they didn't exempt commercial buildings.

Nothing to do with taxes and I don`t live in Calif, but in Nevada. The state workers here also have mandatory days off, for the next two years, just like Calif. My grandgaughter, who is a single mom, has a low paying job and was barely making it. Now, they are so far behind in their workload, that they are working overtime on sundays! Great way to save money, huh.

>>>How does the state income tax and sales tax compare with others?<<<

KY state income tax ranges from 5.8-6.0%. Sales tax is 6% (none on food/prescriptions).

<Prior to Prop 13 my grandmother was literally being taxed out of her home. Her tax payments were significantly larger than her house payment had ever been while my grandfather was still alive and working.>

Those of you who blame and resent Prop. 13 for all our ills apparently don't realize that were it not for Prop. 13 your property taxes would be constantly escalating at the whim of Sacramento as they had been noted by Benson. I have no desire to be a bag lady and when you are retired with no pension, other than SSN, how would you expect us to keep our houses?

Giovanna, I would hope nobody is talking about repealing Prop 13, even us "young" folk benefit because we can tell going into it how much a house will cost us. But it never should have included commercial properties for starters, and there are loopholes, like I have a friend who purchased her inlaws house at market value but got grandfathered in their old tax rate. So she bought the house for close to a million but pays on only the 200K or so the inlaws had. Is that fair or what the law was intended for? It definitely could stand some tweaks.

Oh, and the reason it shouldn't include commercial properties is that many of them are owned by corporations that never die. The original intention was to protect homeowners living in a home, then when the property turns over the new owners get taxed on the value of the property when they purchased it.

<<It definitely could stand some tweaks.>>

Tweak away, just as long I can stay in my house until either it falls or I do! It's not a mansion, but it is infinitely preferable to a shopping cart.

"One problem is voters refuse to support tax increases and this has been going on for many years."

Sounds to me like the voters are telling the governmnent to live within their budget!

>>How does the state income tax and sales tax compare with others?<<

On income and sales, CA is the highest in the nation. When you factor in all other taxes, CA has the 6th highest tax burden in the nation.

http://tinyurl.com/dk238u

it's no wonder they don't want to just fork over more money.

I am on hourly pay, will know on Friday if my deductions are different. I'll let you all know.

"Sounds to me like the voters are telling the governmnent to live within their budget!"

No, what the voters tell the government is that they want you to live within the budget on things they don't like so that you can spend more on things you do like. But, they have lots of people to satisfy so the one's who live near you tell you that they are fighting for what you want and against what the other guy wants. Both said guys then go back and show how they've gotten the money for what those who vote for them like.

I have no desire to be a bag lady and when you are retired with no pension, other than SSN, how would you expect us to keep our houses?

You could sell your house, of course. I don't understand this notion that people have a right to their home if they can't otherwise afford it. Sure, I know it stretches back to the days of the Wild West and ideas that a "Man's/Woman's Home is Their Castle", but Prop 13 is nothing more than an intergenerational income transfer.

Prop 13 leads to higher home prices and higher rents. It discourages people from selling their homes and distorts the supply of housing. It discriminates against the young and minorities. From an economic point of view, it is largely inexcusable.

travelgourmet: I beg to differ.

You should look at Texas where the cost of buying a home is relatively low, but the yearly taxes are high and go higher with the taxpayer having no control over the taxes.

A lot of elderly retired in Texas are being hit with rising property taxes that they can't afford. It's a crying shame that a state will tax it's elderly citizens in this fashion.

I'd rather have a house with a large equity in it and paying lower property taxes than to have a house with a small equity in it but paying huge yearly taxes.

I'd rather have a house with a large equity in it and paying lower property taxes than to have a house with a small equity in it but paying huge yearly taxes.

Of course you would. That is because you bought your home xx years ago. But that rising equity means that it is more expensive to buy now. Prop 13 drives up prices precisely because of the disincentive it provides to sell your home and move on. It ends up reducing the supply of housing and pricing the young out of the market.

A lot of elderly retired in Texas are being hit with rising property taxes that they can't afford. It's a crying shame that a state will tax it's elderly citizens in this fashion.

