In the last three years, a number of states have substantially reformed their property tax systems, providing huge tax benefits to owner-occupied homes and shifting the burden of paying for services like schools and police to commercial property owners (including rental apartment buildings)
That sounds like shifting the property tax burden from homeowners to renters - homeowners are generally wealthier than renters, so it's placing more of the property tax burden on those less able to afford it.
The second order effect will be that rental properties are driven from places where this applies.
That has some not-fun generational aspects.
(1) If schools have lower taxes, their ability to attract good educators for children is reduced. That in turn leads to lower home values since the school quality factor is reduced.
(2) If munis are unable to collect a sufficient tax base, they must reduce services. There will be hemming and hawing about things like cutting the pensions promised decades ago to attract competent service workers, but those are harder to reduce rather than not fixing the fire trucks, the water pipes, and other hidden taxes citizens pay for by reduced services. So your property values will also be reduced in the long term. Small towns are prime examples of this happening, when towns fail.
Trying to build a community out of one socioeconomic class works about as well as trying to redline. It leads to a less vibrant community, less adaptable community, and people are poorer in life and in their finances for it.
Are pensions still an effective way to attract workers? I feel like there’ve been enough cases where workers get screwed out of them, that this isn’t much of an incentive. Similar to offering engineers equity in a startup.
That really depends on the state. Some states have different public school district funding mechanisms that don't depend as much on local property tax collections.
Fire trucks are far more expensive to acquire and maintain than necessary due to monopolistic actions by manufacturers, plus local governments buying fancier apparatus than they really need. There's a lot of room to trim those particular expenses.
I think that's true but in some cases it's also about making home ownership, in the sense of having a home you can't lose short of a destructive disaster, even possible. In a lot of cities property taxes are enough to get in the way of secure housing for, e.g., disabled people. It seems reasonable to want owning the house you live in to be a possibility for planning to eventually live on a fixed or low income.
Someone I know is trying to plan such a thing right now. She has a decent paying job and a degenerative, disability-inflicting illness. She'd like to see the possibility of a secure future in the city where she's lived for the past 10 years, but property taxes and HOA fees alone in her city can be multiple thousands of dollars per month in neighborhoods that from the outside you wouldn't think seem particularly new or posh or luxurious. It seems that if she's forced into early retirement by disability, she'll have no choice but to relocate. So instead she feels trapped in a job she hates because she got it before she became disabled because she's reasonably afraid that employment discrimination, which is terrible at her job that nominally espouses inclusive values, will be even worse most other places. And while she's already disabled, her disability will only continue to get more profound for the rest of her life. And property taxes for sole and lived-in-by-the-owner homes is one of the reason that owning a condo or apartment is so much more expensive than renting one for her.
I feel like HOA fees have to be doing most of the damage there. AFAIK the highest property taxes in the US still top out around 2%, so for a "multiple thousands per month" property tax bill it has to be a house worth more than $1.2 million. I'm not sure what the line is for what level of housing expense is reasonable for society to subsidize housing security for, but I'm pretty sure $1.2 million is well past it.
> I think that's true but in some cases it's also about making home ownership, in the sense of having a home you can't lose short of a destructive disaster, even possible. In a lot of cities property taxes are enough to get in the way of secure housing for, e.g., disabled people. It seems reasonable to want owning the house you live in to be a possibility for planning to eventually live on a fixed or low income.
It seems to be equally straightforward an answer to just not expect homes to function as an investment.
I do not now nor have I ever understood why people expect homes to rise in value. If you live in an area for 20 years, and you enjoy that area, and it serves you well, and educates your kids, and the crime is low, and all that good stuff: why are you then owed money? Why is that a fair expectation? Like I could see it if you made the house bigger, or otherwise improved it? Maybe you put in a new shed, or a nice brick backyard area with a kitchen, sure. House being worth more makes complete sense. But if you just buy a house, and live in it, and maintain it over the years, and then go to sell it: why is it reasonable for you to expect money back out of that?
You've already received what you paid for: a place to live.
Like I just don't see how people go like "My house needs to sell for more than I bought it for years from now" and then complain about the housing market being out of control and houses being expensive. Of course they are. Each time a house changes hands by this logic, it must necessarily be worth more than it was before. So every subsequent buyer of that home is effectively required to tithe to the previous owner for... some fucking reason, that nobody has ever adequately explained to me.
My theory is that the "house" consists of two things: the land and the building.
The land goes up in value when other people spend money. More retail is constructed nearby, transportation is improved, schools improve, jobs are created, etc. My land captures some of that value even though I paid nothing. That to me explains some of the fairness of property tax: the owner should contribute to the government services, such as schools and police, that help make the land appreciate in the first place.
Then there's the building. It's a wood box that sits out in the rain and rots. Water soaks in from the outside and pipes burst on the inside. Termites eat it and insects and vermin invade. Carpet and walls slowly degrade. HVAC systems wear out. Appliances break. Concrete breaks apart. Even on the land portion, plants die and need maintenance. (Trees are the only thing on a property that get better with time.) This building needs constant maintenance and I'm always spending money and time on it.
So I figure the land might go up slowly in value over time. I figure I'm lucky if the building appreciates at all after I consider the money I sink into it.
On paper my house is worth a lot more than when I bought it. But I don't know how much of that is nominal price change due to inflation.
It's an answer to why the number is bigger but not to why the house is worth more. It is common to say "I want my house to appreciate in value" and inflation doesn't mean it's appreciating in value, it just means the number is bigger than it was before. That's not the same thing.
> In a lot of cities property taxes are enough to get in the way of secure housing for, e.g., disabled people.
Nah, the market is supply constrained, if taxes go down the price of the real estate just goes up to fill the gap. People make purchase decisions based on income & total expenses, not on anything else, "can I afford this house?". The price stops rising when the answer switches from "yes" to "no". If your friend can't afford a house right now they don't have enough buying power to compete in the market with other house buyers. Reducing taxes won't give them any advantage in the market that other buyers don't get.
What’s happening is income inequality manifesting on the market. The middle and upper middle of the market is seeing accelerated appreciation as incomes rise for the upper quartile. Some places see >10% annualized appreciation over the last 20 years.
The lower part of the market is very different, and are basically depreciating away. Property taxes are the most fair tax for the most part — you basically pay a prorated share of the levy based on the market value of your home. So if the poorer property is getting less valuable proportionally, your share of the tax pie increases. Some states share Medicaid expenses at the county level so there’s demand pressure for more tax levy.
The problem is old people generally cannot afford their homes, and are usually profoundly ignorant about everything except tax avoidance, even when tax avoidance hurts them. The tax knob is one that can be turned, which makes the problems worse. Senior exemptions, veterans exemptions, all increase the overall share for everyone else.
The new Republican platform is accelerating that — pushing property taxes to non-homestead property and driving up sales tax. In other words, it just a consumption tax, which pushes the tax burden to families and inflates retail costs, so grandma can sit in her big house and her kids get to inherit the place at the stepped up cost basis.
Lower demand for the product globally. If their asset has a higher vacancy rate, raising rent all the time can't solve the problem.
However, tax rates give perverse incentives. What you'll probably get is a lot of commercial slumlords as repairs are seen to increase the value, thus the tax.
If they could raise rents by the amount they would've been taxed, they would have. I'm happy to see more incentives against buying up houses for literal rent seeking.
Is the implication the only path is to design the economy around keeping landlords as happy as possible? Its similar to the fear of a wealth tax driving the rich to move, you can just say out loud who our true masters are.
A major problem with property taxes on owner-occupied housing is that the value the owner derives from the house is not dependent on the resale value of the house. An owner occupied house is not primarily a financial investment in most cases. Any increase in housing value (and thus property taxes) is mostly an increase in the cost of living. Any gain in value cannot easily be realized since it’s not a liquid asset. This leads to a fear of being driven out just because the value of the surrounding neighborhood rises doesn’t mean that the owner’s income rises in lockstep.
One way out could be to tax the value gain at the time of sale, or when the house gets rented out, thus no longer being “owner occupied”.
A major problem with decoupling property taxes on owner-occupied housing from market prices is that it removes the biggest incentive for a homeowner to vote for policies that keep the local real estate market in check. An owner occupied house in a desirable area where there is no disincentive to politically engineering a supply shortage becomes a financial investment. Any increase in housing value becomes profit for the owner (or their descendants). This leads to supply restrictions and escalating prices and an increasingly unhealthy society as the young and the poorer are pushed out of the city, county, or even state.
This is essentially what has happened in coastal California over the last 60 years.
The land should be expensive, the housing doesn’t need to be.
With different policy, there could be more housing built on the same land. The most scarce land there is shouldn’t be predominantly zoned for only low density single family homes.
We could easily build apartments on the coast in CA and then non multi millionaires might be able to live there. We have decided that only multimillionaires deserve to own a coastal house by restricting zoning in the coast so heavily
> value the owner derives from the house is not dependent on the resale value of the house
Value is always relative - even if the experience hasn't changed, the rising house price does mean that same experience is being value more highly relative to other opportunities. (In most cases this is because the experience actually has changed: if your neighborhood gets nicer, you are indeed benefitting!)
The bigger fallacy in rising property taxes is that civic services don't necessarily get better or more expensive just because property rates rise. And the bigger unfairness is that homeowners with rising values but not rising income don't always have efficient access to the equity of their homes.
A fair property tax regime would avoid presuming budget increases just due to rising value of housing stock, and might subsidize HELOCs or similar structures for folks who need to access property value to pay taxes.
"the value the owner derives from the house is not dependent on the resale value of the house"
An owner can derive value from the house in one of three ways:
A) Occupy the whole place.
B) Receive rent from a tenant.
C) Something in between (e.g. airbnb one room).
When property prices double, it's likely that rents roughly double. This may not increase the value the owner can derive from (A) but it will sure change the value they can derive from (B).
So they might decide to switch from living in the place to renting it out. If they don't decide to switch, then it indicates the value they derive from living in the property has either gone up, or it was always way higher than the market rent.
It seems like market rent is a reasonable benchmark to use to calculate property taxes, and property value is a reasonable proxy for market rent.
> One way out could be to tax the value gain at the time of sale, or when the house gets rented out, thus no longer being “owner occupied”.
My local government put exactly this on the ballot: a small percentage transfer tax on the sale price of the home, which would offset some of the costs we currently pay in ad valorem property taxes.
The local real estate community had a meltdown and poured hundreds of thousands of dollars into defeating it, which my neighbors obliged and did.
I think many people would have a hard time believing that a new tax in one area would be offset by lowering taxes in another. Even if they did reduce property taxes shortly after passage, many people would assume they will raise them again later on.
If it wasn’t combined in the same bill, the people will just have two taxes going forward. Effectively every “temporary” tax becomes a permanent tax. During the last local election, our city council was asking people to vote to replace an expiring tax with one at a lower rate and trying to sell it as voting for this reduces your tax.
>> One way out could be to tax the value gain at the time of sale, or when the house gets rented out, thus no longer being “owner occupied”.
>My local government put exactly this on the ballot: a small percentage transfer tax on the sale price of the home,
First comment suggests taxing the gain (income tax), while second comment suggests a tax on sale price (gross receipts tax). Two very different things.
While I grant you that they are two different things, two-thirds of the average sale price in my area is from gains in value accrued over the time the home was occupied prior to sale, almost all of which is currently untaxed.
I own a home in Berkeley which loves transfer taxes. They’re creative about it though they tax at different rates based on the home sales price. Starting 1/1/27 the transfer tax goes from 2.5% to 3.5% based on the selling price of the home.
It’s been attractive to voters since most homes sell in the first tier.
You can reclaim some of the transfer tax by performing seismic upgrades which is actually something I support in a town with some houses that can be 100 years old.
That is true, but on the other hand if you had to pay a hefty yearly property or wealth tax you might not be able to afford it in the sense that your wealth is bound up in the house.
The counter is of course that when you buy a house you should make sure you have enough income and/or liquid wealth so that you can pay the taxes. And if not, move to a smaller house. Of course, opponents of such taxation will then roll out all kinds of grannies living in mansions on meager pensions. Then again, is it fair that this prices out younger people from the property market?
As difficult as they are, I do think we'll need some form of wealth taxation in order to put a brake on spiraling inequality. Yes, call me a fan of Piketty if you want.
A wealth tax is just a warning shot to your wealthy neighbors, if they can afford to flee, they'll flee.
If you're planning a peasant revolt you should really consider going all-in, bloody revolution, you give the kulaks less time & space to plan for contingencies.
The issue with that is the disincentive to sell (or buy), which leads a lot of people to stay put in their oversized home during retirement, for example.
In the UK, 'stamp duty' is something that buyers pay (as opposed to sellers), but sellers also have to buy, so everyone pays to move and everyone stays put to avoid paying.
(And of course no one builds, which is the biggest issue).
I'd say it's OK to defer your property taxes until you sell (or die), but it shouldn't be the default, only something you apply for if you're in a vulnerable position.
I think it's a great idea to let land taxes create the incentives to build efficiently.
It’s really hard to loosen supply side restrictions on “this somehow became a hip neighborhood.” You can in general make more housing available, but not prevent rising prices in specific neighborhoods.
You absolutely can prevent a "hip neighborhood" from becoming the equivalent of a short squeeze. Prices are not only signals of current scarcity, but also future scarcity. Once you've established that any increase in property value will lead to an influx of capital, followed by a swift increase of supply, every increase will partially suffocate itself.
