Report: Prop 13 deeply flawed
It's been 30 years since California passed Proposition 13 to cap property tax assessments, sparking a nationwide trend. A local think tank has taken a look at what's happened since, and concludes that Prop 13-style laws aren't a good idea.
The Lincoln Institute of Land Policy says Prop 13-style laws are "deeply flawed" and can actually result in property tax increases for some homeowners.
Here's how: if the tax rate increases, even while the assessment is capped, or if the market value of homes is reset when homeowners move, the bill can go up.
The report by the Lincoln Institute of Land Policy notes that the Prop 13-style limits can mean similar homes wind up with starkly different property tax bills. A copy of the report can be found here.
In a press release, the Lincoln Institute said: "An assessment limit benefits homeowners in neighborhoods with fast-growing values, but does little for those where values are stagnant or declining. Reduced assessments are no guarantee of lower bills if rates increase to make up for the diminished tax base."
“Severing the connection between property values and property taxes creates a new set of problems,” said Joan Youngman, senior fellow and chair of the Department of Valuation and Taxation at the Lincoln Institute. “It can result in different tax bills for identical homes. Families may be reluctant to move – even if they need more space or would like to be closer to work – if a tax based on acquisition value will rise dramatically with a change of ownership. And it undermines the transparency and accountability of the property tax system as a whole.”
The authors recommended other tax relief measures, including "circuit breaker programs" that tie taxes to the homeowner's ability to pay.
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A far better choice than circuit breakers is another suggestion that the Lincoln study made: the option to defer, with modest interest, some portion of the property tax, as a lien against the property.
This avoids burdening one's neighbors, who may also be struggling to meet their bills, and avoids the need for expensive reverse mortgages, which mostly profit the financial sector of our economy.
You might google "poor widow argument" for more about this option.
Ah, so the Lincoln Institute doesn't like property tax limits. I attended a briefing in the early '80s: its primary focus is to change the methodology for assessments, assessing property at its "potential" value not its present market value. They talk about taxing vacant or depressed areas at their potential in order to encourage improvement and development. Sounds good, until you ask, as I did, if my little Marblehead cottage would be assessed and taxed as a potential McMansion and the answer was yes. So my answer was "Bad idea". And this was before the Kelo decision! when eminent domain was validated as a way to take homes from people who weren't "maximizing" their value, and given to developers.
Barbara Anderson championed Proposition 2˝, which cut property taxes without distorting the market-value tax base. This report advocates property taxes based on market values and deals with the problems that arise when the link between property values and property taxes is broken: shifts in tax liabilities, different taxes for owners of identical property, and a reduction in the transparency and accountability of the tax system.
Excellent idea! Eliminate property tax limits, increase the property tax to 5% per year, and put a lien on the house for unpaid taxes. Result: the State of Taxachusetts (politicians) owns all real estate in the state within 20 years and the homeowners can then also pay rent, creating a people's democratic republic like North Korea. What other planks of the Communist Manifesto are left undone in Taxachusetts? Force homeowners into agricultural and industrial armies to work off their yearly tax debts to the Politburo in Boston?
This blogger might want to review your comment before posting it.
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