Arnold's new property tax

Good morning. Disinclined as I am to wade into state politics, this one is teed up like a Titleist: The governor's proposed "surcharge" on property insurance premiums is more accurately described as a tax increase.  That doesn't make it a bad thing. That makes it a tax increase.

I know, I know, I hear a couple of you saying, "Wait a minute, there are important differences between taxes and fees and surcharges.  There are important legal differences..." And then your lips keep moving but the rest of what you say sounds like "Blah, blah, blah," because I am not listening.

It's a tax increase.

A while back I made a critical comment about Prop. 13, and nearly got my fingers chopped off in the comments. So today I'll let David Lazarus do the talking, and his fingers take the chopping.Today he writes, "Rethinking Proposition 13 wouldn't be easy. But it would be right."

Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Photo credit: Gov. Schwarzenegger (left), with Tony Beard, Sergeant-at-Arms for the state Senate, from L.A. Times

Comments

[Ed]

This is the tip of the iceberg. Wait for it...........

We have two vehicles, two houses (including one out of state, with h.o. + flood insurance on the one here), as well as a boat in another state. All of our insurance business will be transferred to the other state this spring, including both houses, both vehicles and our legal residency as well.

Your move, Gov.

[sunsetbeachguy]

The bubble blogs, particularly The Housing Bubble Blog has beaten Prop 13 to death.

I will save all of you from having to wade through those tedious archives.

Prop 13 is great but has a few too many HUGE loopholes.

Many commercial properties were shunted into LLC's and rather than trading the deed and getting re-assessed at each sale, they trade the LLC's ownership. This has resulted in many commercial buildings having never been re-assessed despite having been bought and sold numerous times.

Plug that loophole, so that any change in beneficial ownership results in a re-assessment for all properties in the state per the law's intent.

Re-visit the % allocated of property tax revenue from 30 years ago. There are donor counties and freeloader counties re-align with the distribution of the population today.

If they really wanted to get punitive make Prop 13 only apply to owner occupied property (require proof), since not throwing Gramdma Millie out of her home was the ostensible pretense for Prop 13.

[mike]

i believe that article said $10.00 per $1000.00 of insurance and that would translate into $125m. i didn't understand. is that $125m per year and also i don't know how much property insurance is carried in the state but $125m sounds like an awful small amount. how much insurance is carried in the state. i bet this will apply to homeowners only and not commercial property owners. typically i don't like taxes but i think the state is in a situation in which we all need to ban together. i like living in cal. i would be homeless here as opposed to living elsewhere. i believe that some kind of tax will be unavoidable this time.

[mike]

this one isn't about prop 13

[amir]

Prop 13 is a statist tax scheme, encouraging people to stay put and never move, never sell. It's harmful to the economy and unfair. Infrastructure such as police, roads, schools and fire department should cost based on the current value of a house, not past value. It's an anti progressive tax, letting rich homeowners pay little, while working families carry the burden.

In a broader sense Prop 13 is part of the system of taxing the working young to pay for the older retired (social security, medicare). Within this decade there will be a revolution to change it.

If you think California is in trouble, you should read the US government controller report to see how medicare/caid and social security will eat up most of the entire federal budget in 20 years time.

[Victor the Predictor]

I hate debt. Especially the debt that stems from overspending. Many smart people think it's good though.

But, another ray of hope. i just heard Ajit Jain, Warren Buffet's insurance guy, on cnbc talking about how they are talking to companies like MBIA in regard to partnering or buying them out (In addition to addition to getting their own bond insurer approved today, at the request of the New York insurance commissioner. He actually approached Berk. Hath. to do this)

So what does that mean? Maybe we can keep our beloved prop. 13? Maybe we can pay less taxes? Why? Because muni bonds would be much less expensive for us. Sell them to Dubai to finance our infrastructure!

[CD]

That 's it. That's the nail on the coffin. Earthquake, flood, crimes,fires, no schools, bad roads,traffic and now more taxes to get more of nothing. Are we crazy to live here or what ? That's my exit signal I think. What Happened to all the money that was exchanged during the boom years, all LLC ....We are fools to live here. I am done.