Only in the most literal sense. In a far more accurate sense what we are talking about is land where people want to live and that does grow, more or less, with population growth. It's only a handful of cities with geography that makes desirable land fixed.
And arguably, they already extracted the value of that house by having a place to live without having paid for it up front. They didn’t even put up the capital in most cases. In the US they will have been granted a loan that is backstopped, and therefore subsidized by the government. Don’t forget the mortgage interest deduction, that’s a massive homeowner subsidy.
So someone else put up the capital, the government made that capital cheap, and societal demand with artificial scarcity (in most places) pushed up the asset value.
I’m not saying it’s a bad thing, but let’s not pretend that making capital gains on a house in the US is anything like any other available investment.
Exactly. Surely the finance industry can come up with a product that automates this so you automatically sell them a tiny slice of your home to make up the property taxes without it affecting your cash flows.
I believe you can get a reverse mortgage line of credit that allows you to take out money as needed. That is, a reverse mortgage doesn't have to be a predetermined lump sum or monthly payout.
This doesn't totally automate it, but it takes away the need to manage money proceeds from a reverse mortgage between the time you receive a payout and the time you pay your taxes.
The private finance industry need not be involved.
Just have government allow taxes to be deferred until time of sale with interest pinned to the cost of borrowing for government. That already exists where I live for people over the age of 65. The government can still get the revenue for free via borrowing and the payback is more or less guaranteed.
That's basic Econ101: households optimize for (subjective) utility, not for profit on some balance sheet. Taxing households for non-realized gains doesn't take into account liquidity nor the (subjective) negative utility and opportunity cost of selling your home and moving away.
> One way out could be to tax the value gain at the time of sale
Stamp duty in the UK, horrendous tax. It's better than nothing at offsetting the unearned increase in house (land) value, but far worse than a regular tax.
If you live somewhere for 10 years, then move, then repeat for 40 years, you pay far more than if you never move. This encourages people to live in less suitable houses for longer.
As to your worry about land values increasing -- the owner is deriving benefit. The higher the land value is, the more benefit the owner gets from the land.
The increased land value is because the land is more desirable. If I buy some land next to a rubbish dump, it's cheap because living there is terrible. If the dump is then closed my land improves in value, and I derive value from that.
Likewise if I buy somewhere cheap in a backwater town, and the town becomes more desirable because there are better employment opportunities, better shops, better amenities, all of which serve to mean people will pay more for the land, then I benefit from that immediately.
The value is subjective, if you lived in a quaint town and now it’s become a bustling place it may be a nightmare for you , despite the price increases. That is actually a win win situation, though, since you can now move to another quaint town elsewhere while taking a pile of cash with you, with the perhaps important caveat that you do lose your proximity to places and people you may consider more important than the money.
These imaginary scenarios do not align with typical real world experiences. Very few people live near a dump that closes or see their small town unexpectedly boom (and as brabel notes, that’s not necessarily a benefit).
Most people’s home values go up because of 1) increasing housing demand and 2) the collective delusion that home prices can continue to far outpace wage growth indefinitely. Neither of these things necessarily result in an increase in amenities or improved quality of life.
My own home value has gone up something like 70% in the last 10 years. Meanwhile, the amenities near me are essentially unchanged. Same schools. Same number and quality of restaurants and grocery stores. My net worth has jumped a fair bit but my immediate benefit seems pretty much flat.
> One way out could be to tax the value gain at the time of sale, or when the house gets rented out, thus no longer being “owner occupied”.
Forcing renters and buyers to pay for the local services instead of property owners seems extremely unfair.
> Any increase in housing value (and thus property taxes) is mostly an increase in the cost of living.
So? If the property values go up then cost of living is going up for renters too. Why should property owners be shielded from this by imposing local service costs on renters who generally have even lower incomes than owners.
> One way out could be to tax the value gain at the time of sale
This is how it works for sales in Sweden, via the so called "reavinstskatt", or profit realisation tax. Funnily enough, it is mostly applied to individuals in practice. To avoid the taxation, companies package properties in subsidiaries, which can then be sold and traded like any other stock. The tax is then postponed until the de jure sale of the property, which never occurs. Individuals are not eligible because the loophole is closed if the legal owner also occupies the property they own.
What I don't understand is (because I honestly haven't been afforded the time to sit down and think about it, also it's frustrating), why do taxes generally trend upwards for the average person? Doing napkin math it seems to have gone from ~10% to ~28% for average family. These are %-based, why does it need to change? Why can't cities/towns/counties work with the money their citizens can give?
Happening in Austin, Texas recently. City cites:
- Rising cost of core services
- Weak sales tax revenue. This is the city’s second-largest revenue source, and it has slowed or dipped.
- A shrinking property tax base. Officials point to falling property values, appraisal protests, more business tax exemptions, and little new construction adding value to the tax rolls.
- Disappearing one-time money. Pandemic relief funds have run out, and federal funding cuts were anticipated.
- Rising service costs. The new budget’s highlights include $6 million more for permanent supportive housing services, $6 million more for fire overtime to keep four-person staffing, and extra EMS overtime. Employee raises and social services were also major line items.
It is frustrating... if core services are costing more, cut extracurricular services? Why would you lean so much on sales tax, seems obvious this would revert to a mean? If your budget is reliant on infinite new construction it seems a bad budget? Why is pandemic relief cuts a shock to anyone? More housing services? I'm empathetic but there's more homeless than ever before. I know it's simplifying the problem but it just feels like people are punished with permanent tax increases for governments spending more than they should... we start with a new "floor" tax rate and repeat forever? Is it going to get to the point where we work 50% of our time just to pay taxes?
In New York state half of property taxes is for county contributions to the state medicaid fund. This excludes the seperate schools tax which is property based. Health care costs drive up many costs in the US including all libality insurances. The second part of this tax mess comes from the excessive military budgets since the late 1970s most of our national debt as of the mid 1990s was from that waste of resources. I understand we shouldn't just cut abruptly but our spend on weapons needs to slowly decline while we fund the transfer of workers out of the military industrial complex. And there are a lot of structural accounting problems like how personal credit card and automobile financing isn't tax deductbable but leveraged buyout interest is. The tax exemption for share buybacks is another budget drain. My instinct is we need a universal national income tax along with a land tax that in some ways exempts housing up to some middle or upper middleclass level.
> In New York state half of property taxes is for county contributions to the state medicaid fund.
That is an insane statistic. Surely the state can throw some weight around to say enough is enough?
I just had my own insane encounter with healthcare. They "accidentally" billed us insurance rate which was about 4-5x more than self-pay. Why is there 4-5x overhead when dealing with insurance? (I know there's the negotiation stuff) but also seems to be quite a mess. I'm actually more mad at hospitals and clinics lately than insurance. Seems they have agreements with companies to "dispense" things at 4-5x the actual price, expecting insurance or taxpayers to pick up the tab. Seems like blatant fraud.
Sorry for the rant, I agree with everything else you mention :)
> In New York state half of property taxes is for county contributions to the state medicaid fund.
Chicago..hold my beer. 80% of taxes here go to funding pensions for 2% of city population. Our parking meter money goes to gulf countries because we sold them to pay for city services back in 08.
People, as a rule, do not want less service. Services generally function like a ratchet, where once one has been added it is incredibly difficult to get rid of.
So not only is the cost of service to be thought of, but the quantity of services.
The same happens within services too. The police got a helicopter 5 years ago, are they going to turn down another one, or are they going to explain why the new one needs to be more expensive with more capability? Multiply that across every agency.
> People, as a rule, do not want less service. Services generally function like a ratchet, where once one has been added it is incredibly difficult to get rid of.
Makes sense, totally agree... however I don't think generally citizens want to pay _more_ taxes... or at least eventually there's a point where they say enough is enough.
> The same happens within services too. The police got a helicopter 5 years ago, are they going to turn down another one, or are they going to explain why the new one needs to be more expensive with more capability? Multiply that across every agency.
This should be stopped. Creates exactly the sort of ratcheting effect you described. Mind boggling to me. I've been in-charge of small budgets and buying more stuff after making more money is a big decision, not taken lightly because we can't assume present returns will match future returns.
> we can't assume present returns will match future returns.
Funnily enough, after spending some time in public service albeit in another country, genereally budgeting for public agencies works almost inverse to this.
If you get allocated X budget but only spend 0.8 * X, then next time you will almost always get <X. This is in itself reasonable, you don't get more allocation than you need. In practice though this means you are incentivised to not save money from your allocation iff you expect to need more in the next period or do not want to lose your allocation (maybe a renovation or smth similiar has been pushed back due to external factors).
Oh for sure, just ask the residents of Austin if they feel services have improved over the last 10, 20 years! I imagine there will be quite a bit of bias and "rose-tinted glasses" but generally speaking I don't think they feel the price tag is reflective of the services they're getting. On that note, not sure why people seem to think of governments as some sort of subscription they pay for and get services in return... but perhaps that is a discussion for another day :)
I don't know about Austin, but where I am the single biggest source of rising costs for the city seems to be its pension fund. Which seems to have severely underperformed the market thanks to the efforts of hedge fund managers who were all hype about dotcoms in 1999, mortgage-backed securities in 2006, cryptocurrencies in 2018, and are probably pretty excited about AI right now.
I think land-value taxation, with a cap on properties based on income (and wealth) for your first home, is the way.
I do think there is something special about the idea of home, and that home ownership should be encouraged. It brings people stability. People shouldn't be pushed out just because others have more income than them.
At the same time, we do need property taxes. In California, rate increases are capped, so older owners often pay pennies compared to new homeowners. Harmonize the taxes, while capping it.
Consider my neighborhood in Chicago. It has gentrified rapidly over the past couple decades. But it wasn't always so wealthy. My retireee neighbor probably bought her house for no more than about $100,000, but now the market rate for a house like hers is more like $500,000. With that comes about $20,000 per year in property taxes.
That might be reasonable for the wealthier families who are moving into the neighborhood and driving up the land values. But it's pushing her into poverty.
No, its pushing her into a cash flow problem. Its not poverty; she has substantial wealth, but its all in the house.
There are mechanisms, of course, to access that wealth without moving, including ones specifically geared toward income-limited house-rich retirees.
Now, those end up creating a debt that must be resolved before transferring the house, including via estate, so living on the value of the home reduces its utility as a vehicle for generational wealth, but...unless you want to reproduce California’s system which makes it much harder for people to become homeowners while rewarding those who already have, eapecially the wealthiest, making the rich richer and what would be the comfirtable middle class anywhere else in the country poor, that’s the way it works (and your exact scenario was the major sales pitch that was used to sell the California system; its maybe understadable how people without 50 years of California’s example fell for it then, but...)
So your solution is to take the house away via a second mortgage?
Why are we trying to take houses away from homeowners? Many who have lived in their homes for twenty years or more. What services that the city has could be so important to push residents out of the homes they've lived in all their lives? Most of it is inefficient pork on admin and roles the people living there didn't choose to hire for.
Build more. Encourage building multifamily. Pay to buy these homeowners out of their single family and convert the land to multifamily. If you can't pay, don't try to make it up with tax increases. That forces people out.
Deregulate and build.
Maybe a city failing to stretch services will send new residents seeking other cities, which would be healthier anyway.
Or maybe property taxes should be based on the services rendered. If they increased from $1,000/year to $20,000/year and you subtract away the inflation here is the city government delivering more value or less?
In my city and others our city council delivers large grants to non-profits and other entities under various auspices. “Defending gay rights” is one, or maybe helping the homeless or something. Of course I support both causes in general, but if the city gives a million dollars away maybe we just have to have some people kicked out of their homes to pay for these programs?
You can say well we will just raise taxes on the wealthy. Sure yea, whatever but that isn’t a viable long term strategy for places outside of California or New York which have an ability to capture wealth better due to intrisinic location value. There are only so many “rich” people. Could I afford another $10,000 in city taxes? Yea. I won’t be able to go out to eat or shop at local business as much though. So then what happens? Do those businesses go under? Raise prices? What about their property tax? Maybe instead I sell and take a loss on the house and the market value goes down so now that home pays less in taxes (depending on how this stuff is measured in a given jurisdiction).
> Maybe a city failing to stretch services will send new residents seeking other cities, which would be healthier anyway.
Yea. Tell Google and Meta and whoever to stop putting more jobs in the “cool” cities and come to Ohio where I live instead of these data centers.
This stuff is rather complicated, unfortunately. Even the case of a city let’s say “building affordable housing” is arguably a benefit to the local homeowners, but if you do that yea sorry Granny McPension has to pay for it too - she has a house, she’s wealthy!
> Pay to buy these homeowners out of their single family and convert the land to multifamily.
But that's what the market is already doing? In your example from above, you can take a $400,000 windfall and move somewhere else, or take out a mortgage against that $400,000 of new equity to pay your taxes and still come out waaaaay ahead. I don't understand your characterization of a second mortgage as "taking the house away" at all.
What poverty--she owns a house worth $500k.
I think deferral schemes where certain individuals can pay taxes upon sale of the home (with fair interest) should be fine to avoid forcing anyone into a reverse mortgage.
Houses are not the same thing as cash or other fungible assets.
Especially not when you're getting older, have limited ability to manage a move for yourself, built a life and raised your kids in the building, and would have to consider unloading a lifetime's worth of objects and/or moving infeasibly far away from your friends and community to get into a living situation that's more financially tenable.
> Houses are not the same thing as cash or other fungible assets.