I don't think it is a shame at all. Why should the elderly citizens not be taxed? Why should they be exempt from the same budgeting decisions as the working population? Why should we incentivize the elderly to hang onto their homes if they no longer suit their financial needs?

Prop 13 is distortionary and only indirectly achieves any sort of social good. The costs outweigh the benefits. If you want to help the poor with their expenses, then cut them a check. I mean, does it make sense to screw up the housing market, artificially inflate housing prices, and levy a tax on the young, just so that you can provide a massive, non-means-tested handout to the long-tenured property holder?

travelgourmet, it doesn't help to skewer facts all to one side.

Yes the cost of a house goes up (therefore the taxes under Prop 13) - but so have salaries. I'll bet you won't be content to be making the princely sum of $400 a month nowadays.

Besides which, what does rising real estate values really have to do with the way that real estate is taxed? I always thought it was "location, location, location" that gave real estate value, not "taxes, taxes, taxes".

"Prop 13 is distortionary and only indirectly achieves any sort of social good. The costs outweigh the benefits."

Nonsense (as ira would say )

The way the State of California is unable to achieve a balanced budget is not due to Prop 13 at all. Had Prop 13 not been passed, it would just have meant more money into government coffers - not that the various levels of government would be better at spending those taxes.

Prop 13 is good in that it caps property taxes. However, it also caps property taxes for hundreds of thousands of properties at 1976 values. For example we own a home that is appraised at about 2 million dollars (we live across the street from the beach). Our taxes are less than $1,000 a year because of Prop 13. As long as we don't sell our house.

Now also under Prop 13 a person who just bought the house next door will pay taxes at 1.5% on the sale value of the house. If they buy the house at $ 1 million dollars they will pay $15,000 in property taxes.

This is not really equitable.

What is even more unequitable is that corporations who bought commercial property let's say back in the 1970's and still own the land such as Robinson's or Nordstroms, or IBM, or other big corporations (notice all the shopping malls that have been around since the 1970's or 1980's in sourthern California) will not pay more than a few thousand dollars in property taxes either.



What's even worse is

What people may not know is that in California, Prop 13 caps your property at the amount you paid in taxes on the house in 1976 (or whenever prop 13 went into effect) FOREVER. Or for as long as you own the house.

This is ok - EXCEPT when you have (like I said above) corporations (Silcon Valley, Shopping Malls, corporate headqtrs) who pay literaly a couple thousand dollars a year in property taxes on large tracks of land which they lease out for millions of dollars.

This is ok - EXCEPT when you have (like I said above) corporations (Silcon Valley, Shopping Malls, corporate headqtrs) who pay literaly a couple thousand dollars a year in property taxes on large tracks of land which they lease out for millions of dollars.

See, I don't think it is OK in either case. I don't see why homeowners are any more deserving of an intergenerational income transfer than corporations.

I don't think so either travelgourmet and I agree with you.

I just think it's far worse to give the corporations who can most afford it a gigantic unfair tax break. They suck up a lot of resources and it's the newer homeowners who bear the brunt.

The argument about a little old couple on social security being taxed out of their home has some concern and merit

"Prop 13 drives up prices precisely because of the disincentive it provides to sell your home and move on."

Then perhaps Calif should do what Florida has done. THey've made this benefit portable. Your discount is determined and it goes with you to the new house. So if you're assessed at $200K less than the market value, then the same amount is deducted from the market value of the new home.

Commercial properties are exempt, and are taxed at their "highest and best use". (not a great solution for commercial, but that's a different thread)

joan, we do have something similar in California that allows someone to move and kept a tax break. It is a one time thing and I think for people over a certain age.

Believe it or not the last couple of years in California (despite the need for tax money to avoid the state going bankrupt) they have allowed property owners to prove the value of their homes have decreased and the assessor's office has lowered millions of properties' tax values.

I think this is alarming at a time when we need more tax money to keep civil service jobs in this state.