[jaded]

California does not deserve another penny of my money because:

in the first place, California exercises ZERO fiscal responsibility. The state spends recklessly, plans for endless boom times, and can turn a $10 windfall into a $30 debt--and then cry budget gap.

in the second place, if you give the state $5 in taxes for a specific, stated purpose (i.e. the gas tax), the legislature will quietly steal $4.50 of it for the general fund while Arnold looks the other way.

Arnold will pretend that this new tax is all about better equipping firefighting efforts, but really it's about adding new revenue that can slip and slide its way into whatever black hole needs filling.

No way to this one.

[mike]

peter: if you want a good comment reaction on this blog just write "prop 13 "and let the people comment. you don't need to write a blog at all.

[RadioManTodd]

Prop 13 is archane. And we're gonna see how prop 13 fails us here in a couple years, as property values decline, state and local governments decline, forcing a tightening of the belts, meaning police and fire suffer cuts, roads and highways suffer cuts, and because of all that... your property value goes down even further.

I don't have a solution... but I can recognize a problem.

[Jay]

The people of California have no clue. I am a born native and have watched the inner decay since the Reagan years. This was once the envy of the world. The liberal strangle hold on Sacramento has taken the state down to a 3rd rate hostel.

Arnold has sold out. Simple. I voted for him the first time and not the second. He abused his power. More bonds, more borrowing and some irrational belief he would take in even more tax revenue to make up the shortfalls. WRONG!

Listening to the take over California crowd run by Fabien Numbnutz has turn us into a rob Peter to pay Juan society. This is class warfare now at its worse. The employers, business and citizens are in flight mode and what will remain is basically another country. Thank You Lost Angeles and San Frickincisco you idiots.

[TakeFive]

The California legislature has shown they are pathalogically unable to control spending. This is at a lever worse than any drug addiction. Can you imagine if they were allowed to raise our property taxes every time they needed a fix?

How many billions in bonds did they float to clean up the last mess? And when the money started flowing again, did they save any? Did they pay off any debt and save some money one interest payments?

No. Instead we got the state floating billions more in bonds for research so it can meddle in the stem cell debate. We've got proposals to fund healthcare for everyone with no clear way to pay for it.

Nope, it's time for this state to begin to face reality.

[Jay]

Unfortunately "reality" in Californication is stick it to the taxpayer...... worse state tax system, worse business enviroment, highest debt owed to public workers state wide for decades ahead, worse use of money for failing school systems... I'm telling you, TOM McCLINTOCK had all the answers nailed to the fiscal "T"...... shame on you California.

[Joe]

Amir - Your thinking is so flawed, it's scary. All those phony arguments have been tried before. Read the rest of these blogs and get a clue. I could parse your statement, but I can see that it's pointless to try and teach you some logic.

[Tombstone Realty]

Avoiding the whole tax-no it isn't argument....

I'm wondering if the ......"surcharge".... might be enough to cause more homeowners already on the brink to throw in the Title (groan), and walk away? Are the banks who own foreclosed properties on the hook for this charge if they are owners at time of assessment?

Irregardless of whether or not raising taxes is a good or bad thing, surely tying the expectation of "X" amount of dollars on a declining asset is kinda dumb, no?

[MyLessThanPrimeBeef]

Why should we worry? The affluent foreigners are going to rescue us by buying up everything in this country, which, and I just checked, includes California. Let them worry about paying all the taxes.

[MyLessThanPrimeBeef]

Amir, Mr. Buffet will tell you himself that long term investors should be rewarded, just look it the untaxed compound rates of return on his very long term investments.

So, if you want to encourage long term investing, what's wrong with the long term investors paying less in property tax, in addition to having a lower long term capital gains tax as well?