> Especially not when you're getting older
Houses are wealth. And the wealth in them can be accessed while retaining use of the house. Especially when you are getting older.
Why are we replaying the dishonest “think of the retirees” now? It was bullshit in California in 1978 to sell Prop 13, and its even bigger (and more transparent) bullshit now when, especially when it is used to sell the same basic idea.
How can someone be so out of touch? A person buys a house, spend a whole life there, and through no action of her own happens to live in an area that drastically appreciates in value over the decades, all she wants is to spend her last few years in the same house that she loves and would never consider selling, and now we ask them to kindly pay all their income or more in property taxes, otherwise fuck off??
And where would she move to? All decent areas probably also increased in price, her property went up 10x in value but so did all other properties she would contemplate to buy. That’s the fallacy of thinking property is wealth when talking about your only residence.
The suggestion is that this person can get a mortgage to pay their property taxes over the next 20 or 30 years as part of their retirement - or they can sell their property and live well in a cheaper location.
Claiming that the retiree has a right to both the home value and the ability to live there is the friction point. It reads as hollow in the face of rising homelessness and the inability for young people and families to access housing.
All else equal, I can see why the ability to live in the same house until you die would be given a high moral value. But in practice, IMO, this culture causes a number of problems. For instance, where I live, there was a lot of growth in the 70s and 80s, and a lot of young families, so they built a bunch of schools. It's an attractive place to live, so a lot of those people who lived in those houses when they were new and raised those families and attended those schools have kept living in those houses. But those kids that they raised there can't live in those same neighborhoods as adults, because there's no turnover, so they can't raise their own kids there. So now the schools are all half (or less) full, because the neighborhoods they were built to serve no longer have a lot of families living in them. So then they have to close and consolidate schools and everybody hates that. I don't really have a strong view on the moral question of whether houses "should" be owned by older people who have lived there a long time or by young people families, but from a pragmatic standpoint, this situation seems quite bad to me.
I think if we had a totally different culture, with multigenerational families living in the same house, then this might work better. But this model where we build new family friendly neighborhoods with parks and schools, and then nearly everyone ages in place and all the family amenities become empty over time, and the families all end up in the next new neighborhood and then it repeats, this doesn't seem ideal to me.
GP is not forcing the retiree to move. GP is instead advocating retaining the use of property while reducing the cash flow burden. Asking someone to get a cash out refinance is not morally bankrupt; it is a pragmatic and fair solution. Some states also have deferred property tax schemes; these are even better. It is only fair for someone who, by luck, paid $100k to get a house that is now worth $500k and lives in a neighborhood that is now far better than when she bought the house.
The comment you are responding to is saying the opposite. They are saying that the person can access the wealth of the house (eg via a reverse mortgage) in order to pay the taxes while staying in the house. That's what this meant:
> Houses are wealth. And the wealth in them can be accessed while retaining use of the house. Especially when you are getting older.
Simple example. I bought the house at $100k. It's now worth $500k. That means I owe $20k/yr in taxes, but it also means I have $400k of additional wealth. A bank will lend me money with that wealth as collateral. If you imagine that the interest on the loan is roughly equivalent to the rate of appreciation of the property going forward, that's 20 years of taxes paid for by the increase in home value. Seems like a pretty good deal for everyone!
Defered property tax for elderly can be (and usually is) implemented as a lien on the estate, to be settled upon the owners death. Do you heve any problem with that? Or should we now also think of (inheritance of) the children?
"And where would she move to?" -- Either the graveyard or the incinerator? She's dead... the bill doesn't come due until after her death and is settled from the value of the house.
It's classic neoliberalism think which for some reason the tech crowd is unreasonably susceptible to. "Oh you're poor? Can't afford your bills? Must be your fault." It's utterly disgusting.
So your solution is to force her to sell her home and move? Move where? I've seen this in so many areas of the country where property taxes on your property are tied to market value rather than purchase price. It drives retired and lower income people out of neighborhoods that they have lived in for decades, forcing them to move down the scale of home ownership.
Perhaps the retired person is living on a fixed income of $40k/year. Over time their proterty taxes on the home that they have lived in for decades can now be more than half of their total income? How is this fair at any level?
How is it fair that working people have to pay 10x for housing than she did when she was young? How is it fair that the money goes to her inheritance while she made her working neighbors pay her share of taxes?
Of course, let's let yet another corporate land grab take even more residential property off the market for profit-based motives. This can't possibly do any more harm than locking property taxes at the time of sale.
Where I live, we are looking at locking property taxes once you hit a specified age (65) and have under a specified income ($40k+/-). The current debates revolve around exactly what those numbers are and at what level the taxes get locked. The goal is to protect the elderly who have already contributed to the economy and society for 40+ years and not force them into a financial situation forcing them to sell their home just to pay even more property taxes that they have paid for the entire ownership.
Meeting the basic needs of the population, by having enough housing and preventing hoarding of housing by wealthy individuals, is not a "coporare land grab."
We are clearly talking about different things. I'm talking about protecting single home homeowners on a fixed income from being forced out of their homes. Staying in the only home she owns is not hoarding.
Telling people that the solution is to sell their home to an insurance company as a solution is most certainly a corporate land grab.
You seem to be arguing about people/corporations that own multiple homes or even entire portfolios of property. These are not the same argument.
The solution is not necessarily to sell, they should only do that if they want.
If their asset is gaining in price so much that the tax burden is getting high, then tax deferement until a liquidity event both keeps them in their home, but also keeps them honest about how much they are taking away from the rest of society by taking that piece of land.
Why should this person take up a family home in a desirable area? It is inefficient. The pressure she is feeling to leave is the system working as intended.
We shouldn’t prioritize efficiency when it comes to moral matters. That’s a bad idea for the government.
People’s primary residences are more than just an economic asset. If you don’t understand that, it’s difficult to have a conversation as we have very different starting points about morality.
Well she doesn't have the 500k. This is akin to saying we should force people out if market conditions make their house more expensive. That seems like a really strange consequence to all this, idk
$20k on $500k is 4% annually, which is really high. I'm not seeing any Chicago neighborhoods that are this high (looks like a max of maybe 2%) but perhaps I'm missing something about how Chicago works?
Why can’t she pay from her retirement accounts? 20K/yr isn’t all that much considering today’s cost of living. The stock market has skyrocketed in the last decade and change.
I also don’t buy 20K of property tax on a 500K home, that’s a 4% tax which seems unlikely in Chicago.
You don’t need to be rich to own. Some people are lucky to buy a home where/when it’s cheap. Imagine the value (and taxes) outpacing your income. Like an elderly person with fixed income.
Either it's really valuable, and they can borrow money to pay taxes, or it's not and taxes are low. But people shouldn't be allowed to freeload on the work others do to make the property valuable.
Borrow money needs to be paid back. It's entirely possible and it wouldn't be a surprise someone retired lives for 30 or 40 years, accruing all that back taxes have to be paid up until eventually the taxes are worth more than the house.
The boatman doesn't charge money, so what's the problem with that? They got to live somewhere other people invested to make nice without extra money out of their pocket.
Well you might need to if the property taxes can spike like crazy, which is the point some people may be making. You could budget a mortgage but with taxes as a substantial wild card, it can blow up your budget.
Because a cap or exclusion or credit for your primary home lets people who can just barely afford it to purchase their own home. And that's a good thing.
I'm not sure it is. If you can just barely afford a home, that also suggests that you don't have enough financial cushion to deal with all the little surprises that come with homeownership. Worse, you might be ill-positioned to weather a something like a recession. Recessions are nasty things and have a tendency to cause people to lose their jobs and become underwater on their home loans in rapid succession.
Now, apartments can suck too. Especially in places like the USA where we have a landlord cartel actively pushing up prices, and a professional landlord president who shut down an antitrust investigation into said cartel shortly after entering office.
I certainly can't say I have all the answers here; right now housing sucks every way you look at it. But I do believe quite firmly that this idea that going very deeply into debt and securing it with the actual roof over your head is somehow good for a person's financial security is an idea that mostly serves the interests of people who earn a commission on convincing people to get into that situation.
Even assuming things just increase at the rate of inflation, a house you can just barely afford today is a good investment because in 20 or 30 years that house is going to be worth far more while your payments have stayed the same and your income has increased.
Note that I'm very against cash out refinancing, which a lot of people are doing to get the cash that the house is worth. In my opinion the best reason to have a house is in 30 years it's paid off and now you can live there rent free for the rest of your life.
I just don't believe that that math works out so easily if you run real numbers.
I am a fairly recent homeowner. Before that I lived in an apartment in the same neighborhood. I like owning the house and having control over the space. I like having a bit more space. But, after I add up home loan interest, taxes, homeowner's insurance, higher utility bills, maintenance, etc., the amount of money that I will definitely never see again adds up to quite a bit more than I was paying to live in an apartment that, square footage aside, was aesthetically much nicer and better situated than the house.
And then, yeah, some additional amount goes to equity in an "investment" that is less liquid and historically earns a lower rate than a decent index fund.
When a person buys a home with a mortgage (congrats, by the way!), they gain the possibility of getting some return on the money they spend to have a place to live. It might work out long-term or it might not, but there's a chance (and it's often a pretty favorable one) that it works out well-enough as the years tick by that the light at the end of the tunnel keeps getting actually-closer.
Every day, thousands of folks do emerge from that tunnel and gain the ability to make profound statements like "Well, at least the house is paid for."
This is in stark contrast to renting, wherein: There is absolute certainty that none of the money spent towards having a place to live will ever be returned. It doesn't matter how much is spent: Whether a little, a lot, or a lot more, that money is always just unilaterally gone. There's no chance at all of anything else happening. The odds of winning are nonexistent. There is no light at the end of the tunnel, and there never can be -- it's just inescapable darkness in there.
> But, after I add up home loan interest, taxes, homeowner's insurance, higher utility bills, maintenance, etc., the amount of money that I will definitely never see again adds up
So your landlord was renting your apartment to you at a loss?
You're just arguing what "barely afford a home" is. Ok, it has to include a maintenance budget. And maybe a financial buffer. But those are true regardless of taxes. That doesn't mean that there are lots of people who can afford the home and the maintenance and some taxes but not the full tax amount.
> I'm not sure it is. If you can just barely afford a home, that also suggests that you don't have enough financial cushion to deal with all the little surprises that come with homeownership. Worse, you might be ill-positioned to weather a something like a recession. Recessions are nasty things and have a tendency to cause people to lose their jobs and become underwater on their home loans in rapid succession.
'Tis better than to have owned and lost, than to have never owned at all.
> Now, apartments can suck too. Especially in places like the USA where we have a landlord cartel actively pushing up prices, and a professional landlord president who shut down an antitrust investigation into said cartel shortly after entering office.
So rather than ever own a home, just rent. It's about the same as taking a pile of money out into the middle of the street every month and setting it on fire, but what else can a person do?
That's looking at the ability to buy ONLY as a numbers game, but it says nothing of the emotional effect it has on actual buyers. I bought a house. I can ask for a raise I'm worth it. I am doing well now... I'll get a better job next. Now I have a wife and kid and they want me to do better. etc...
While not all stories are like that, many are (in fact most are).
>"If you can just barely afford a home, that also suggests that you don't have enough financial cushion to deal with all the little surprises that come with homeownership. Worse, you might be ill-positioned to weather a something like a recession. Recessions are nasty things and have a tendency to cause people to lose their jobs and become underwater on their home loans in rapid succession."
Except you have to live somewhere, it's not like buying a boat. All of these dangers apply equally to owners and renters. Yet the protection you get from owning in that situation is massively advantaged over renting. Lose your job and can't afford your mortgage? Oh no, guess I'll have to take out a HELOC, or apply for forbearance, then wait years to be foreclosed on and declare bankruptcy. Lose your job and can't afford your rent? Sheriff's knocking on the door in 90 days to throw you on the street.
Likely because of legacy homeowners who bought their $2m home 50 years ago for $25k and are now retired. They don’t have the income to pay those taxes even though their non-liquid net worth is way high
Maybe you’re referring to someone who owns multiple properties… But I think if someone owns the house they live in, there should be a cap once they reach a certain age. My Mom is retired and owns her home, but she still effectively pays rent on the property. She has a fixed income and the property tax comes in around 16% of her monthly income.
That doesn’t seem too bad, until you see all of her other costs have gone up dramatically because inflation has been high post pandemic. She only has so much money to spend every month, and if her property taxes kept going up too, she’d eventually be unable to afford to live in her house. She only owns her home because she was worried about being secure later in life and prioritized it above things like vacations or cars.
For a lot of folks as they age, even if they’re frugal, it’s not easy to survive. If you live for 20-30 years after retirement you’re likely to have your buying power cut by half if not more.
With that said, if someone’s home is worth more than say 10x the average price in your area, or your assets are $10+ million[1], I think there’s room for increased taxation. My primary point was simply being a property isn’t necessarily the right measure to determine a reasonable tax rate.
[1] The number obviously depends on where someone lives. Living in New York or SF, $10 million dollars of assets would be an extremely comfortable life but most likely not a lavish lifestyle. But… $10 million dollars in rural Mississippi is going to have you living an extremely lavish lifestyle.
Raise capital gains taxes then on those who inherit the property. It’s not extremely unfair to reward folks with a home to live the rest of their life in… I’m also not sure at all how it’s excess wealth to own a home. Most people in retirement now bought their homes at reasonable prices, that well exceed what they paid for or perhaps even made in life. If they sell they can’t buy something else.
