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Article about California's fiscal crisis

Original post made by Resident on Jun 27, 2009

This article talks about the fiscal crisis in California:
Web Link

Comments (22)

Posted by Resident, a resident of Another Pleasanton neighborhood
on Jun 27, 2009 at 5:08 pm

I posted that article. It is interesting because it talks about prop 13. I agree that prop 13 has something to do with the fiscal deficit, although that is not the whole problem. There are issues like unions, too big a government, redundant government agencies, too many social/welfare programs, unreasonable pensions.

But prop 13 does add to it. I know people who bought their houses in the 70s, and their taxes are fixed to late 70's home values. Even in states where housing is affordable, paying so little in taxes is unheard of. I bought a house 10 years ago in the south bay, and the person I bought it from had taxes based on a 60K assessment! That is not right. Maybe it's okay not to raise the taxes so much, but some assessment must be done. People cannot live in California today and expect to use its services when they pay property taxes based on a 60K assessment of their property.

Likewise, when I sold the house, the new owners paid more in taxes than me, because I sold it for more than I paid for. It is an unfair tax system. But the most unfair part of it is that some people are both collecting social services (medicare, etc) and paying property taxes based on 60K.


Posted by Yo Resident, a resident of Another Pleasanton neighborhood
on Jun 27, 2009 at 9:03 pm

Good article. California has to get over its love affair with proposition 13. The first step to getting California sorted out should be reforming that stink bomb of a law.


Posted by Really?, a resident of Birdland
on Jun 28, 2009 at 8:53 am

If you are still blaming Prop 13 instead of our state legislators you need to think about the situation. California has the HIGHEST INCOME TAX RATE in the nation. California has the HIGHEST SALES TAX RATE in the nation. Property tax rates are low relative to most states however property values have been very high relative to most parts of the country resulting in a significant property tax "revenue" stream for many years. Our state is in a fiscal crisis because of the failure of our elected officials to manage OUR money. They have used it to buy votes.

Think about the Prop 13 tax revenues logically. What happens to homes that were purchased in the 70s? Well a large percentage have been sold as people relocate and their tax bases have increased. Resident is wrong; their tax rates are not "fixed to late 70s home values". All property tax base values can increase up to 2%/year. I bought my house in 1992 and the value quadrupled (rather unrealistically, wouldn't you agree?) and my property tax would have quadrupled which might have forced me to sell. Every homeowner in California benefits from Prop 13. Prop 13 hasn't failed this state, the politicians have.


Posted by Get the facts, a resident of Another Pleasanton neighborhood
on Jun 28, 2009 at 9:00 am

Funny how you all are trashing Prop 13. When it came around, it was the greatest thing, because people were complaining so much about their property taxes, which were skyrocketing. Prop 13 passed overwhelmingly, despite the protest of the few who saw what would happen, which is EXACTLY what did happen. Cutbacks to schools, libraries, etc.

So it's a little late to be complaining, we did this to ourselves (or, at least, those who could vote back in 1978 did this to us).


Posted by Resident, a resident of Another Pleasanton neighborhood
on Jun 28, 2009 at 9:25 am

Get the facts:

I agree, but it is now time to fix it. Perhaps a modification to prop 13 is in order, combined with fixing Sacramento: get rid of unions' unreasonable perks, reduced government spending, etc.

Really?:
Like I said, prop 13 is only a portion of the problem, but it is a problem. The person I bought a house from 10 years ago had assessments for property tax based on 60K.... that included the 2% per year increase. Do the math, and if someone bought a house at 40K, increase 2% per year, it is still peanuts.

Yes, we have the highest income tax, I know that, but it is not a fair tax system. Some pay a lot of taxes (income and property) and many who rely on taxpayer funded services such as medicare also enjoy the benefits of prop 13 with low property tax. It is time to fix some of this, and I think it is going to happen soon.

Other problems need fixing too: unions, government spending, redundant agencies, pensions, etc. But prop 13 needs fixing too.

Did we do it to ourselves? Maybe those who back then were young and voted for it. It is now time for the younger generation to have a say in it.


