...
And no, I'm not in favor of retired people losing their homes over property taxes. I already mentioned the programs we have in Washington to prevent this. The key difference from California is in Washington these programs are narrowly targeted at folks whose income is on the low side, folks who might reasonably be expected to have a hard time paying their tax. It's not a blanket giveaway to everyone rich or poor who has lived in the state for a while, at the expense of those who have come in more recently and almost certainly have much higher housing expenses even before they're required to pay half of their neighbor's tax.
+1. Prop 13 is a horribly regressive policy that is bad for California and Californians. And with how big of a deal California's economy is for the whole US, it's a bad deal for the country as well. We should all be outraged about it. Prop 13 may solve the "little old lady forced out of her home" problem, but at ENORMOUS cost. There are less costly ways to solve the problem.
---
In an ideal world, we would tax land value instead of property value, and zoning would be much less restrictive. This would create more virtuous incentives for valuable land to be improved to its highest and best use, as opposed to the current property tax system which incentivizes hoarding under-developed land in high value locations.
A shortage of housing in economically high-value cities is knee-capping our economic growth by inhibiting people from moving for better jobs and more economic opportunity. Our current property tax system means that the owner of a surface parking lot or a run-down low-rise building can easily make their tax bill, while their use of the land is providing very little value and is actually imposing a massive opportunity cost on the public.
And that situation is even worse under the regime of prop 13 in California—if prop 13 were
really about the little old ladies, why the hell is it subsidizing the tax bill of some land speculator who owns a bunch of parking lots on some of the most valuable land in the country?? What if every owner of a surface parking lot in Silicon Valley were taking a concrete hit to their wallet every year as the land values rose? At a certain point they would have to either develop, or sell, and that would be GOOD for the economy and the community.
If your tax bill has exploded because the underlying land value has increased, that's a signal that the land is too valuable to be squandered on a low-efficiency land use. Land is fundamentally one of the main public assets of a State. If a State is going to allow private property ownership, a land tax (or, in our imperfect world, property tax) is a sensible way of signaling that private ownership of land imposes a cost on society that needs to be paid for. The story of humanity is the story of technological innovations enabling us to overcome resource limitations, whether that's using a limited resource more efficiently, or discovering a way to use a new resource for the same use. Well, the technologies that allows us to use land more efficiently are taller and denser buildings. We have the solution, we just are so stupid that we made it illegal to use.
If your ownership of a large-lot single family home in a location with a lot of job opportunities is imposing too much cost on society, your property tax goes up. If you can't pay it, you probably shouldn't be forced to move... but you should probably be allowed to solve your own problem by building an ADU, remodeling your home into a duplex, or splitting your lot to sell the other half. Your new rental income should cover the tax and then some, or if you don't want to work of becoming a landlord, the lot split provides a windfall while also reducing your ongoing tax liability. So much of the property tax discourse is inflamed by the fact that these kinds of common-sense land uses are illegal in so much of the country.
Understanding all this really clarifies how much of the very worst dysfunction of California is directly tied up in Prop 13. Voting property owners were sheltered from the consequences of (and actually rewarded for!) their own
worst policy decisions, because their taxes never go up to reflect that their land use policy has banned common sense. In places where land is not as valuable as California's, American-style sprawl can limp along and function okay, but as land becomes more valuable, you need to build up. On the upward trajectory of land values in places like Portland and Seattle, we've seen sensible infill reforms occur much
earlier than in California. It's impossible to say for sure, but I'd expect that the lack of Prop 13 played a part. Rising property tax burdens probably led some voters, on the margin, to consider the idea that they could
personally benefit from building an ADU or selling off a piece of that over-sized back yard.
/rant