By your logic anyone who is retired and has an asset appreciate should immediately sell it, and be forced to move somewhere else.
I cannot afford a home in Portland where I live. I could probably make the mortgage but it’s too risky in my opinion to have a 30 year debt obligation. None of my friends own their own home, not a single one. We’ve all just entered our 40s. The lack of somewhere to live won’t be fixed by a lien, nor will liens on an individuals actual home due at death fix it. It will absolutely incentivize investors who can exploit that, who will pay the liens and add to their portfolio.
If we want more housing at better prices we need to encourage development of more housing. That means making cities more dense and removing NIMBY policies which prevent it. Sure some of these homeowners may be voting for those policies, but they are the minority in larger cities.
Land value taxation is the worst idea ever. I already don’t like the idea of property taxes, where you have to pay for a piece of land you own. The ideal should be that unless you’re making use of public services you can live a free life. You should not have to pay just to exist. I’d much rather that income is taxed for the higher tax brackets more.
I don't like taxes but I also like having roads, sewage treatment, 100+ psi water pressure, multi-gigabit internet access, and a reasonably constant flow of electricity. The cost of public education and the management of that system is the only serious concern I have with my local taxes.
I actually don't mind the cost of living in my neighborhood going up. The $2500/yr HOA fee is a feature for me. I picked this location precisely because of it. I've lived in many places with virtually no maintenance overhead or economic friction. You may eventually learn that there are two sides to this coin. Neighbors who can afford and are willing to participate in ridiculously scaled housing markets also tend to take better care of their properties and local communities.
> Neighbors who can afford and are willing to participate in ridiculously scaled housing markets also tend to take better care of their properties and local communities.
Whereas you take great care of your local community by even refusing to live around anyone not as well off as you ?
Imagine the horror of having to live within 10 miles of a low class smelly poor plebeian, you might have to lay your eyes on their 3 days overgrown lawn from time to time.
This works in other areas of life. A courtesy charge creates a better environment by giving participants skin in the game and filtering out actors who wouldn’t mind abusing you but wont pay to do so.
In this country of oh-so-much freedom and journalism how can a layperson like myself check whether in the final degree my tax dollars are really paying for someone’s collection of vintage Ferraris, hidden behind an inconspicuous budget item?
Wait until you get a tyrannical HOA board and realize you have to make a choice between dealing with them or moving. Dealing with them typically involves lawsuits which come out of your HOA fees, which will go up along with all your neighbors who are now angry that their fees have gone up as well. (Ask me about open records my HOA hasn’t delivered for over 350 days.
I pay my city for sewer, water, and trash. I pay an ISP for fiber to the home, a power company for electricity. If you get all those things for $2500/year from your HOA, congratulations.
My friends lost a battle to paint their garage door a slightly different shade of white than the approved Pantone shade. No private entity should ever have that degree of power over one’s private life. Petty tyrants, I tell ya.
Sure, I meant this more in the sense that my friends' experience trying to very gently and largely unmeaningfully deviate from the petty tyrants' decrees taught me I never want to live anywhere near this type of governance structure. (unfortunately HOA-less developments are becoming more and more difficult to find and so whether you read the contract or not is slowly ceasing to matter - do you want a house or don't you? John Oliver did a great video about this stuff if you're so inclined)
all of those services are ones that should be realized by the city, from taxes paid to the city. If they are not, the problem is that people vote for wrong people
The problem with having the city pick things like your trash pickup is that you end up bound to whatever choices they make.
In Canada for instance, I’ve seen towns where they have pick up once every two weeks and the canister is not even a full size one. It’s a “gentle” push to get people to recycle and compost.
HOAs in general are nothing but classic American privatization of that which would otherwise be public, because counties and cities here either lack the tax base (rural), budgeting skills (urban), or both, to provide the services some subdevelopments are built with.
It’s dumb. Here in Washington it’s rather common, I’m finding, for rural land plots to be part of a “Road Maintenance Association”. Exact same legal construct as an HOA, but scoped only to road maintenance on roads the county didn’t want to deal with. It would make so much more sense for the county to socialize those roads and reuse the same maintenance crews and vehicles for these stretches of road! But instead, a private entity pays through the nose to duplicate all that maintenance infrastructure (or pay contractors).
In most jurisdictions (not califoria) property tax increases are somewhat unlinked from your actual property value
1) the tax entity sets their budget (usually an increase)
2) the valuation group values all properties
3) the tax entity sets a tax rate to raise their budgeted amount. budgeted amount = tax rate * total value
Most people think if their value doubles, their tax doubles. This mostly isnt the case. If everyone's value doubles, the rate decreases so they raise the budgeted amount. Mostly property tax increases are due to ever increasing budgets not rising values.
1) If everyone's value stayed the same, and the budget increased, your tax would increase by the amount of the budget increase
2) if everyone's value doubled, but the budget stayed the same, your tax would not increase
3) if your value doubled, everyone else's stayed the same, and the budget stayed the same, your tax would double.
Let’s say you wee solid middle class and bought your forever home, in what was at the time, the near suburbs. Now that neighbourhood is unaffordable. The city might set a percentage of the home value as their target but now your well placed forever home is beyond your what your pension can afford. This happened a lot in Canada.
The worst part is that for all these taxes, the level of service has dropped since that home was bought.
Because boomers voted to defer fully funding pensions until later. Now it's later. We're paying for past work and current work.
In Washington State, Puget Sound Energy is a for-profit utility owned by mostly pension plans! Their guaranteed ROI is sucked out of the productive economy. Everywhere you look rent is being extracted either by the 0.01% or the elderly, and the working class must slave to get 1/10 what they gave themselves.
At the level of an economy, I don't see how funding model can make a difference. Ultimately, there are now old people that want/vote for some level of service, and young people that provide it to them. The young people can and perhaps will at some point decide to revolt, or the old people will die.
Not an economist but I don't see how money can be anything other than an accounting tool at that level. If they had "paid for it" back in the day, young people would still be screwed.
The two big ways to increase prosperity that I see are for people to take care of their health so they need fewer medical services, and for fewer people to be devoted to administration (e.g. the medical billing quagmire, SaaS companies focused on how to better extract rent) or convincing people to buy stupid crap (c.f. the giant advertising industry that swallows up bright workers to build a surveillance and propaganda apparatus instead of e.g. industrial automation), fewer pointless wars, and more people devoted to actually doing things people need or building infrastructure (e.g. solar).
> there are now old people that want/vote for some level of service
The problem isn't that there are old people, is that there's currently a glut of old people, which puts real strain on the system. Being old is expensive for governments. Not only do older people not typically pay nearly as much in taxes, they also require more resources to support.
So many of today's problems come down to the simple demographic fact: there's a lot of baby boomers, and they're getting old.
Isn't it better for society if retirees downsize to a retirement community and allow young families to move in to the neighborhood with schools and amenities?
While that may be useful, there should never be a necessity to move out of a house you’ve paid off, and quite well may have built up to support your own aging in place. Some people want a “forever home”, and that’s okay.
In some countries and cultures the good of the many comes before the good of the individual, no matter the sacrifices required to get there. The US (and to a slightly lesser degree, Canada) generally does not subscribe to such a cultural mantra.
Edit to add: for the cases where the societal good really does outweigh the personal good, we have a tool for that: eminent domain, which is how we build train lines and so forth.
A point against: if someone was an early adopter in a community that urbanized over 30 years, in effect the increased value means their future ownership at present rates requires the collective subsidy of their neighbors. Young families subsidizing the elderly in this way is a huge issue in tax burden disparity where I live.
How so? e.g. anywhere I've looked, schools are a huge part of the budget. Special education alone is over 10% of the county budget where I live. Schools in total are over half of city+county. The elderly wouldn't be contributing to service demand there. They're likely also not going on tons of crime sprees necessitating police, generally another large budget item.
Like another poster said, things like pensions and medicare might overall drain the entire economy, so the end result is the same, but that seems more diffuse than local tax bases, and wouldn't properly appear in local government budgets.
If we're going for a "better for society" angle, I have so many other things that are far more impactful for society and less damaging to the individuals that we will never get around to messing with evicting pensioners so younger families can use their spot to get to school.
This is but one of the ways well-meaning people get displaced. And, frankly, th the is hypothetical family is the most fortunate of that class. They have equity and a pension. Playing my tiny Monoprice violin, from the 4th apartment I've lived in over the past 10 years (not including couch-surfing). And even I'm still on the "fortunate" side of the line, if just barely.
I don't think people really understand how bad it is out here. I imagine that if a dignified line on the base standard were held, there would be less of a need for this kind of middle-class pearl-clutching.
I live in a municipality that taxes like OP and you don't understand how OP described it. Lets try with easy numbers:
Y2K: buy an 1/8th of a million dollar house. There are 10 houses in the village and an annual budget of $10K. The total value of all houses in my village is $1.25M but it really doesn't matter. As the owner of 1/10th of the "total housing value" in the village, I pay 1/10th the annual budget of $10K which is $1K prop tax.
If your mental model is the city tax rate is 0.8%, that is ... numerically correct but its mere numerology.
2026: house is now worth 1/2 of a million dollars. There are 10 houses in the village and an annual budget of $10K. The total value of all houses in my village is $5M but it really doesn't matter. As the owner of 1/10th of the "total housing value" in the village, I pay 1/10th the annual budget of $10K which is $1K prop tax.
If your mental model is the city tax rate historically was 0.8%, then you'd have to pay $4K/yr, but it doesn't even remotely work that way, so it simply doesn't matter. Its just numerology. My fraction of total property ownership "value" times the annual village budget is what I'll be taxed, which in this case is the same old $1K.
In reality grandma gets kicked to the street because inflation raises the price of everything, including real estate, but real estate is not even remotely the problem or the solution. Grandma might have afforded a house and its taxes when a McDonalds Big Mac was 75 cents each but now that its $13.49 the village budget has gone up 10x, 20x what it was when she bought, so she better find a way to make 10x, 20x more money or not only is she not going to pay her fair share of the budget via taxes, she's not going to eat food either.
"Now that neighbourhood is unaffordable." Thats the real problem. No one can move in and pay the city budget, and the city budget explodes because now they have to pay the dog catcher at least $250K/yr to live there and nobody can afford to rob peter to pay paul quite that much...
Depends on the jurisdiction. I've lived in both, budget based rates like you describe (Minnesota), and fixed rates with market based assessments (D.C.). I wonder which is more common.
It seems like we should tax non economic wealth hoarding more not less. We have a glut of elderly people occupying houses that are far too large for their current needs while young families can’t afford larger homes. People forget that part of what property tax exist is to encourage dormant assets to trade hands from Low economic use to higher economic use. If some isn’t using a property to its highest and best use because there are no carrying costs then they will just hoard it and have no incentive to sell it to someone that could use it more productively.
It would make a lot more sense to increase the carrying costs of homes so that people are inclined to sell them when they no longer need a particular configuration.
It's not necessarily that people forgot that reason for property taxes existing. Many voters fundamentally disagree with that as a valid reason. This is a matter of ideology and values as much as economics, and not everyone shares your priorities. You can label them as greedy hoarders or whatever but that won't change how they vote.
I don't know how economics escaped basic elementary/middle school curriculum. There is so much confusion in people's lives around money, and so much destruction that results from it, yet we still don't teach the basics of what is going on in school. It's totally perplexing to me.
Most people aren't capable of understanding numbers: https://politifact.com/factchecks/2020/mar/06/msnbc/bad-math.... You can't educate them to do it, any more than you can educate your average person to be able to reliably hit three pointers. It's a physical limitation.
That's why socialization is so important. You can't get voters to understand the difference between billions and trillions or put anything in context when the numbers get that big. All you can do is socialize them from an early age to have directionally correct gut feelings like, "there's no such thing as a free lunch" or "saving is good."
Hilarious. They were right to do the comparison, but got it oh so wrong.
I was recently trying to understand Elon Musk's wealth, and come up with similar comparison: For example, he could make millionaire's of every single person in Seattle, and still have hundreds billions of dollars of wealth left over. Truly mind boggling.
Elon doesn't have a pile of cash, and it wouldn't be possible to convert his assets into cash either (without an incredible discount). This is true for most billionaires. In fact this very fallacy is part of what I'm alluding to with "we need to educate better".
So while fun thought experiments are excellent selling points, they aren't actually grounded in reality.
Economics class is usually in high school and it's optional.
Schools are really expensive to operate. Most districts and schools make it easy to graduate to maximize their graduation rates. Standardized testing is suppose to catch local lowering of standards but state departments of education are also under pressure to maximize test pass rate. So resources flow into pulling the bottom quintile of students up to a minimum standard. This means teaching to the test on math and English, and de-prioritizing other subjects or dropping them entirely.
We could expand the breadth of educational basic standards. This would require a cultural shift in valuing formal education more, increasing teacher training/recruiting resources, making schools year round, more centralization of education budgets at the state or even Federal level.
Generally speaking public schools tend to be better in states like Massachusetts than Kansas.
In the majority of states in the USA, districts in the state are not allowed to graduate students without taking both an econ class and a personal finance class. Kansas is one of the stricter states. I can only think of three off the top of my head that do not mandate econ/finance classes, Colorado, Massachusetts, and Washington. Pretty hilarious to claim MA has better education requirements than KS LOL when its the other way around. Also hilarious when the average SAT score in Kansas is 1256 vs a mere 1128 in Massachusetts, LOL. I can't immediately think of any way that the schools in MA are better than KS, which is pretty funny. Is there even one stat or requirement where MA beats KS? Maybe college sports scores...
