[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.