The Jury Talks Back

5/13/2010

Proposition 13

Filed under: California Politics — aphrael @ 2:04 pm

This year’s Proposition 13 is a minor technical revision to the California Constitution; it’s so minor, and so technical, that it’s generated virtually no controversy (nobody submitted an argument against), and it wouldn’t even be on the ballot had the authors of a previous proposition not required that any modifications get voter approval.

I will probably be voting for this measure, while grumbling about it being on the ballot at all.

———-

The state constitution contains very specific rules for property taxes, including rules that govern how the taxable value of a property is determined. In general, the taxable value of existing construction does not change until the property is sold, but new construction triggers a revaluation.

That said, certain kinds of new construction are exempt, including two exemptions for earthquake-safety improvements: (1) “reconstruction or improvement to a structure, constructed of unreinforced masonry bearing wall construction” (emphasis added) is constitutionally exempt for fifteen years if it was “necessary to comply with any local ordinance relating to seismic safety”, and (2) the Legislature has the power to exempt “the construction or installation of seismic retroffiting improvements or improvements utilizing earthquake hazard mitigation technologies” entirely … except that such rules may not override the 15-year exclusion for unreinforced masonry.

Proposition 13 replaces both of these with a new constitutional exemption for: “that portion of an existing structure that consists of the construction or reconstruction of seismic retrofitting components, as defined by the Legislature.” This new exemption runs until the property is sold.

My reading of these suggests that it’s a weakening of the exemption: the constitutional exemption for masonry buildings is replaced with an exemption subject to legislative redefinition. That weakens the rule, as the legislature can arbitrarily define away “seismic retrofitting components” or, alternately, define them to be so broad as to encompass everything under the sun. The law has no limitations which I can see on how the legislature defines the term.

The tradeoff is that this allows owners of unreinforced masonry buildings to exclude improvements for a longer period. Aside from the unfairness of treating unreinforced masonry building owners disfavorably, I think the argument is that the potentially shorter-term treatment reduces the economic value of the exclusion and thereby reduces the exclusion’s effectiveness as a bribe: there are some number of unreinforced masonry buildings which are not being retrofitted because the owner has decided that the cost is too high, and a longer-term exclusion would reduce the costs enough to make the safety improvements economically viable.

Both of these strike me as being a stretch. It seems unlikely to me that the legislature would define away this exclusion (because that would be interfering with earthquake safety, an unlikely proposition) or arbitrarily broaden it (because that would reduce state revenue, something the state legislature would be reluctant to approve). I also find it unlikely that there are a substantial number of people who (a) are not fixing safety issues with their unreinforced masonry buildings because they think the expense is unjustified and (b) would be convinced to do it by changing a fifteen-year exclusion into an exclusion-until-sale. There may be some, but I can’t believe it’s a substantial problem.

Either way, this seems like an issue with minor risk and minor reward. It’s somewhat hard to care about, and extremely difficult to get worked up about. That said, there appears to be a benefit (at least one person will likely be motivated to repair their property because of it) and there doesn’t appear to be a harm … and, to the extent that I think this is the sort of thing which we hire representatives to thresh out for us, the fact that our representatives put it on the ballot unanimously (while not being able to agree on anything else) counsels me to vote for it.

15 Comments »

  1. They should abolish the fiscal straight jacket that is proposition 13

    Comment by Caleb — 5/26/2010 @ 12:45 pm

  2. Abolish propostion 13 raise proporty tax and reduce the taxes on income sales and on profits with same amount and start taxing land based on land value and in doing so raise some much needed revenues while strenghening Califoronias deteriorating buisness envieroment.

    Comment by Caleb — 5/26/2010 @ 12:55 pm

  3. Propostion 13 leads to a more centralized goverenmental run California since the local governments are not able to fund them self thanks to prop 13 tax limits on proporty taxation the state government do the funding instead.
    Leading to lower revenues for state government and an ever incresing state budget defecit Calfornia is rooting from deep within and its to a very large degree thanks to propostion 13.

    Comment by Caleb — 5/26/2010 @ 1:05 pm

  4. Abolish Prop 13 limits on proporty taxation start tax land on commercial land value by increasing Californias grossly undertaxed landvalue. Then reduce taxes on income sales commerce and enterprise with the same amount as proporty taxes are rasised or are valued in land value terms. Thus in doing so increase revenues through an enchnased Califorinian buisness and investment enviroment.