That said, public schools are mandatory pass, and the kids know it.
I think the problem with education is the prepack solutions sold by politicians intentionally don't reflect reality, sometimes intentionally reflect the opposite, and are designed to be ineffective or even actively counterproductive.
Looking around, it looks like MA beats KS on most metrics. For example, 55% of MA students take the SAT, while only 2% of KS students take the test. There is a reason that MA always ends up at the top of lists that rank public education while KS is much lower. To be fair, KS has been improving in rankings quite a bit, which I agree MA has been unable to do.
MA did pass a personal finance requirement for schools earlier this year. Like many other states it doesn’t have to be, but can be a stand alone course. While it may seem like MA is lagging behind, the majority of those requirements have been put into place within the last 5 or 6 years, so this is pretty new in most places. And a lot of states have done things that seem counter productive, like allowing a personal finance course to replace core math requirements. MA typically lets schools figure out how to implement requirements, so as in most cases the wealthier areas will figure out a high quality way to do this, and the poor areas will do their best to meet the state requirements for the lowest cost, providing less benefits to the students than it should. (Yet another reason that relying so heavily on local resources for public education is a poor choice).
Likely it just means that college-bound students (which should be ~1/3 of young adults based off educational attainment levels in the US), strongly lean to taking the ACT.
I know cynics would run to say this, but on the whole the lack of knowledge is an unambiguous net negative even to the powers that be. And they even know this, but somehow it's still expected for people to just innately understand what's going on, but they don't. And everyone else who does have the insight just ends up perpetually frustrated.
The "lack of knowledge is an unambiguous net negative even to the powers that be".
I think it's far more ambiguous and less measured of a net negative, than it is a clear, measured net positive for the "powers that be" if we define them as the wealthy.
You can take a very clear, measured look at wealth distribution over the past 50 years.
I have never worked with anyone in business who wished their customers had less economic/financial literacy. Just endless frustration.
On the other hand, you have a massive contingent of people who are constantly scoring own goals because their economic insight is purely an emotional surface level intuition.
It depends. Predatory salesmen are happy to oblige a customer's desire for a $299 monthly payment, while glossing over the 84 month schedule and 12% interest. They have a very short term view. Uninformed customers are like shooting fish in a barrel.
A mainstream bank takes a longer term view. They offer financial literacy info for customers who are interested. If a customer overdrafts less frequently and is able to leave significant amounts of money deposited the interest spread is more profitable than collecting overdraft fees.
The predatory loan market is a fringe market though, and it's not even that lucrative because delayed payments and default rates are so high (and bankruptcy rinses the lender).
Don't confuse the existence of people who profit on inefficiencies as being a sign that the system works best with those inefficiencies, or that those inefficieces are even particularly profitable.
If calculators had never been invented then perhaps arithmetic and economic literacy would be required of citizens. A big problem is that we invented a tool for something that's most powerful when you can do it easily and constantly in your head. People are not pulling out the tool to use it constantly because there's friction to that.
> I would like the price of my home to rise, because it increases my wealth, but I would also like the prices of all other homes to fall, so that I could sell my house and buy an even nicer house.
There’s a way to do this. Buy in a VHCOL area like San Francisco, wait for 3-10 years, then move to Texas, Florida, South Carolina, etc. Real estate is highly localized so you do not need to stay in the same area all the time.
The homelab guy at CloudFlare did this because the prices of real estate in Austin are actually falling.
I wouldn’t count somewhere I don’t want to live being cheaper as the prices of all other homes falling… ;) Nor as lack of need to stay either - if real estate prices were the only thing keeping people around, cities might not exist.
I mean yes it’s a bet, but real estate in SF has historically done very well. The progressives/NIMBYs have a strong presence to thwart new housing so that existing properties increase in value.
No property tax where I live, which is true for about half of the Swiss Kantons. There used to be a system where they would calculate how much you would be paid if you rented out your property and then charged you tax on that value. So basically a property tax.
But they got rid of that tax while at the same time removing the ability to deduct mortgage interest. So now it makes most sense to pay off your loans.
Mortgages are different here - they are interest-only loans for usually 1 to 5 years. And when the loan expires you have the opportunity to pay off as much as possible and then renew the loan for the remainder.
There’s no reason the local government budget should increase at the same rate as the property values in the taxed area. Property taxes should generally increase at the rate of inflation not because property values increase.
However, where I live local government is wildly inefficient. So in that case property taxes should go down while property taxes go up via the expedient of competent governance. Alas.
My house has appreciated at a ridiculous rate. Personally I'd be fine if it hadn't. It's not in great shape. It's literally the cheapest house in town.
I can see how, conceptually, shifting tax burden to companies rather than individuals puts public services at risk. Companies don’t really have a lot of incentive to want things like quality schools, parks, and other non-profit public services.
On the other hand, property taxes seem to be a pretty flawed system that still result in inequalities. Individual homeowners hate them and will do anything to lower their burden. More wealthy and mobile people will move to different jurisdictions specifically to save on tax burden. There are extreme examples like The Villages in Florida where the heavy demographics skew toward older residents means that minimal funding reaches services that benefit younger families who work there as service industry workers. My understanding is that this is a particularly extreme arrangement in the villages: if you lose your employment within the jurisdiction you have to pull your kids out of the local schools immediately.
Then you have issues where you get poor jurisdictions and wealthy ones based on property values. Some states help mitigate this by pooling property taxes across the state for school funding.
I’ve heard that many condo buildings in my area have a standing arrangement with a law firm to submit appraisal appeals every single year and the law firm is paid on a percentage based on the savings they achieve.
This system can’t be efficient for anyone involved. When you really think about it this is like a siphon of money that could be going into public services into a private law firm.
The thing about property taxes especially those that have owner-occupier exceptions is that they sort of work okay because they’re a good approximation for wealth. They’re still regressive but you can pretty safely assume that someone who owns a second home is wealthy enough to pay a high tax rate.
On the other hand, that arrangement passes more costs on to the lower income renter. Their property owner landlord has higher property taxes than owner-occupiers and theoretically passes those costs on to the renter.
I think someone could devise a better system and do away with property taxes as they function today entirely. We need a system that makes all the stakeholders in our society feel like every dollar they invest is a positive investment with returns.
If the value of a house doesn't increase, then the property taxes, upkeep, mortgage interest, and selling fees would make home ownership untenable and worse than renting. And then if you rent the problem gets pushed up to the landlords anyway.
Besides the fact that your hostility is unnecessary, rent prices very rarely decrease. There’s been a good deal of journalism investigating this in recent years, especially in my metro area of Seattle. Landlords would rather leave something sitting empty, potentially even off market, waiting for market rents to increase back to their target, than ever let the rent prices fall. This is especially true for landlords who own multiple units: they’ll often trickle those units out one or two at a time to avoid flooding the market, to artificially keep prices high.
This is so much of a thing that there was even a federal investigation into it (particularly the SaaS service used to help feed the data driving this trend).
It's nice that you would like the world to be this way but it's time to put this tired old canard to bed. It's not individuals but the financial system that treats houses as assets. They do so by extending mortgages. Try getting one for your car.
It’s a consumer good most people want and will pay for and it retains its use for a very long time. So naturally there are fairly liquid markets and loans for it.
Yeah, I view my house as a consumer good and I don't want the value of my home to increase relative to inflation - ignoring taxes if I have to sell it I'd just have to buy another house at an increased price which will take up any realized gains from the transaction. Plus the fees involved in the cost of buying/selling are higher now b/c they are usually a percentage of the transaction.
Interestingly enough, it’s the opposite in NH. Our taxes just increase 1,000 each year to pay for horrible public schools while also giving state school budget funds to everyone that wants to homeschool or sent their kids to one of the many alternative schools we have. I would love to know how much of the US this actually reads as true for, because my friends in various other states also feel very similarly about their taxes going up and the housing prices not so much.
School system and taxation for schools in NH is very specific to NH « low/no taxes » mantra.
I am a resident of a neighbor state with several co-workers living in NH and I recall 15 years ago that there were massive school funding differences between towns. So there was an attempt at redistributing taxes to help pay for other schools from other towns, which was extended to all schools (freedom!) - so home schooling etc.
Is NH state funding local schools in some form ?
Typically it’s a mix of local, state and federal funds…
I was encouraged by a story I heard from NPR about a Hasidic community turning out the vote and using official powers to take private a school building that had been underfunded under municipal control. It was genuinely impressive how much they changed their local community.
I understand how this would be infuriating to other locals. But it shows the power of community organization. They don’t win because America is systemically pro Hasidic, they simply turned out the vote (after years of non-participation.). This is an encouragement to be active in your own community. If you don’t, someone else may do it for you.
The cult leaders tell them how to vote and then bus them to the polling station. They also largely are unemployed or work for others in the cult, so there is no obstacle there.
It's a scientology level cult, not a "community", and while certainly impressive knowledge and coordination to hijack tax payer money, it's still nakedly fraudulent.
I swear so many societal problems have their roots in the attitude of "I've got mine, screw everybody else"
I've seen people completely change their attitudes about things once they own a home. I know a self-proclaimed liberal who claims to care about people suddenly go all NIMBY because they are buying a $2M house and now they don't want duplexes in their neighborhood and don't like the idea of more housing being built ("we're full"). They feel entitled to a high (and increasing) property value in a desirable area.
But isn't it understandable? You work your whole life to buy a piece of property. But not just a piece of property anywhere. It's a specific one, in a specific neighborhood, in a specific zone. All of these things tie into the $ that you paid for that property. Regardless of the change in value, a change there impacts how you perceive living there.
If all of the sudden the neighborhood behind you gets rezoned to industrial and you get a datacenter nearby, everybody understands you're up in arms.
If at the same time the neighborhood behind you gets converted from 200 single-family homes to 200 8-plexes, complaining is NIMBY. Even though it has the same dramatic impact on the quality of life you bought into. Way more noise, way more street parking, cars racing late at night etc.
Why should society value stability of your quality of life (which is a pretty nebulous bundle of your preferences and environment—neither of which we can bet on being stable in any event) over the interests of all those people who want to live on land that can readily support them—and without putting any true undue burden on your ability to do the same on your land?
You need extremely high levels of trust and community to incentive the kind of behavior you are asking for. That is not reinforced or taught at any of our schools or government institutions. It only exists in small family or religious communities.
So absent of that, I think your personal incentives also lead you to your current housing policy preferences. Don’t you?
This is a potentially reductive take, but, property tax is theft.
In the guise of 'paying your fair share to be a part of society', property tax is essentially the institution of serfdom to the royalty of state bureaucracy.
Property tax is effectively the same as rent, but the one collecting rent also has martial and lawfare capabilities. Not to mention effectively unlimited funds with which to crush anyone who doesn't fall in line.
If what you have can be taken by another if you don't meet some set of conditions, you don't really own that thing, do you? It's more like a loaner than it is 'I own this thing'.
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I'll offer a blanket alternative for state and federal taxation: no taxes on individuals, their income, or their property. Instead we tax exchange. States levy a 10% VAT on all transactions. Federal government levies taxes on interstate commerce, imports, and exports only.
All other forms of taxation are barred. New taxes may not be levied. If the state needs additional funds it may issue short or long term bonds accordingly.
Money printing is shifted away from being owned by an international banker's consortium, re-pinned to durable goods or precious metals.
Yes that is generally what you get down to: you can’t really own land free and clear in a populated area. You depend on the government in many ways to enforce property rights, as well provide services for that property and in return you have to pay for that.
It makes me uncomfortable too actually but I can’t see any alternative that does not get back to a similar spot or violence. In addition if we shifted to a land value tax, it would push taxes onto the very dense developed areas encouraging better use.
> One might think that homeowners would be happy that their largest asset has appreciated substantially in value, as homes did,...
This is absurd. There's absolutely no benefit to you if the value of your house increases if you have no intention of selling it. That's exactly the point of treating owner-occupied homes differently from commercially owned property. The author should be embarrassed that he, as a an economist, doesn't know that in economic theory, households do not optimize for profit on some balance sheet, but for personal (subjective) utility. That's econ 101.
Yes there is. You own a more valuable asset, so now even if you want to keep it you could take out a loan against it for a greater amount than if it hadn't appreciated.
Your statement is based on assumptions that just don't hold for many people. First and foremost, you imply a subjective utility of receiving a loan. For many people, having loans - especially collateralized against your home - has negative utility, not positive. Case in point: someone who'd need to take our a loan to pay the property tax.
But even if you were right for the majority of home owners: feel free to tax collateralized homes as commercial property based on the volume of the mortgage. Case solved.
You mean take out a loan to pay for the increased taxes? The banks win with that one. Some people, especially as they age, are seeking out simplicity with their finances amongst everything else.
You're making a valid point, but not in favor of taxing owner-occupied homes, but in favor of treating collateralized homes as commercial property. I'd be okay with that as long as the basis for taxation is the volume of the mortgage.
Millions of us: We would like to be housed please. We're still recovering from the 2021 rental markets that forced people with jobs and savings into homelessness.
Regime in charge: Enjoy these property tax reforms that will lead to higher housing costs and (further) transfer of wealth towards people who already own homes. Let us know what else we can do to keep people in lower classes trapped and vulnerable to exploitation.