Posted by Resident, a resident of Another Pleasanton neighborhood
on Jun 28, 2009 at 9:27 am

"reduceD government spending, etc."

meant to say "REDUCE government spending, etc." (no D)


Posted by Really?, a resident of Birdland
on Jun 28, 2009 at 10:06 am

Resident: you're allowed to pay extra taxes if you feel the inclination to do so but I suppose you don't. However, you are quick to volunteer others to pay more taxes. Puzzling because you do seem to recognize that the problem lies in Sacramento. Why not attack the spending problems before you sign up to give away more of your hard-earned money? How about reducing the government intrusion in our lives?

Nobody was buying houses around here for $40k but if they did, would it be reasonable to expect they could now afford to pay 400% more in property taxes based on a market bubble that was unrealistic? How many people do you think would have been forced to leave their homes? This would have driven up foreclosure and tax delinquency rates. We wouldn't be having this discussion were it not for the runaway housing market that has now collapsed. Prop 13 was driven by a similar explosion in home values in the 70s.


Posted by Yo Resident, a resident of Another Pleasanton neighborhood
on Jun 28, 2009 at 10:42 am

"Resident: you're allowed to pay extra taxes if you feel the inclination to do so but I suppose you don't. However, you are quick to volunteer others to pay more taxes. "

That has got to be one of the lamest arguments I've ever heard. Right up there with "If the government is so smart why doesn't the government pay for everything." People want the services but pandering politicians won't pay for them. If we want the services we should pay for them.


Posted by Resident, a resident of Another Pleasanton neighborhood
on Jun 28, 2009 at 1:20 pm

Really?:

I already pay my fair share of property and income taxes. If prop 13 is adjusted, I don't mind the extra tax, as long as everyone else is also paying their fair share.

Yes, government spending, unions, etc are out of control and must be fixed. But prop 13 must be fixed too.

You talk about the housing bubble. I think prop 13 had a lot to do with that. People who could not afford to keep their houses (due to higher taxes and their limited income) stayed there, and sales became rare. I bought a house during a housing boom, and paid above list price because of multiple offers and few properties on the market. When I sold that house, I too received multiple offers, all above list price because there were simply not too many houses for sale - and I sold during a buyers' market.

Besides, many people who bought a long time ago used their house as a personal bank account, refinancing and getting money out even though their income was little or non-existent. I have looked at public records, and many foreclosures, even here in ptown, have been not only from people who bought recently and bought beyond their means, but also people who bought a long time ago for very cheap and then refinanced to get money out. They foreclosed eventually.

Prop 13, I think, will eventually be modified.


Posted by Felix, a resident of Mohr Park
on Jun 28, 2009 at 4:38 pm

No more freebies for illegal aliens.


Posted by Really?, a resident of Birdland
on Jun 28, 2009 at 8:32 pm

Resident: If you believe that many homeowners are not paying their fair share of taxes due to Prop 13, what do you think will happen when their property taxes increase 2, 5, or 10-fold? You say that you're paying your fair share of taxs but others aren't....spoken like a true liberal. You're going to hold on to your money while you want others to pay more whle claiming that people who have held on to their homes for many years are greedy.


Posted by Yo Really, a resident of Another Pleasanton neighborhood
on Jun 28, 2009 at 8:49 pm

Where do you get 10 fold? Who said anything about that. Prop 13 needs to be reformed. That doesn't mean all limits on taxation need to be thrown out. How many voters bought their homes in 1972 and stayed? Not many. The votes are there for reform. The right wing chant of tax cuts and deregulation fix everything is getting quite stale. Deregulation sure didn't fix the investment banking industry. Seems like we need some liberals to fix this Republican mess. Yes, proposition 13 will be modified, and that will be a good thing.


Posted by Yo, Yo Really, a resident of Another Pleasanton neighborhood
on Jun 28, 2009 at 8:59 pm

Can you stay out of Resident and Really?'s discussion. I am interested in what they have to say and you keep butting in and are a loud distraction saying nothing helpful.

Not a surprise if you're the "Yo" that always replies to people...

Thanks so much!


Posted by Stacey, a resident of Amberwood/Wood Meadows
on Jun 28, 2009 at 9:03 pm

Stacey is a registered user.

Big pieces of the puzzle are missing from the "blame Prop 13" article. Prop 13 is only the revenue side of the equation. Remember the Gann limit passed back alongside Prop 13? That's the piece of law that dealt with the spending side of the equation and it got weakened by subsequent propositions. So with spending now out of balance with revenue, it seems easy to point fingers at Prop 13, right?