The argument about a little old couple on social security being taxed out of their home has some concern and merit

Again, Prop 13 only indirectly addresses this concern. You could just as easily provide checks or tax reductions for those that can demonstrate need, and do this on a selective basis. Prop 13 gives this discount without regard for need. The rich retiree gets the discount as much as the poor pensioner.

In general, this comes down to whether you feel that old people deserve a tax break simply because they are old. I don't.

"You could just as easily provide checks"

Great! more of the welfare state.

why should I trust someone else - especially someone in state government - to determine what my needs are when I can provide for myself? This is just going to swell an already non-productive bureaucracy.

"In general, this comes down to whether you feel that old people deserve a tax break simply because they are old."

What tax break is this? Many of these people worked all their lives and PAID California taxes all their lives. Now you want to take their homes away from them because they are no longer working? This is worst than Communism.

Great! more of the welfare state.

This is funny. I love how the middle class and wealthy want to pretend that there is a difference between tax breaks like this and a welfare check. Prop 13, Social Security, Medicare, and "welfare" all involve an income transfer from one group to another. With "welfare", at least there is some necessity that the recipient need the money. With Prop 13, one only needs to have lived in a house for a long time and SS and Medicare only require that you be old.

What tax break is this? Many of these people worked all their lives and PAID California taxes all their lives. Now you want to take their homes away from them because they are no longer working?

The tax break is the lower tax you pay because your assessed value is artificially deflated. And, no, I'm not calling for taking homes away from people (though I do think the law shouldn't discourage people from selling a home that is beyond their means, which is what Prop 13 does). You are the one that seems opposed to helping the poor, not me.

travelgourmet: you seem to think that it's OK for a state to tax homeowners so that they will lose their homes. You call that "helping the poor"?

We have a huge community of "poor" in East San Jose. They can't afford to pay your inflated tax rates. There are plenty of communities in California in the same boat. They are not the "middle class" and far from being the "wealthy".

It seems like you're the one in favor of kicking the poor and the elderly out of their homes by raising their taxes to an unsupportable level.

easytraveler: Actually, I just don't think that one should get a tax break (=income transfer) simply because they have lived in a house for a while. This is what Prop 13 does. It makes no distinction between rich and poor, and helps those with means as much as those without. I have no problem with social assistance to those that need it.

If your objective is to help the poor, then help the poor. Provide the poor subsidies or tax breaks. To provide subsidies simply because of one's length of residence is stupid and distortional. Prop 13 increases the cost of housing (and the relative tax burden) on the poor that happen to have less tenure in their home or that rent. I have a hard time believing that the poor that benefit from it outnumber the poor that are hurt by it. All the while, the wealthy and middle class reap substantial benefits.

Claiming that Prop 13 helps "the poor" is, disingenuous, at best. It might help some poor folks, but that is not its intent and it certainly isn't the actual result. This was always a tax break for the middle and upper class and this has only become more the case as housing prices skyrocketed.

Nanabee, do you really think that those whose homes are today worth half of what they were worth two years ago should pay the same property taxes?

"To provide subsidies simply because of one's length of residence"

This is NOT based on length of residence, it is based on length of OWNERSHIP.

First you say:
"This is what Prop 13 does. It makes no distinction between rich and poor, and helps those with means as much as those without."

Then you contradict yourself and say "This was always a tax break for the middle and upper class"

It's not just a tax break for the middle and upper class. It's a "tax break" for ALL homeowners, rich or poor, upper class or lower class.

I am against having the government collect any more money, given the poor record it has of showing good money management of what existing taxes it already collects.

Nanabee, have you signed up with Close the Loophole?
http://closetheloophole.com/

It's not just a tax break for the middle and upper class. It's a "tax break" for ALL homeowners, rich or poor, upper class or lower class.

Yeah, because we all know that the rich and middle class aren't disproportionately represented as homeowners. There is no contradiction. But, you are right, I should have said that it helps those with means FAR MORE than those without, as that is more accurate.

I am against having the government collect any more money, given the poor record it has of showing good money management of what existing taxes it already collects.

Yeah... That's it. Look, everyone hates paying taxes. I get that, but there is a right and a wrong way to tax. Prop 13 is just about the most wrong way there is, since it distorts the free market. I could care less if the total tax burden rises or falls, but Prop 13 won't change your total tax burden. At best, it redistributes the tax burden among the various taxes - sales, property, income, etc.