I think society should be structured in such a way as to incentivize contributing to society. Heal the sick, get rewarded, feed the hungry, get rewarded, teach the ignorant, get rewarded. Own a thing; no reward as far as I'm concerned. Owning stuff _is_ the reward, not something to be incentivized. It's its own incentive. Why should society give a gold star to someone for owning a toothbrush, or a house? They're a reward in themselves.
I think most normal people, including me, don't like it when housing costs are so out of step with everything else. The "value" in your primary residence isn't very useful, unless you sell and move to a more depressed area.
I'm a multi-homeowner and I'd love it if house prices fell, or at least stopped rising.
Is there any country where I can walk into town with a bag of money, buy a house in cash, and never have to pay taxes on it again? EU countries either have a property tax or a wealth tax that includes people's first homes.
Surely one missed tax payment is not enough for the government to evict and assume ownership? I see these cases in SF occasionally and it takes years of non-payment.
Fine, you win. We're all serfs. You've redefined "serfdom" to mean living in a modern civilization with public infrastructure, and the property tax tradeoff that comes with it. I'll choose this serfdom until a better viable option presents itself.
> Thus, older voters who tend to have higher accumulated wealth, partly in the form of home equity, but also lower current income, are a politically powerful and sympathetic group in the push to reduce or eliminate property taxes.
Miss on two points: there are exemptions for retired that freeze prop tax and equity is wealth that’s rare to access before death
This has been a sticking point for me for the better part of my adult life (~20 years now), and it all started with wondering who that dude in the taxi in “Airplane!” was: Howard Jarvis, one of the major proponents of California’s Proposition 13. From Wikipedia:
> The proposition adjusted the property tax rate, pegging it at 1% of the purchase price of the property.
That sent me down a rabbit hole of trying to understand why property taxes go down while home values go up, and why raising property taxes is so damn hard in so many states (it’s largely because of caps etched into law by Boomers in the 70s and 80s). It’s also why I have the strong opinions on the issue I hold today.
Tax displacement is a very real issue, but one that theoretically should be solved by a liquid property market where you can sell your home at FMV and downsize to another one you can afford. Americans, special creatures that we are, instead demanded we get the McMansions without the property tax valuations, while also deciding what housing gets built regardless of demand, while also keeping the distorted value of the home should we sell it for a retirement nest egg.
In other words: homeowners keep all the money, while paying decreasing to no taxes on it. This has been a significant contributor to the housing crisis of today, with shitbox properties in major cities selling for upwards of a million dollars but families pulling in not even a tenth of that in yearly income. The typical soundbite responses of “we need more housing” and “we need to reform or loosen regulations”, while technically correct, ignore the root incentive structure crafted back in the 70s with these sorts of inverse taxation schemes, and therefore leave the problem intact. We’d have to build so much housing, so quickly, that property values halve nationally for there to be any long-term fix to this problem, and nobody seems inclined to do this given the ponzi scheme we’ve discovered suburbia to be (just look at new developments in CA with dirt roads as an example of homeowners having to foot the bill and realizing it ain’t worth it given the thin density of suburbs).
And thus we arrive back at the beginning: we need to raise taxes on homes to reflect their high assessment values, which would displace existing homeowners who couldn’t afford said bill, which is leading to the same demographics as before demanding the same solutions as they enacted in the 70s and 80s: caps, limits, or shifting costs onto less-advantaged demographics (like renters via commercial real estate). As perverse as it sounds to most Americans, the actual solution is to finally let property taxes “float” with valuations in their entirety, no caps or cuts, and let the market sort it out. Will that lead to some folks becoming homeless? Yeah, and that’s a whole other ball of wax we’ve ignored dealing with precisely because we catered to homeowners as a political group, but that’s infinitely more solvable than trying to build our way out of a housing crisis engineered by lower taxes and controls on builds.
We gotta eat the pain up front to find a better collective tomorrow for everyone.
In so many ways it helps to focus more deeply on the fundamentals.
For one thing, in the 1970's lots of true "baby boomers" were still too young to vote.
Maybe what you mean is old folks in general, they were the ones in California who were desperate enough to support the proposition which might be able to save their homes.
They should know, lots of them had been through The Great Depression, and were so much older than boomers they could be their grandparents, well they actually were if you do the math.
And they did the math, getting by just by the skin of their teeth while those just a little bit older who had been on a fixed income earlier had already been taxed out beyond recovery before the proposition.
They already ate the pain, I guess it's difficult to remember how up-front it was if you never spent that many years among Depression survivors.
Nobody ever wanted a depression again, and losing your home through no fault of your own was one of the most visible outcomes that ordinary people could do something about before it got out of hand.
This was supposed to be big, and it is bigger than ever, this is by design.
The problem comes from trying to work against it when the entire economic system surrounding "real estate" was supposed to evolve by now to where nobody pays more tax by now than the most proposition-protected properties.
The idea was for it not to end up making any difference as the years went by, nothing could be more fair than that.
The pearl-clutching comes from the failure of following generations to evolve away from taxing properties or wealth, with all levies eventually falling exclusively onto commerce instead so that only those who are actively making big transactions at the time are logically expected to be able to afford anything at all at the time.
Otherwise things are going to stay as medieval as they can, and the torture will continue until the attitude improves.
Well good news! Because taxes are there to pay for services, there's absolutely no reason why they should increase just because the value of your property... Oh that's not how local governments see it?
Well at least your property value will go up endlessly. No bubble there. Totally not based on speculation.
> Because taxes are there to pay for services, there's absolutely no reason why they should increase just because the value of your property... Oh that's not how local governments see it?
Actually that often is how local governments see it in many places.
Local bond issues, which are paid for by property taxes, are often not a fixed rate. They are often a fixed amount (e.g., $2 million/year for 5 years) or a fixed initial amount with some growth allowed (e.g., $2 million/year for 5 years with inflation adjustments, often capped at some maximum adjustment).
With these each year the rate changes to keep the amount collected on target. If aggregate property values go up the rate goes down and if aggregate property values go down the rate goes up. If everyone's property values went up or down by the same percentage the amount of tax each person paid would stay the same.
Your share of the tax is proportional to your share of the aggregate property value, so our individual taxes can change regardless of any changes in aggregate value. For example if aggregate value goes up 5%, but your assessed value us up 10% and mine is up 3% your tax for a fixed amount bond will go up and mine will go down.
Most of local and state gov expenditure is salaries (subject to inflation, particularly local housing) and financial support for low income residents (also tied to inflation and housing).
Thurston county WA collects my property tax. Thurston county should not have attacked Iran and caused a surge in energy prices. The county should have hiked rates earlier and more aggressively. Thurston county is out of control!
Government is not a borg. We elected the dumbest motherfucker in the country, he consolidated power, and we got incredibly inflationary (among other things...) policies. Local government is just along for the ride.
If the price of housing the rises, the cost of living will rise, employees will demand raises, and the cost of providing services will increase. Even if housing prices remain flat, there will be inflation leading to the same result.
But I agree that pinning all hopes of class mobility or comfortable retirement on perpetually increasing housing costs cannot work for very much longer.
Having sat on a county assessment appeal board, this is basically every hearing. People want the comps high when they sell and low when the notice arrives.
Of course. Everyone wants the money they have to increase, the amount of services they receive increase or stay the same, and the money they pay to decrease or stay the same.
That sounds like shifting the property tax burden from homeowners to renters - homeowners are generally wealthier than renters, so it's placing more of the property tax burden on those less able to afford it.
That has some not-fun generational aspects.
(1) If schools have lower taxes, their ability to attract good educators for children is reduced. That in turn leads to lower home values since the school quality factor is reduced.
(2) If munis are unable to collect a sufficient tax base, they must reduce services. There will be hemming and hawing about things like cutting the pensions promised decades ago to attract competent service workers, but those are harder to reduce rather than not fixing the fire trucks, the water pipes, and other hidden taxes citizens pay for by reduced services. So your property values will also be reduced in the long term. Small towns are prime examples of this happening, when towns fail.
Trying to build a community out of one socioeconomic class works about as well as trying to redline. It leads to a less vibrant community, less adaptable community, and people are poorer in life and in their finances for it.
Anything past the paycheck is a gamble.
Fire trucks are far more expensive to acquire and maintain than necessary due to monopolistic actions by manufacturers, plus local governments buying fancier apparatus than they really need. There's a lot of room to trim those particular expenses.
https://www.iaff.org/news/fire-apparatus-crisis-sparks-inves...
Someone I know is trying to plan such a thing right now. She has a decent paying job and a degenerative, disability-inflicting illness. She'd like to see the possibility of a secure future in the city where she's lived for the past 10 years, but property taxes and HOA fees alone in her city can be multiple thousands of dollars per month in neighborhoods that from the outside you wouldn't think seem particularly new or posh or luxurious. It seems that if she's forced into early retirement by disability, she'll have no choice but to relocate. So instead she feels trapped in a job she hates because she got it before she became disabled because she's reasonably afraid that employment discrimination, which is terrible at her job that nominally espouses inclusive values, will be even worse most other places. And while she's already disabled, her disability will only continue to get more profound for the rest of her life. And property taxes for sole and lived-in-by-the-owner homes is one of the reason that owning a condo or apartment is so much more expensive than renting one for her.
I feel like HOA fees have to be doing most of the damage there. AFAIK the highest property taxes in the US still top out around 2%, so for a "multiple thousands per month" property tax bill it has to be a house worth more than $1.2 million. I'm not sure what the line is for what level of housing expense is reasonable for society to subsidize housing security for, but I'm pretty sure $1.2 million is well past it.
It seems to be equally straightforward an answer to just not expect homes to function as an investment.
I do not now nor have I ever understood why people expect homes to rise in value. If you live in an area for 20 years, and you enjoy that area, and it serves you well, and educates your kids, and the crime is low, and all that good stuff: why are you then owed money? Why is that a fair expectation? Like I could see it if you made the house bigger, or otherwise improved it? Maybe you put in a new shed, or a nice brick backyard area with a kitchen, sure. House being worth more makes complete sense. But if you just buy a house, and live in it, and maintain it over the years, and then go to sell it: why is it reasonable for you to expect money back out of that?
You've already received what you paid for: a place to live.
Like I just don't see how people go like "My house needs to sell for more than I bought it for years from now" and then complain about the housing market being out of control and houses being expensive. Of course they are. Each time a house changes hands by this logic, it must necessarily be worth more than it was before. So every subsequent buyer of that home is effectively required to tithe to the previous owner for... some fucking reason, that nobody has ever adequately explained to me.
The land goes up in value when other people spend money. More retail is constructed nearby, transportation is improved, schools improve, jobs are created, etc. My land captures some of that value even though I paid nothing. That to me explains some of the fairness of property tax: the owner should contribute to the government services, such as schools and police, that help make the land appreciate in the first place.
Then there's the building. It's a wood box that sits out in the rain and rots. Water soaks in from the outside and pipes burst on the inside. Termites eat it and insects and vermin invade. Carpet and walls slowly degrade. HVAC systems wear out. Appliances break. Concrete breaks apart. Even on the land portion, plants die and need maintenance. (Trees are the only thing on a property that get better with time.) This building needs constant maintenance and I'm always spending money and time on it.
So I figure the land might go up slowly in value over time. I figure I'm lucky if the building appreciates at all after I consider the money I sink into it.
On paper my house is worth a lot more than when I bought it. But I don't know how much of that is nominal price change due to inflation.
Nah, the market is supply constrained, if taxes go down the price of the real estate just goes up to fill the gap. People make purchase decisions based on income & total expenses, not on anything else, "can I afford this house?". The price stops rising when the answer switches from "yes" to "no". If your friend can't afford a house right now they don't have enough buying power to compete in the market with other house buyers. Reducing taxes won't give them any advantage in the market that other buyers don't get.
What’s happening is income inequality manifesting on the market. The middle and upper middle of the market is seeing accelerated appreciation as incomes rise for the upper quartile. Some places see >10% annualized appreciation over the last 20 years.
The lower part of the market is very different, and are basically depreciating away. Property taxes are the most fair tax for the most part — you basically pay a prorated share of the levy based on the market value of your home. So if the poorer property is getting less valuable proportionally, your share of the tax pie increases. Some states share Medicaid expenses at the county level so there’s demand pressure for more tax levy.
The problem is old people generally cannot afford their homes, and are usually profoundly ignorant about everything except tax avoidance, even when tax avoidance hurts them. The tax knob is one that can be turned, which makes the problems worse. Senior exemptions, veterans exemptions, all increase the overall share for everyone else.
The new Republican platform is accelerating that — pushing property taxes to non-homestead property and driving up sales tax. In other words, it just a consumption tax, which pushes the tax burden to families and inflates retail costs, so grandma can sit in her big house and her kids get to inherit the place at the stepped up cost basis.
However, tax rates give perverse incentives. What you'll probably get is a lot of commercial slumlords as repairs are seen to increase the value, thus the tax.
One way out could be to tax the value gain at the time of sale, or when the house gets rented out, thus no longer being “owner occupied”.
This is essentially what has happened in coastal California over the last 60 years.
With different policy, there could be more housing built on the same land. The most scarce land there is shouldn’t be predominantly zoned for only low density single family homes.
It often is, instead. Eg the resale value of my flat increased because the area where I live became a better place.
Value is always relative - even if the experience hasn't changed, the rising house price does mean that same experience is being value more highly relative to other opportunities. (In most cases this is because the experience actually has changed: if your neighborhood gets nicer, you are indeed benefitting!)