    Comment by Caleb — 5/27/2010 @ 12:59 am

  5. The heavy burden of income and sales taxes in California has to be shifted away from income sales and profits to higher proporty taxes.
    Increase proporty tax revenue through land value based taxation and reduce taxes on income business sales and enterprise with same amount.
    Propostion 13 style taxation is fundamentlay unfair since someone who just bought a house has to pay considrebly more taxes than somone else who has lived in identical house for a longer period of time.
    Califomias proporty taxation need to be evend out so that the taxation is both fair and revenue bringing.

    Comment by Caleb — 5/27/2010 @ 1:49 am

  6. I’m pretty sure Prop 13 is also very unlucky. I mean, come on… “13”.

    No, in all seriousness, Caleb is right that California is driving businesses away, and their tax policy is certainly at least part of that (the level of regulation is also a crushing problem). And let’s not forget the true problem of any Greece or Cali style government: they spend too much, their government is too big, and they have too many dependents.

    I don’t think Cali’s prop taxes make much sense, but I can only imagine the massive problems that would occur if these people with homes actually worth millions suddenly had to pay their share. but that’s probably a necessary step to get businesses to want to move back to the Golden State.

    Comment by Dustin — 5/27/2010 @ 8:36 pm

  7. Off courese proporty owners could be more than compensated for having to pay higher proporty taxes thruogh being able to pay considerbly less income and sales taxes. Its about rebalancing Californias defunct revenue collection base so that overall taxation is reduced and revenues increased.

    Comment by Caleb — 5/28/2010 @ 1:21 am

  8. Retired people only pay property taxes, usually out of their retirement savings. Obviously you’re too young to know why the thing passed in the first place. Among other things, the elderly were being forced to sell their houses to pay tripled property tax on paper gains.

    Comment by Kevin Murphy — 5/29/2010 @ 7:47 pm

  9. Proposition 13 discrminate younger first time hombyers and puts all the costs on them. Older poeple should live in houses their retierment savings afford them thoudh market based land and proporty value not houses that are subsidised through Proposition 13s tax exemption by first time homebyers.
    Proposition 13 is chasing away younger and able bodied people away from California bacouse of the costs proposition 13 puts on them.

    Comment by Caleb — 5/30/2010 @ 2:42 am

  10. Thanks to proposition 13 Calfornia is becoming more and more unaffordable to younger first time hombyers who are the ones paying the costs of Proposition 13 so younger and able bodied people are moving away from the state in larger and larger numbers.

    Comment by Caleb — 5/30/2010 @ 2:48 am

  11. Propostion 13 i no more than a tax dodge regressive tax on young people who make less then middle aged.
    If person is not willing to pay the fair market price for a house then that person should move somwhere else it that simple.
    People shouldent expect that other peoploe to take upp the burden to subsidize them and their houses.

    Comment by Caleb — 5/30/2010 @ 11:21 am

  12. try this scenario Caleb one note:

    i own a house, yet live in an area where a large portion of the population doesn’t, and therefore doesn’t see the property tax in their rent payment.

    said population continues to vote for more free stuff, to be paid for by raising my property taxes until i can’t afford to keep my house.

    thus Prop 13 was born.

    Comment by redc1c4 — 6/1/2010 @ 11:17 am

  13. So, caleb, how would higher property tax valuations help young people buy houses? You seem to have argued your way into a box.

    Comment by Kevin Murphy — 6/1/2010 @ 1:44 pm

  14. Prop 13 does not make housing unaffordable. Restrictions and costs of development make houses unaffordable. California has a lot of land but makes it hard and expensive to build on it. Supply and demand, and huge costs, make houses expensive. Government was using this to tax people out of their homes before Prop 13. I pay about the same tax on my house in Texas that I paid on a much more expensive house in California, but Texas is sound and creates two thirds of the jobs in the nation while California is bleeding jobs and is bankrupt. Prop 13 is not California’s problem. California government is their problem.

    The idea that California would reduce income or business tax if they could increase property tax is such a howler it is hard to believe you are serious.

    Comment by Machinist — 6/7/2010 @ 1:43 pm

  15. Machinist hit it right on the head…to think I could be taxed out of my ‘payed for’ home when I’m retired is just plain wrong. Government just wants more and more…we need to say STOP!!!

    To those of you who think higher taxes is the solution to the horrible business climate here needs to do a little more due-dilligence and maybe a little more soul-searching. I’m willing to bet none of you own a business.

    Comment by James — 6/8/2010 @ 11:31 am

RSS feed for comments on this post. TrackBack URI

Leave a comment

Comment moderation is enabled. Your comment may take some time to appear.

Live Preview


Powered by WordPress.