[twblalock]

Maybe the solution is to stop making property tax the main way that cities are funded.

Among other things, this method of taxation tightly couples school funding to local home values. Areas with expensive homes have the best schools. (And areas with cheap homes have bad schools, which is not really what you want if you are trying to do something about inter-generational poverty.) This is self-reinforcing because now parents compete with each other to buy homes that are located in the best school districts, which drives up prices even more.

When home values drop, such as they did in 2008, property tax revenue drops too (Prop 13 is not a one-way ratchet, you can get re-appraised and lower your taxes, and 2008-2009 was a pretty convenient time to do that).

It doesn't seem like a good idea to base city revenue on something that is so undependable, especially something that is so often treated as a speculative investment.

What I would rather do is come up with a system where a simple tax is paid per parcel, perhaps a flat tax or one based on the size of the parcel, and which is not based on the market value of the parcel.

The rest of city funding can be covered by income tax -- unlike the current system, at least that has a chance of being progressive. No old people will be priced out of their homes by tax increases, and school funding would be distributed somewhat more evenly because not all high earners live in the most expensive areas. And if you are worried about an influx of high earners flooding into your area and driving up the prices, a local income tax would certainly discourage them.

[babesh]

This comment is wrong on a fundamental basis.

Richer areas get less state funding than poorer school districts. These districts have to scramble to just narrow the gap rather than have more funding.

The richer areas have higher scoring schools because wealth correlates with school scores probably due to a combination of natural ability and a more conducive parental and community environment (all multiplicative and compounding over time]. A change in taxes does not affect this one iota.

There are already flat rates paid per parcel in many cities.

There are age over 55 exemptions for certain parcel taxes to raise money for schools.

An income tax per parcel does not scale. How do you tax rentals? Who pays the tax for rentals? What if you want to own multiple homes? What if you are buying a house for your parents to live in?

[thaumasiotes]

> The richer areas have higher scoring schools because wealth correlates with school scores probably due to a combination of natural ability and a more conducive parental and community environment

True enough.

> Richer areas get less state funding than poorer school districts.

Also true.

> These districts have to scramble to just narrow the gap rather than have more funding.

The necessity of narrowing the gap is not at all obvious; as you point out, test scores correlate with local wealth. But test scores also correlate with per-pupil spending -- and that correlation is (1) small; and (2) negative. This is easy to explain with the model "poor students attract spending", but you also need the coda "...and it doesn't accomplish much".

[babesh]

They need enough to pay for teachers, administrators, facilities, and the supplemental education that better off folks love: debate, music, sports, speech therapy, early reading help, etc... That extra money has very high return.

[twblalock]

> An income tax per parcel does not scale. How do you tax rentals? Who pays the tax? What if you want to own multiple homes?

I was not proposing an income tax per parcel, I was proposing a flat tax per parcel and also an income tax on everyone who lives in the city.

Parcel taxes should be paid by the owner of the parcel. Income taxes should be paid by the earner of the income. It's not hard to deal with.

[babesh]

There are already flat taxes per parcel.

So you are taxing an owner of a rental on their total income rather than the income they earn on the property?

[babesh]

What if a corporation owns the property? If you do this, I would transfer the property to a corporation and then rent it back to myself for a $1 a year. The corporation would have only $1 of income per year.

This is so badly thought out.

[twblalock]

No, I'm proposing taxing city residents on their income regardless of whether they own or rent. If the owner of the parcel doesn't live in the city then he wouldn't pay a dime of income tax to the city -- he would pay the parcel tax to the city where the parcel is located, and he would pay income tax wherever he lives.

[babesh]

Time for the international buyers to buy housing en masse, rent it out, and not pay your income tax. The renters would be stuck paying the income tax and the international buyers would just pay the parcel tax. So renters would be stuck paying for rent and an additional income tax for renting. Hahahahaha.

[twblalock]

That's fine, they will pay the parcel tax and their tenants will pay income tax.

It seems wrong to me to make someone pay tax where they do not live. It's not like the owners of rental homes are the people who use the city services -- the people who live in the homes do, and they should pay for them.

[babesh]

Another hack. Claim residency in another state or country. Voila your personal income tax for the property disappears and you can live in the home for one day less than six months out of the year. This proposal would be a vacation home rebate. In fact, just keep buying vacation homes. The people stuck living there year round would be screwed.

Another hack. Buy the biggest parcel you can find. Then you can build a huge home and pay the same taxes as the 800 square foot bungalow. Build a bunch of huge vacation homes. The help have to pay for the services. You don’t.

Yet another hack. Build a house and rent it out on AirBnB. That way you only pay the parcel tax and NO ONE pays the income tax. Genius. It’s a discount to run an AirBnB. Better raise the hotel tax to compensate.

[seiferteric]

Pretty sure that won't work. CA is famous for vigorously going after people trying to doge taxes like this, and the rules for residency/part year residency are pretty stringent for what taxes you will owe.

[toast0]

In California, cities are totally independent of school districts (except in that San Francisco is a combined county and city and its city counsil and mayor are also its county board of supervisors, and county boards and the state school board both supervise school districts).

School district funding in most districts is property taxes supplimented with state funds to a specific level per student. There are a small number of school districts that have property tax revenues above that, but most don't. IIRC, in the sf bay area, Santa Clara, one of the Palo Alto districts, and maybe one or two others are not getting state funds, but I think Cupertino is on the state funding schedule, and is well regarded.

Only the hardest hit counties like Fresno saw property tax decrease in the 2008 time frame. Although market values dropped, many properties were still below their capped assesment, and so their taxes would increase either by the yearly cap or because they were sold and triggered a fresh assessment. I don't know about other counties, but Santa Clara's assessor did assess down automatically; but the tax rolls still increased. So in that way, it's a lot more dependable than an income tax.

[bradlys]

> It doesn't seem like a good idea to base city revenue on something that is so undependable, especially something that is so often treated as a speculative investment.

Isn't property tax a pretty reliable source of income?? I thought the income tax was an unreliable source of income because people can't always be relied on to generate income... but they do tend to pay their property tax.

[lambdaops]

Wealth should definitely be taxed, especially land wealth. It's super easy to hide money in land wealth if you don't tax it. We need land to go to the highest best use for cities. Otherwise you end up with terrible strip malls, low density housing, and traffic everywhere.

Whoops, I just described Santa Clara County. And LA.