<<You could sell your house, of course. I don't understand this notion that people have a right to their home if they can't otherwise afford it. Sure, I know it stretches back to the days of the Wild West and ideas that a "Man's/Woman's Home is Their Castle", but Prop 13 is nothing more than an intergenerational income transfer.>>

How assured you are with your theories and how dispassionate. Do you think you'll never grow old? Yes, we could sell our house and then what? We can "afford" our house, we just can't afford year after year of property tax increases because our county or Sacramento wants more money. The precise reasons Prop. 13 originated. It was a never ending spiral. It's a shame you don't feel those of us who have worked all our lives, paid taxes all those years, do not deserve a break.

>>Prop 13 leads to higher home prices and higher rents.<<

Prop 13 has at best a minor effect on home prices, which are really based on supply and demand. Moreover, the housing turnover rate in CA isn't much different than the national average, even with Prop 13.

>>It discriminates against the young and minorities.<<

But it has greatly benefited homeowners whose homes have appreciated in value since it was passed. Property taxes are highly regressive, particularly affecting those (such as the elderly) whose incomes have not risen as fast as property values.

travelgourmet: I know what the idiot legislators in Sacramento are doing. They are casting a covetous eye on the money that Californians work very hard to earn. They want to claim that the state government is entitled to more of that hard-earned money and that Prop 13 is some kind of subsidy, etc. and therefore shouldn't exist in its current form.

I say they should clean up their spending act first.

California's lawmakers make $110880.00 a year for working from January to September or about 8 months in a year and they also "get money to lease a car and $138 in per diem when the Legislature is in session. Lawmakers also get $400 a month in car allowance."

($138 a day comes out to be $4,410.00 if the legislature is in session all 30 days in a month. This means an additional $25K-32K a year).

"Lawmakers' salaries vary widely, but California clearly offers the top pay.

Alabama pays its legislators $3,650 per year, for example, according to numbers provided by the National Conference of State Legislatures. New York and Michigan pay their lawmakers more than $79,000.

New Mexico pays its lawmakers no salary; instead they get $146 per day when they meet."

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2005/05/24/BAGTFCTOKG1.DTL

Then there are all the other perks, like getting an office in Sacramento and getting a budget for "staff" to help them.


Meanwhile, back at the farm, these same legislators approve some pretty drastic cuts plus RAIDING LOCAL GOVERNMENTS' BUDGETS:

"Lawmakers on Friday approved a complex package of spending cuts, accounting maneuvers and raids on local government coffers to fill California's gigantic budget deficit..."

http://www.cbsnews.com/stories/2009/07/24/national/main5186859.shtml

I say they should cut back their own salaries (maybe to the level of an Alabama legislator's pay? ), cut back their own big spender habits before they cast covetous eyes on what more monies can be squeezed out of property owners.

travelgourmet, you are ignoring the fact that prices didn't just rise, they skyrocketed. I think it's reasonable that when people decide to make a major purchase like a house they should be able to figure out how much it's going to cost them moving forward. If you budget and buy a house at $350K, and then the value of that house rises to $1 million (and yes, this is what happened from 1996 to 2005) but your income doesn't rise enough to pay your taxes on it, you should just say oh well, sell your house and do what exactly? You couldn't even buy your own house again. And this is your idea of fair?

I have neighbors in utah who have a really hard time paying their property taxes and keeping the home they have worked hard to stay in for the past 20+ years. They have 9 kids and are always living on the edge of losing their home. They sure wish they had Prop 13.

I have to wonder, even a little, if the taxes really did jump that much if it would have helped rein in the runaway housing costs... if no one can afford it eventually the demand is reduced and the prices come back down. But, I'm not an economist!

And flygirl, the pain along the way.... Also think about what it would do to neighborhoods, right now you have some variation in income because some people who make less bought earlier. If people had to move because they couldn't afford taxes, you'd have some really rich neighborhoods and the poor ones (or places like Tracy) where all of the rest of us had to go.