California isn't anywhere near the bottom in average property tax bills compared to other States.

I don't understand the idea that somehow it's unfair that since you bought your home in 2005 that you have to pay more tax than someone who bought in 1972. What about how unfair it is for the person who bought in 1972 to have to pay more simply because someone paid too much for their neighbors home? See? To some the idea of unfairness lies in what one person pays versus another, but the real unfairness is having to pay more with no proportional return in benefit from government services. It's like saying, "Man, it's so unfair that my friend has to pay so much money in sales tax because she has a shopping addiction while I get away with paying very little sales tax because I don't go on spending sprees."


Posted by Resident, a resident of Another Pleasanton neighborhood
on Jun 29, 2009 at 2:49 am

"I don't understand the idea that somehow it's unfair that since you bought your home in 2005 that you have to pay more tax than someone who bought in 1972. What about how unfair it is for the person who bought in 1972 to have to pay more simply because someone paid too much for their neighbors home?"

Everything must be adjusted for inflation. Do you still pay the same for post stamps now as you did in 1972? How about car prices? or gas prices? Prop. 13 will be modified eventually.

Can you imagine if my income tax had been locked at what I paid when I got my first job out of college? I would be paying very little in taxes now, but instead, I pay quite a bit in taxes as it should be, because as your income grows so does your tax. Property taxes should not be any different. Otherwise, all the social services people have come to expect would not be here because there would be no tax base to support it, which is what is happening right now in California (along with problems with the way Sacramento does things, unions, etc)

Even in states where housing has not gone up as much as in California, there are people paying more in property tax than some here in California. Most states adjust property taxes.

If prop 13 had not passed, perhaps we would not have seen such a housing bubble.


Posted by Scott Walsh, a resident of Pleasanton Valley
on Jun 29, 2009 at 8:31 am

Are there not some states that have no property tax but have other taxes such as car registration, etc. that pay for services. I am always amazed at how we continue to allow commercial property to be built when we already have a glut of empty commercial property. I must say I know little about how commercial property is taxed. I remember years ago being told that Prop 13 left commercial property out of the mix. Anyboy know that side of things.

Our problems are bigger than the blame game--Liberal/Conservative; Demo/Repub; Union/CEO/Investors. It is an American problem, a Californian problem, a Pleasantonian problem. We need to stop the Blame Game and find concensus to fix things but it is too easy to point a finger at someone. My Dad told me one time to be careful at pointing your finger at someone. While you are pointing "one" at someone else---three are usually pointing at you. We all allowed this and took our "eyes off the ball". We should not count on anyone else to fix this mess but ourselves. Reliance on others is not a successful venture in most cases.


Posted by Ken in South Pleasanton, a resident of Downtown
on Jun 29, 2009 at 9:38 am

I don't believe all the comments about "I wouldn't mind paying more taxes". Why not just go to Las Vegas or Reno and drop your money into the caverns of those casinos? You would get more for your money that we get now from our state government. Hold the legislature and governor accountable for responsible spending. Much of the problem we experience today comes from the short-sighted agreements and laws that have been passed that create mandatory spending limits on many "entitlelment" programs. When state revenues drop these "entitlement" programs continue to receive annual increases. This just makes no sense and is indicative of the lack of fiscal responsibility demonstrated by our elected officials over the past years. Prop 13 allowed many California citizens who helped build this state stay in their homes and remain California residents. Get rid of your incumbent legislator and put someone in office who isn't beholding to some political action group and who can try to do something different. It couldn't be any worse than it is now...notice that we still don't have an approved budget, even after our legislators saw how infuriated we all are about their fiscal irresponsibility? Yes, I'm mad and I'm not ashamed to say it to anyone!


Posted by Really?, a resident of Birdland
on Jun 29, 2009 at 2:01 pm

Resident said: "Everything must be adjusted for inflation. Do you still pay the same for post stamps now as you did in 1972? How about car prices? or gas prices?"

As I pointed out earlier, and as you are well aware, assessed values are not fixed under Prop 13 and can adjust as much as 2%/year. That is an adjustment for inflation in the property values. We have not had inflation of 1000% since Prop 13 passed although that is how much property values have increased.

============================================================

"Can you imagine if my income tax had been locked at what I paid when I got my first job out of college? I would be paying very little in taxes now, but instead, I pay quite a bit in taxes as it should be, because as your income grows so does your tax. Property taxes should not be any different."

