[gangstead]

Seniors do get a slight property tax discount here in Texas. Still I suppose it does encourage people to downsize when they are empty nesters and no longer need to house a big family. In California you get the opposite problem where people can't afford to move as their needs change since their property tax would no longer be kept low.

[Domenic_S]

There is an exception in CA (it's complicated and only good in some counties) where an older person can transfer their tax basis, once, to a new house for precisely this situation.

Once again young people get the shaft in CA though.

[telotortium]

The exceptions are easier to get now with the passage of Prop 19 this year. The summary on Ballotpedia (https://ballotpedia.org/California_Proposition_19,_Property_...) is pretty good:

- allow eligible homeowners to transfer their tax assessments anywhere within the state and allow tax assessments to be transferred to a more expensive home with an upward adjustment;

- increase the number of times that persons over 55 years old or with severe disabilities can transfer their tax assessments from one to three;

- require that inherited homes that are not used as principal residences, such as second homes or rentals, be reassessed at market value when transferred; and

- allocate additional revenue or net savings resulting from the ballot measure to wildfire agencies and counties.

[giantg2]

Seems like a convoluted system to tax people based on property while still making it means based. What was the reasoning they gave for not just using an income based system, which should more implicitly align with one's means?

[Domenic_S]

Makes gaming the system harder. Once you're rich enough you could only take compensation every other (3rd/5th/etc) year and pay property tax only then. Unlike compensation once the property tax year's gone it's gone, there's no deferring situation (eg, vis a vis deferring comp where the big chunk in later years would still be taxed)

It's not an unusual situation in urban CA for an elderly person to have bought a house currently worth many millions back in the day for <$100k. Downsizing for them means still spending many hundreds of thousands of dollars, far beyond the tax basis of their current home. I think the current system encourages (or at least doesn't disincentivize) older folks with expensive homes to sell and downsize, meaning the tax basis for that same home will increase a whole bunch for the new buyer (since tax basis is recast as the purchase price when sold), ultimately driving more tax revenue.

[giantg2]

"Once you're rich enough..."

Which means you had to recieve that money at some point and it would have been taxed.

I'm sure rich people can avoid or find a way to deduct property taxes anyways. For example, setting up an anonymous Wyoming LLC or some form of trust.

It sounds like the system you are describing for the elderly is specific to CA.

[njarboe]

Most problems and gaming of the tax system comes down to the fact that people are taxed on income and businesses are taxed on profit. Maybe we should tax businesses on income also, but that would be a very different world. Might as well make income taxes illegal and implement a national land tax.

[giantg2]

Yeah, PA gives a small discount too.

It depends on how far someone is willing to downsize. Many 1500sqft single homes in that region are paying about $8k-9k per year in property tax. I guess you could cut that in half if you live in a row home of about 900 sqft. That can be a big lifestyle change depending on one's hobbies (gardening, keeping a classic car, beekeeping, etc may require more space). Not to mention $4k-5k could still be around or over 10% of a retired persons income, or even working families too (Philadelphia has the highest rate of extreme poverty of any city in the US measured as families of 4 making <$12k per year).