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I think a lot of changes in the state finances resulted from prop 13. There’s a great podcast interview series with Jerry Brown where he talks about the passage, and the chaos that ensued, worth a listen.

Prop 13 happened in 1978 after thousands of senior Californians became homeless after retirement. It was meant to protect tax paying Californians from being evicted from homes.

xrikcus 1625 days ago

The problem is that because of the tax burden shift, the cost of keeping those people in their homes is paid by people who are trying to buy homes. It's a form of redistribution to people who already have assets from people who have income and are trying to build assets. It keeps people in their homes, in some cases it traps people in their homes, but at significant cost to other people.

NoRagrets 1625 days ago

That’s not true. Nobody is ‘keeping’ seniors afloat. They do pay taxes. Unless a sale is made, there is no profit. Property tax is an ad valorem tax. It’s just like unrealized gains. If you haven’t vested your stocks, should you be paying taxes on them?

It’s like everyone asking Elon musk to pay ‘his fair share’ because Tesla is doing well and his money is just a number.

Those who are trying to buy homes are not finding homes. I agree. It’s very easy to solve in a free market. Pay more. Seniors are not a burden to the infrastructure and utilities.

Instead of wanting to sip champagne on a beer budget, perhaps those who want to buy need to evaluate their wallets and purchasing power. And if their quality of life is wanting, the people who need to be questioned are our public servants. Demand that they SERVE the public. Not developers and the only ones being supported here are the public servants with developers colluding with them.

My grandmother bought a Diamond ring for 1000 bucks. If it’s worth a million now, it’s not her fault and she shouldn’t be penalized. It doesn’t cost anyone anything if she refuses to sell the Diamond.

It costs people nothing to NOT covet what’s not theirs..

Sure, and it was terribly designed if the sole purpose was to save seniors on fixed incomes from losing their homes. And anyway, that’s beside the point of it messing up the state’s finances, isn’t it?

It was fairly designed. The alternative is to kick people out right after they finish paying their mortgages and have retired. Is that what you’d call a good design?

That’s precisely the point about the state’s finances. You have to go back to Gov.Gray Davis disastrous handling of the state pension funds that has led to staggering unfunded pension liabilities.

[..] The California Pension system is way under water and in dire need of reform. The state's unfunded pension and retirement liabilities approach $1 trillion, or roughly $80,000 for each taxpayer in the state.[..]

From 2016: https://www.latimes.com/projects/la-me-pension-unfunded/ : Understanding California's public pension debt

2018: https://amp.sacbee.com/opinion/editorials/article199693069.h... : The pension nightmare for California’s cities is getting scarier

There was a whole investigative piece done in 2015-16. Search for Gov.Gray Davis + ‘unfunded pension liabilities’ + California

It’s been downhill for a while and mostly because the wealth creators are not even eligible to vote in California. Ask the right questions to get the right answers..that’s my guiding principle. Otherwise, everything is just noise.

Nope, that wasn’t the only alternative. If it was really meant for seniors, they should’ve made it age-based, and they should’ve set reasonable limits - the yearly tax exemption should’ve been set at a 1 bedroom condo level, with them paying whatever the excess is. This would’ve encouraged the behavior many seniors in other places engage in - downsizing when their kids leave home, to allow family-sized housing stock to open up for people with growing families.

And they certainly shouldn’t have made the tax exemption inheritable. And it shouldn’t apply to corporations.

As it’s designed, the whole “don’t let seniors lose their homes” argument is pretty obviously just political cover for a pretty egregious wealth transfer scheme.

No argument about the pension liability problem, CA’s governance issues are a big reason we decided not to put down roots long term. Prop 13 is one of the bigger examples of that, in our minds.

I agree. Wealth transfer should be considered as income and should be taxed moderately. There is no legal reason for kicking out seniors out of their homes from which the unrealized gains haven’t been harvested.

The truth is that most people don’t want to downsize. Why should anyone work 40-60 hours a week and pay a mortgage for most of their working adult life and taxes only to live in a condo when they have paid their dues and want to enjoy their retirement.

Should we be dictating to seniors that they deserve no more than a one bedroom condo just because they got older? Is that what you are suggesting?

That’s akin to discarding people and kicking them out of their homes. I don’t know any culture or country that would even suggest this except here in the United States. It’s actually truly appalling to me.

[0] https://www.pewtrusts.org/en/research-and-analysis/issue-bri...

dragonwriter 1625 days ago

> The alternative is to kick people out right after they finish paying their mortgages and have retired.

False dichotomy much? If there was actually a problem with that happening under the preexisting tax policy (there wasn’t, really, on any significant scale, and if there had been there would be less now just from the improvement in the range of financial vehicles to let people access equity in their home, which is the source of the supposed risk) it would have been easy to solve it without either:

(1) Prop 13’s low fixed nominal property rate for all property (not limited to owner-occupied residential, or even residential property), or

(2) Prop 13’s limit on assessment increases without sale or other qualifying event on all property (not limited to owner-occupied residential, or even residential property), or

(3) Prop 13’s requirement for a 2/3 vote of the state legislature on any bill that includes an increase of any non-property taxes (even if it was a revenue neutral or negative shift), or

(4) Prop 13’s requirement that special local taxes be referred to public ballot with a 2/3 vote of the electors required to pass.

How? Simply by adopting an income-based limit on property taxes on an owner-occupied primary residence.

> You have to go back to Gov.Gray Davis disastrous handling of the state pension funds that has led to staggering unfunded pension liabilities.

California public pension funding has been improving and is around the national average funding ration (71.9% in 2019 vs. 71.3% nationally.) [0]

> The California Pension system is way under water and in dire need of reform. The state’s unfunded pension and retirement liabilities approach $1 trillion

They don’t and never have (even the source you directly cite claims only $241 billion at the time, which is very much not approaching $1 trillion); more recently the total liabilities are around 2/3 of that $1 trillion claim ($660 billion), and the unfunded share less than 1/5 of that ($185 billion). [0]

I refuse to get into prop 13 debate with you. I am sorry but I didn’t read your reply. I don’t think taxing unrealized gains is fair. I am saving us both time and bandwidth by not engaging with you on this. Thanks.

dragonwriter 1625 days ago

> Sure, and it was terribly designed if the sole purpose was to save seniors on fixed incomes from losing their homes.

That was not the purpose.

The purpose was to starve state and local government in California of revenue; while it long predates Grover Norquist’s famous statement about getting government “down to the size where we can drown it in the bathtub”, it was pushed by people with similar ideology.

(It’s true that the specter of pushing people out of their homes with property taxes was used to sell it, but it was very much not focussed on that in its design or intent.)

Yeah, that’s the same conclusion I’ve drawn.