Income tax is a graduated system theoretically based on what you could afford to pay. Your suggestion to repeal Prop 13 limits is not based on ability to pay so you would be forcing many people out of their homes because they can no longer afford to pay the property tax on their homes. People will lose their homes.

I find it curious that you say you are "paying quite a bit in taxes as it should be." Why should you paying quite a bit in taxes? Didn't you work hard for your money only to hand it over to politicians to distribute as they see fit? You seem to be an intelligent person and I believe you could probably find better and more efficient ways to spend that money and it will still benefit other individuals and the economy.

======================================================

"Otherwise, all the social services people have come to expect would not be here because there would be no tax base to support it, which is what is happening right now in California (along with problems with the way Sacramento does things, unions, etc)"

You've got the second part right; free-spending politicians, unions that have gained control of those politicians, and out of control social programs are the big problem. It's not that you aren't handing over enough money (I'll bet that when you add up the taxes and "fees" that you pay, more than half of your income goes to taxes. I want you to keep your money. Our government (local, state, and federal) have been spending money that they don't have. Money they assumed they would have in the future. You probably don't manage your own money that way, do you?

===========================================================

"Even in states where housing has not gone up as much as in California, there are people paying more in property tax than some here in California. Most states adjust property taxes."

True. Look at their state income tax and sales tax rates. California adjusts property tax rates; up to 2%/year.

===============================================================

"If prop 13 had not passed, perhaps we would not have seen such a housing bubble."

Certainly property values would have been negatively impacted because if you need to hand over more money to the tax assessor you can't afford as much house. But the housing bubble, and crash, was nationwide so it's obviously not due to Prop 13. Providing loans to people who otherwise wouldn't have been allowed to obtain loans had more to do with it. These were the people with poor credit scores and inadequate income...a very high percentage of them have defaulted on their loans (as their credit scores would have predicted).


Posted by Stacey, a resident of Amberwood/Wood Meadows
on Jun 29, 2009 at 8:53 pm

Stacey is a registered user.

Resident wrote: "Everything must be adjusted for inflation."

The Gann Limit was a spending cap that adjusted for population and inflation. Did you see the chart published by the Mercury News about a week ago? Go here: Web Link then click on #1 in the cartoon at the bottom. Now see the orange line? It shows what spending should be at adjusted for both population and inflation. Notice that California's actual spending today outstrips the orange line by roughly $20B.

If you notice from the chart, spending and revenue pretty closely match the orange line. In the early 90s the revenue collected is getting below the orange line. Perhaps that would have been a good time to adjust revenue intake. That lack of revenue lead to propositions being put on the ballot in the late 90s that weakened the Gann Limit. Notice that within the last 10-15 years State spending took off. You'll also notice how revenue in those years is pretty far above the orange line. And this is supposed to be Prop 13's fault?


Posted by Yo Ken, a resident of Another Pleasanton neighborhood
on Jun 29, 2009 at 9:11 pm

"Why not just go to Las Vegas or Reno and drop your money into the caverns of those casinos? You would get more for your money that we get now from our state government. "

California universities are the best in the nation and some of the best in the world. That's just one example of how our money is put to work.

The age of small government, tax cuts, and deregulation is over. That applies to the nation and to California. We see where that thinking got us -- an economic crisis and trillions of dollars of tax payer give-aways to the wealthiest bankers. Obama is doing the hard work at the national level and if we can elect some solid legislators and a good governor, we can do the same thing at the state level.

No Proposition 13.


Posted by Yo Stacey, a resident of Another Pleasanton neighborhood
on Jun 29, 2009 at 9:14 pm

Voters wanted better services like CSR for schools, better health care and environmental protections. We need to pay for them. Proposition 13 blocked a much needed source of revenue. Its days are numbered.


Posted by Yo Really, a resident of Another Pleasanton neighborhood
on Jun 29, 2009 at 9:23 pm

" ...I believe you could probably find better and more efficient ways to spend that money and it will still benefit other individuals and the economy."

What kind of rubbish is that. You almost sound like a Republican. Even the discredited economist Art Laffer believed there was some optimal level of taxation.

Web Link

You seem to be saying that all taxes are bad. Why should anybody pay any taxes there "find better and more efficient ways " to spend money?

Reform Proposition 13 now.


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