[Jenna]

Not saying I support an increase, but the characterizations of the state legislature as spend crazy people is not entirely fair. One of the hugest parts of the state budget now is health care. As we all know healthcare costs have ballooned and don't show any sign of stopping. That is part of the reason why the state keeps spending and spending. Until they can reign in costs, they are stuck.

Aside from health care the state also spends an enormous amount on education and prisons. And while it is certainly an option to just stop spending, the consequence will be that some children will have a substandard education, we will have to stop locking up more people, poor people can't get wheelchairs, etc. We are definitely at a crossroads. What are we willing to pay for?

You can check out the following for a budget breakdown http://www.ebudget.ca.gov/agencies.html

[Westside Bubble]

A simple solution: Assess all properties at 1% of CURRENT market value. But allow homeowners to defer the difference between taxes based on purchase price and current value until the property is sold.

[sheila]

it seems to me that "gains on paper" should not be taxed, since they are erratic and fleeting (see recent boom and pending bust).

an actual, modest "capital gains" type tax once appreciation is REALIZED (via sale or transfer) makes the most sense, with a minimum threshold of some sort (i think the federal one is $500,000).

and i agree with the commercial properties/LLC scam. start there. then cut out all the pork these guys are giving their corporate donors. the money and perqs these guys scoop up (arnie and fabian are equally guilty) is disgusting.

[Mad as hell and not going to take it any more]

What kind of private property is it that you have to pay tribute every year to the government to keep? California is doomed. The insane tyrants in Sacramento will take and take until there is no more and then borrow on your future. Oh sorry, they've already done that. I was right, we are doomed.

Maybe it's time for a revolution?

[Jay]

Why are the citizens in the dark about almost everything....... This state spends more on nonsense than any other state. Your argument Jenna is weak and you are full of misinformation. Healthcare costs ballooned because of ILLEGAL care. SImple, fact. Prisons are ballooned with illegal criminals. Spending more money on a failed school system is ludicrous, my father reminds me every time this bull argument is thrown out there that they were educated in temporary tents during WW!! costing about.... NOTHING! Its the system not the money. If you want to keep crying about more moeny go ahead but when the earners, business and employers all leave I hope you have enough cash to bail out who is left.....

[Enlightenment]

How about adding a special fire property tax on houses located in higher-risk fire areas?

Same goes for houses close to the ocean and lower flood-prone areas, should have a tsunami / flood tax on those houses.

I don't have a problem with you living in any location, but don't increase my taxes / fees to support people living in risky areas. They take on more risk, thus should pay more.

[Doug]

Prop 13 is an excellent example of tax inequality based on seniority. There is no reason new property owners should be ask to bear the brunt of the tax burden since their neighbor of 25 years gets a pass. Its time we had a balanced budget amendment to rectify the entire tax code and state budget since our lawmakers do not have the courage to do it themselves.

http://www.up2daterealestate.com/2008/01/02/
is-proposition-13-unfair/

[amir]

"Amir, Mr. Buffet will tell you himself that long term investors should be rewarded, just look it the untaxed compound rates of return on his very long term investments.

So, if you want to encourage long term investing, what's wrong with the long term investors paying less in property tax, in addition to having a lower long term capital gains tax as well?"

Posted by: MyLessThanPrimeBeef

Long term investors make money because of the rise in the value of the asset, especially if they choose the right asset and don't overpay. They also make money because they don't lose to transactional costs. These factors are not about the state making it cheaper to hold on to assets that require maintenance and supporting infrastructure. Without a police force, roads, schools and firemen, real estate is worthless, yet the costs aren't distributed fairly.

Actually, from a basic economic stand point, one of the reasons America surpassed Europe in economic development is that the American work force is ready to move to where the jobs are. This has lead to a much greater efficiency, innovation and growth. Prop 13 stymies that advantage, that is why I called it statist.

If you really want to prevent people from losing their homes because of high property taxes, prop 13 should only exist for homeowners that live in the asset, and limited to a lower tax bracket.

Obviously, how to tax fairly has nothing to do with the state overspending our tax dollars.