| > california was crushed in the housing bubble and prop 13 makes revenue collection even more inflexible. Actually, prop 13 is the only reason most CA cities aren't declaring bankruptcy. Prop 13 has two relevant provisions - a cap on property tax rates and a cap on the rate of growth of the taxable basis w/o a change of ownership or new construction. (IIRC, most/all bay area cites are at the cap.) When you buy a house, you know the most that you'll pay in taxes going forward. When housing prices boom, Prop 13 means that tax revenues don't boom. It also means that when housing prices crash, tax revenues don't crash. Yes, the taxes paid by folks who bought near the peak will drop with housing prices. However, the taxes paid by folks who bought long before the peak are continuing to grow because their taxable basis lags the market. Prop 13 was passed in reaction to a previous boom - property taxes were going up 10-20% a year because that's what housing prices were doing. CA govts don't cut rates and they don't cut revenues either. If CA cities/counties had been able to grow their tax revenues in proportion to the property values, do you really think that they'd be willing to let their revenues drop with property values? Of course not - they'd increase the tax rates. |