The bigger fallacy in rising property taxes is that civic services don't necessarily get better or more expensive just because property rates rise. And the bigger unfairness is that homeowners with rising values but not rising income don't always have efficient access to the equity of their homes.
A fair property tax regime would avoid presuming budget increases just due to rising value of housing stock, and might subsidize HELOCs or similar structures for folks who need to access property value to pay taxes.
An owner can derive value from the house in one of three ways:
A) Occupy the whole place.
B) Receive rent from a tenant.
C) Something in between (e.g. airbnb one room).
When property prices double, it's likely that rents roughly double. This may not increase the value the owner can derive from (A) but it will sure change the value they can derive from (B).
So they might decide to switch from living in the place to renting it out. If they don't decide to switch, then it indicates the value they derive from living in the property has either gone up, or it was always way higher than the market rent.
It seems like market rent is a reasonable benchmark to use to calculate property taxes, and property value is a reasonable proxy for market rent.
My local government put exactly this on the ballot: a small percentage transfer tax on the sale price of the home, which would offset some of the costs we currently pay in ad valorem property taxes.
The local real estate community had a meltdown and poured hundreds of thousands of dollars into defeating it, which my neighbors obliged and did.
>My local government put exactly this on the ballot: a small percentage transfer tax on the sale price of the home,
First comment suggests taxing the gain (income tax), while second comment suggests a tax on sale price (gross receipts tax). Two very different things.
It’s been attractive to voters since most homes sell in the first tier.
You can reclaim some of the transfer tax by performing seismic upgrades which is actually something I support in a town with some houses that can be 100 years old.
The counter is of course that when you buy a house you should make sure you have enough income and/or liquid wealth so that you can pay the taxes. And if not, move to a smaller house. Of course, opponents of such taxation will then roll out all kinds of grannies living in mansions on meager pensions. Then again, is it fair that this prices out younger people from the property market?
As difficult as they are, I do think we'll need some form of wealth taxation in order to put a brake on spiraling inequality. Yes, call me a fan of Piketty if you want.
If you're planning a peasant revolt you should really consider going all-in, bloody revolution, you give the kulaks less time & space to plan for contingencies.
In the UK, 'stamp duty' is something that buyers pay (as opposed to sellers), but sellers also have to buy, so everyone pays to move and everyone stays put to avoid paying.
(And of course no one builds, which is the biggest issue).
I'd say it's OK to defer your property taxes until you sell (or die), but it shouldn't be the default, only something you apply for if you're in a vulnerable position.
I think it's a great idea to let land taxes create the incentives to build efficiently.
It's basically excuse to get rid of poor that made a mistake of buying a house in area that turned more expensive 2 decades after.
Tax anything after first house, sure, but taxing house by value is terrible idea that never actually worked in a way proponents are saying it would
Reverse mortgage
So someone else put up the capital, the government made that capital cheap, and societal demand with artificial scarcity (in most places) pushed up the asset value.
I’m not saying it’s a bad thing, but let’s not pretend that making capital gains on a house in the US is anything like any other available investment.
This doesn't totally automate it, but it takes away the need to manage money proceeds from a reverse mortgage between the time you receive a payout and the time you pay your taxes.
Just have government allow taxes to be deferred until time of sale with interest pinned to the cost of borrowing for government. That already exists where I live for people over the age of 65. The government can still get the revenue for free via borrowing and the payback is more or less guaranteed.
Stamp duty in the UK, horrendous tax. It's better than nothing at offsetting the unearned increase in house (land) value, but far worse than a regular tax.
If you live somewhere for 10 years, then move, then repeat for 40 years, you pay far more than if you never move. This encourages people to live in less suitable houses for longer.
As to your worry about land values increasing -- the owner is deriving benefit. The higher the land value is, the more benefit the owner gets from the land.
This sounds like a problem with the way the particular tax is written, not with the idea of taxing housing gains at the time of sale.
> The higher the land value is, the more benefit the owner gets from the land.
What benefit does a homeowner derive from increased land value before selling?
Likewise if I buy somewhere cheap in a backwater town, and the town becomes more desirable because there are better employment opportunities, better shops, better amenities, all of which serve to mean people will pay more for the land, then I benefit from that immediately.
Most people’s home values go up because of 1) increasing housing demand and 2) the collective delusion that home prices can continue to far outpace wage growth indefinitely. Neither of these things necessarily result in an increase in amenities or improved quality of life.
My own home value has gone up something like 70% in the last 10 years. Meanwhile, the amenities near me are essentially unchanged. Same schools. Same number and quality of restaurants and grocery stores. My net worth has jumped a fair bit but my immediate benefit seems pretty much flat.
Forcing renters and buyers to pay for the local services instead of property owners seems extremely unfair.
> Any increase in housing value (and thus property taxes) is mostly an increase in the cost of living.
So? If the property values go up then cost of living is going up for renters too. Why should property owners be shielded from this by imposing local service costs on renters who generally have even lower incomes than owners.
This is how it works for sales in Sweden, via the so called "reavinstskatt", or profit realisation tax. Funnily enough, it is mostly applied to individuals in practice. To avoid the taxation, companies package properties in subsidiaries, which can then be sold and traded like any other stock. The tax is then postponed until the de jure sale of the property, which never occurs. Individuals are not eligible because the loophole is closed if the legal owner also occupies the property they own.
Happening in Austin, Texas recently. City cites:
- Rising cost of core services
- Weak sales tax revenue. This is the city’s second-largest revenue source, and it has slowed or dipped.
- A shrinking property tax base. Officials point to falling property values, appraisal protests, more business tax exemptions, and little new construction adding value to the tax rolls.
- Disappearing one-time money. Pandemic relief funds have run out, and federal funding cuts were anticipated.
- Rising service costs. The new budget’s highlights include $6 million more for permanent supportive housing services, $6 million more for fire overtime to keep four-person staffing, and extra EMS overtime. Employee raises and social services were also major line items.
It is frustrating... if core services are costing more, cut extracurricular services? Why would you lean so much on sales tax, seems obvious this would revert to a mean? If your budget is reliant on infinite new construction it seems a bad budget? Why is pandemic relief cuts a shock to anyone? More housing services? I'm empathetic but there's more homeless than ever before. I know it's simplifying the problem but it just feels like people are punished with permanent tax increases for governments spending more than they should... we start with a new "floor" tax rate and repeat forever? Is it going to get to the point where we work 50% of our time just to pay taxes?
That is an insane statistic. Surely the state can throw some weight around to say enough is enough?
I just had my own insane encounter with healthcare. They "accidentally" billed us insurance rate which was about 4-5x more than self-pay. Why is there 4-5x overhead when dealing with insurance? (I know there's the negotiation stuff) but also seems to be quite a mess. I'm actually more mad at hospitals and clinics lately than insurance. Seems they have agreements with companies to "dispense" things at 4-5x the actual price, expecting insurance or taxpayers to pick up the tab. Seems like blatant fraud.
Sorry for the rant, I agree with everything else you mention :)
Chicago..hold my beer. 80% of taxes here go to funding pensions for 2% of city population. Our parking meter money goes to gulf countries because we sold them to pay for city services back in 08.
So not only is the cost of service to be thought of, but the quantity of services.
The same happens within services too. The police got a helicopter 5 years ago, are they going to turn down another one, or are they going to explain why the new one needs to be more expensive with more capability? Multiply that across every agency.
Makes sense, totally agree... however I don't think generally citizens want to pay _more_ taxes... or at least eventually there's a point where they say enough is enough.
https://www.kut.org/politics/2025-11-05/austin-tx-prop-q-fai...
> The same happens within services too. The police got a helicopter 5 years ago, are they going to turn down another one, or are they going to explain why the new one needs to be more expensive with more capability? Multiply that across every agency.
This should be stopped. Creates exactly the sort of ratcheting effect you described. Mind boggling to me. I've been in-charge of small budgets and buying more stuff after making more money is a big decision, not taken lightly because we can't assume present returns will match future returns.
Funnily enough, after spending some time in public service albeit in another country, genereally budgeting for public agencies works almost inverse to this.
If you get allocated X budget but only spend 0.8 * X, then next time you will almost always get <X. This is in itself reasonable, you don't get more allocation than you need. In practice though this means you are incentivised to not save money from your allocation iff you expect to need more in the next period or do not want to lose your allocation (maybe a renovation or smth similiar has been pushed back due to external factors).
You could pay more and still get worse services.
I do think there is something special about the idea of home, and that home ownership should be encouraged. It brings people stability. People shouldn't be pushed out just because others have more income than them.
At the same time, we do need property taxes. In California, rate increases are capped, so older owners often pay pennies compared to new homeowners. Harmonize the taxes, while capping it.
That might be reasonable for the wealthier families who are moving into the neighborhood and driving up the land values. But it's pushing her into poverty.
No, its pushing her into a cash flow problem. Its not poverty; she has substantial wealth, but its all in the house.
There are mechanisms, of course, to access that wealth without moving, including ones specifically geared toward income-limited house-rich retirees.
Now, those end up creating a debt that must be resolved before transferring the house, including via estate, so living on the value of the home reduces its utility as a vehicle for generational wealth, but...unless you want to reproduce California’s system which makes it much harder for people to become homeowners while rewarding those who already have, eapecially the wealthiest, making the rich richer and what would be the comfirtable middle class anywhere else in the country poor, that’s the way it works (and your exact scenario was the major sales pitch that was used to sell the California system; its maybe understadable how people without 50 years of California’s example fell for it then, but...)
Why are we trying to take houses away from homeowners? Many who have lived in their homes for twenty years or more. What services that the city has could be so important to push residents out of the homes they've lived in all their lives? Most of it is inefficient pork on admin and roles the people living there didn't choose to hire for.
Build more. Encourage building multifamily. Pay to buy these homeowners out of their single family and convert the land to multifamily. If you can't pay, don't try to make it up with tax increases. That forces people out.
Deregulate and build.
Maybe a city failing to stretch services will send new residents seeking other cities, which would be healthier anyway.
In my city and others our city council delivers large grants to non-profits and other entities under various auspices. “Defending gay rights” is one, or maybe helping the homeless or something. Of course I support both causes in general, but if the city gives a million dollars away maybe we just have to have some people kicked out of their homes to pay for these programs?
You can say well we will just raise taxes on the wealthy. Sure yea, whatever but that isn’t a viable long term strategy for places outside of California or New York which have an ability to capture wealth better due to intrisinic location value. There are only so many “rich” people. Could I afford another $10,000 in city taxes? Yea. I won’t be able to go out to eat or shop at local business as much though. So then what happens? Do those businesses go under? Raise prices? What about their property tax? Maybe instead I sell and take a loss on the house and the market value goes down so now that home pays less in taxes (depending on how this stuff is measured in a given jurisdiction).
> Maybe a city failing to stretch services will send new residents seeking other cities, which would be healthier anyway.
Yea. Tell Google and Meta and whoever to stop putting more jobs in the “cool” cities and come to Ohio where I live instead of these data centers.
This stuff is rather complicated, unfortunately. Even the case of a city let’s say “building affordable housing” is arguably a benefit to the local homeowners, but if you do that yea sorry Granny McPension has to pay for it too - she has a house, she’s wealthy!
Probably less.
And probably irrelevant to the people that already live there.
But that's what the market is already doing? In your example from above, you can take a $400,000 windfall and move somewhere else, or take out a mortgage against that $400,000 of new equity to pay your taxes and still come out waaaaay ahead. I don't understand your characterization of a second mortgage as "taking the house away" at all.
Especially not when you're getting older, have limited ability to manage a move for yourself, built a life and raised your kids in the building, and would have to consider unloading a lifetime's worth of objects and/or moving infeasibly far away from your friends and community to get into a living situation that's more financially tenable.
> Especially not when you're getting older
Houses are wealth. And the wealth in them can be accessed while retaining use of the house. Especially when you are getting older.
Why are we replaying the dishonest “think of the retirees” now? It was bullshit in California in 1978 to sell Prop 13, and its even bigger (and more transparent) bullshit now when, especially when it is used to sell the same basic idea.
And where would she move to? All decent areas probably also increased in price, her property went up 10x in value but so did all other properties she would contemplate to buy. That’s the fallacy of thinking property is wealth when talking about your only residence.
What a morally bankrupt viewpoint.
Claiming that the retiree has a right to both the home value and the ability to live there is the friction point. It reads as hollow in the face of rising homelessness and the inability for young people and families to access housing.
I think if we had a totally different culture, with multigenerational families living in the same house, then this might work better. But this model where we build new family friendly neighborhoods with parks and schools, and then nearly everyone ages in place and all the family amenities become empty over time, and the families all end up in the next new neighborhood and then it repeats, this doesn't seem ideal to me.
> Houses are wealth. And the wealth in them can be accessed while retaining use of the house. Especially when you are getting older.
Simple example. I bought the house at $100k. It's now worth $500k. That means I owe $20k/yr in taxes, but it also means I have $400k of additional wealth. A bank will lend me money with that wealth as collateral. If you imagine that the interest on the loan is roughly equivalent to the rate of appreciation of the property going forward, that's 20 years of taxes paid for by the increase in home value. Seems like a pretty good deal for everyone!
"And where would she move to?" -- Either the graveyard or the incinerator? She's dead... the bill doesn't come due until after her death and is settled from the value of the house.
I don’t want my country to force old people to either move from their home, or take out risky debt.
There are absolutely problems and prop 13 has been awful for California but it’s a red herring to worry about the primary residence exceptions.
Perhaps the retired person is living on a fixed income of $40k/year. Over time their proterty taxes on the home that they have lived in for decades can now be more than half of their total income? How is this fair at any level?
> How is this fair at any level?
How is it fair that working people have to pay 10x for housing than she did when she was young? How is it fair that the money goes to her inheritance while she made her working neighbors pay her share of taxes?
Where I live, we are looking at locking property taxes once you hit a specified age (65) and have under a specified income ($40k+/-). The current debates revolve around exactly what those numbers are and at what level the taxes get locked. The goal is to protect the elderly who have already contributed to the economy and society for 40+ years and not force them into a financial situation forcing them to sell their home just to pay even more property taxes that they have paid for the entire ownership.
Quite the opposite.
Telling people that the solution is to sell their home to an insurance company as a solution is most certainly a corporate land grab.
You seem to be arguing about people/corporations that own multiple homes or even entire portfolios of property. These are not the same argument.
If their asset is gaining in price so much that the tax burden is getting high, then tax deferement until a liquidity event both keeps them in their home, but also keeps them honest about how much they are taking away from the rest of society by taking that piece of land.
The premise does not warrant this conclusion.
People’s primary residences are more than just an economic asset. If you don’t understand that, it’s difficult to have a conversation as we have very different starting points about morality.
If it's not, then I would also like to live in a nice neighborhood for $100k and zero property tax, please.
On the other hand, if it is, then this person has a substantial economic asset that she could reverse mortgage, rent out, or sell.
I also don’t buy 20K of property tax on a 500K home, that’s a 4% tax which seems unlikely in Chicago.
Something isn’t right. Poor financial planning maybe?
Now, apartments can suck too. Especially in places like the USA where we have a landlord cartel actively pushing up prices, and a professional landlord president who shut down an antitrust investigation into said cartel shortly after entering office.
I certainly can't say I have all the answers here; right now housing sucks every way you look at it. But I do believe quite firmly that this idea that going very deeply into debt and securing it with the actual roof over your head is somehow good for a person's financial security is an idea that mostly serves the interests of people who earn a commission on convincing people to get into that situation.
Note that I'm very against cash out refinancing, which a lot of people are doing to get the cash that the house is worth. In my opinion the best reason to have a house is in 30 years it's paid off and now you can live there rent free for the rest of your life.
I am a fairly recent homeowner. Before that I lived in an apartment in the same neighborhood. I like owning the house and having control over the space. I like having a bit more space. But, after I add up home loan interest, taxes, homeowner's insurance, higher utility bills, maintenance, etc., the amount of money that I will definitely never see again adds up to quite a bit more than I was paying to live in an apartment that, square footage aside, was aesthetically much nicer and better situated than the house.
And then, yeah, some additional amount goes to equity in an "investment" that is less liquid and historically earns a lower rate than a decent index fund.
Every day, thousands of folks do emerge from that tunnel and gain the ability to make profound statements like "Well, at least the house is paid for."
This is in stark contrast to renting, wherein: There is absolute certainty that none of the money spent towards having a place to live will ever be returned. It doesn't matter how much is spent: Whether a little, a lot, or a lot more, that money is always just unilaterally gone. There's no chance at all of anything else happening. The odds of winning are nonexistent. There is no light at the end of the tunnel, and there never can be -- it's just inescapable darkness in there.
So your landlord was renting your apartment to you at a loss?
'Tis better than to have owned and lost, than to have never owned at all.
> Now, apartments can suck too. Especially in places like the USA where we have a landlord cartel actively pushing up prices, and a professional landlord president who shut down an antitrust investigation into said cartel shortly after entering office.
So rather than ever own a home, just rent. It's about the same as taking a pile of money out into the middle of the street every month and setting it on fire, but what else can a person do?
Die?
While not all stories are like that, many are (in fact most are).
Except you have to live somewhere, it's not like buying a boat. All of these dangers apply equally to owners and renters. Yet the protection you get from owning in that situation is massively advantaged over renting. Lose your job and can't afford your mortgage? Oh no, guess I'll have to take out a HELOC, or apply for forbearance, then wait years to be foreclosed on and declare bankruptcy. Lose your job and can't afford your rent? Sheriff's knocking on the door in 90 days to throw you on the street.
That doesn’t seem too bad, until you see all of her other costs have gone up dramatically because inflation has been high post pandemic. She only has so much money to spend every month, and if her property taxes kept going up too, she’d eventually be unable to afford to live in her house. She only owns her home because she was worried about being secure later in life and prioritized it above things like vacations or cars.
For a lot of folks as they age, even if they’re frugal, it’s not easy to survive. If you live for 20-30 years after retirement you’re likely to have your buying power cut by half if not more.
With that said, if someone’s home is worth more than say 10x the average price in your area, or your assets are $10+ million[1], I think there’s room for increased taxation. My primary point was simply being a property isn’t necessarily the right measure to determine a reasonable tax rate.
[1] The number obviously depends on where someone lives. Living in New York or SF, $10 million dollars of assets would be an extremely comfortable life but most likely not a lavish lifestyle. But… $10 million dollars in rural Mississippi is going to have you living an extremely lavish lifestyle.
The only fair thing to do is to allow some portion of the taxes into a lien that is paid out when the he is sold.
It's extremely unfair to reward excess wealth to the wealthy people of a community, while everyone else is struggling just to find a place to live.
Not only is it unfair, but it skews financial incentives and results in very poor politics for improving the unfair housing situation.
By your logic anyone who is retired and has an asset appreciate should immediately sell it, and be forced to move somewhere else.
I cannot afford a home in Portland where I live. I could probably make the mortgage but it’s too risky in my opinion to have a 30 year debt obligation. None of my friends own their own home, not a single one. We’ve all just entered our 40s. The lack of somewhere to live won’t be fixed by a lien, nor will liens on an individuals actual home due at death fix it. It will absolutely incentivize investors who can exploit that, who will pay the liens and add to their portfolio.
If we want more housing at better prices we need to encourage development of more housing. That means making cities more dense and removing NIMBY policies which prevent it. Sure some of these homeowners may be voting for those policies, but they are the minority in larger cities.
The wealth gains far outpace any potential tax increase. They just don't get to keep excess wealth that comes from keeping others out of the area.
I actually don't mind the cost of living in my neighborhood going up. The $2500/yr HOA fee is a feature for me. I picked this location precisely because of it. I've lived in many places with virtually no maintenance overhead or economic friction. You may eventually learn that there are two sides to this coin. Neighbors who can afford and are willing to participate in ridiculously scaled housing markets also tend to take better care of their properties and local communities.
Whereas you take great care of your local community by even refusing to live around anyone not as well off as you ?
Imagine the horror of having to live within 10 miles of a low class smelly poor plebeian, you might have to lay your eyes on their 3 days overgrown lawn from time to time.
I pay my city for sewer, water, and trash. I pay an ISP for fiber to the home, a power company for electricity. If you get all those things for $2500/year from your HOA, congratulations.
all of those services are ones that should be realized by the city, from taxes paid to the city. If they are not, the problem is that people vote for wrong people
In Canada for instance, I’ve seen towns where they have pick up once every two weeks and the canister is not even a full size one. It’s a “gentle” push to get people to recycle and compost.
No way that would fly in Freedom Town USA.
It’s dumb. Here in Washington it’s rather common, I’m finding, for rural land plots to be part of a “Road Maintenance Association”. Exact same legal construct as an HOA, but scoped only to road maintenance on roads the county didn’t want to deal with. It would make so much more sense for the county to socialize those roads and reuse the same maintenance crews and vehicles for these stretches of road! But instead, a private entity pays through the nose to duplicate all that maintenance infrastructure (or pay contractors).
1) the tax entity sets their budget (usually an increase)
2) the valuation group values all properties
3) the tax entity sets a tax rate to raise their budgeted amount. budgeted amount = tax rate * total value
Most people think if their value doubles, their tax doubles. This mostly isnt the case. If everyone's value doubles, the rate decreases so they raise the budgeted amount. Mostly property tax increases are due to ever increasing budgets not rising values.
1) If everyone's value stayed the same, and the budget increased, your tax would increase by the amount of the budget increase
2) if everyone's value doubled, but the budget stayed the same, your tax would not increase
3) if your value doubled, everyone else's stayed the same, and the budget stayed the same, your tax would double.
The worst part is that for all these taxes, the level of service has dropped since that home was bought.
In Washington State, Puget Sound Energy is a for-profit utility owned by mostly pension plans! Their guaranteed ROI is sucked out of the productive economy. Everywhere you look rent is being extracted either by the 0.01% or the elderly, and the working class must slave to get 1/10 what they gave themselves.
Not an economist but I don't see how money can be anything other than an accounting tool at that level. If they had "paid for it" back in the day, young people would still be screwed.
The two big ways to increase prosperity that I see are for people to take care of their health so they need fewer medical services, and for fewer people to be devoted to administration (e.g. the medical billing quagmire, SaaS companies focused on how to better extract rent) or convincing people to buy stupid crap (c.f. the giant advertising industry that swallows up bright workers to build a surveillance and propaganda apparatus instead of e.g. industrial automation), fewer pointless wars, and more people devoted to actually doing things people need or building infrastructure (e.g. solar).
The problem isn't that there are old people, is that there's currently a glut of old people, which puts real strain on the system. Being old is expensive for governments. Not only do older people not typically pay nearly as much in taxes, they also require more resources to support.
So many of today's problems come down to the simple demographic fact: there's a lot of baby boomers, and they're getting old.
In some countries and cultures the good of the many comes before the good of the individual, no matter the sacrifices required to get there. The US (and to a slightly lesser degree, Canada) generally does not subscribe to such a cultural mantra.
Edit to add: for the cases where the societal good really does outweigh the personal good, we have a tool for that: eminent domain, which is how we build train lines and so forth.
Like another poster said, things like pensions and medicare might overall drain the entire economy, so the end result is the same, but that seems more diffuse than local tax bases, and wouldn't properly appear in local government budgets.
They're also economically and socially viable participants in the community.
I don't think people really understand how bad it is out here. I imagine that if a dignified line on the base standard were held, there would be less of a need for this kind of middle-class pearl-clutching.
Y2K: buy an 1/8th of a million dollar house. There are 10 houses in the village and an annual budget of $10K. The total value of all houses in my village is $1.25M but it really doesn't matter. As the owner of 1/10th of the "total housing value" in the village, I pay 1/10th the annual budget of $10K which is $1K prop tax.
If your mental model is the city tax rate is 0.8%, that is ... numerically correct but its mere numerology.
2026: house is now worth 1/2 of a million dollars. There are 10 houses in the village and an annual budget of $10K. The total value of all houses in my village is $5M but it really doesn't matter. As the owner of 1/10th of the "total housing value" in the village, I pay 1/10th the annual budget of $10K which is $1K prop tax.
If your mental model is the city tax rate historically was 0.8%, then you'd have to pay $4K/yr, but it doesn't even remotely work that way, so it simply doesn't matter. Its just numerology. My fraction of total property ownership "value" times the annual village budget is what I'll be taxed, which in this case is the same old $1K.
In reality grandma gets kicked to the street because inflation raises the price of everything, including real estate, but real estate is not even remotely the problem or the solution. Grandma might have afforded a house and its taxes when a McDonalds Big Mac was 75 cents each but now that its $13.49 the village budget has gone up 10x, 20x what it was when she bought, so she better find a way to make 10x, 20x more money or not only is she not going to pay her fair share of the budget via taxes, she's not going to eat food either.
"Now that neighbourhood is unaffordable." Thats the real problem. No one can move in and pay the city budget, and the city budget explodes because now they have to pay the dog catcher at least $250K/yr to live there and nobody can afford to rob peter to pay paul quite that much...
It would make a lot more sense to increase the carrying costs of homes so that people are inclined to sell them when they no longer need a particular configuration.
That's why socialization is so important. You can't get voters to understand the difference between billions and trillions or put anything in context when the numbers get that big. All you can do is socialize them from an early age to have directionally correct gut feelings like, "there's no such thing as a free lunch" or "saving is good."
I was recently trying to understand Elon Musk's wealth, and come up with similar comparison: For example, he could make millionaire's of every single person in Seattle, and still have hundreds billions of dollars of wealth left over. Truly mind boggling.
So while fun thought experiments are excellent selling points, they aren't actually grounded in reality.
Schools are really expensive to operate. Most districts and schools make it easy to graduate to maximize their graduation rates. Standardized testing is suppose to catch local lowering of standards but state departments of education are also under pressure to maximize test pass rate. So resources flow into pulling the bottom quintile of students up to a minimum standard. This means teaching to the test on math and English, and de-prioritizing other subjects or dropping them entirely.
We could expand the breadth of educational basic standards. This would require a cultural shift in valuing formal education more, increasing teacher training/recruiting resources, making schools year round, more centralization of education budgets at the state or even Federal level.
Generally speaking public schools tend to be better in states like Massachusetts than Kansas.
LOL, no.
In the majority of states in the USA, districts in the state are not allowed to graduate students without taking both an econ class and a personal finance class. Kansas is one of the stricter states. I can only think of three off the top of my head that do not mandate econ/finance classes, Colorado, Massachusetts, and Washington. Pretty hilarious to claim MA has better education requirements than KS LOL when its the other way around. Also hilarious when the average SAT score in Kansas is 1256 vs a mere 1128 in Massachusetts, LOL. I can't immediately think of any way that the schools in MA are better than KS, which is pretty funny. Is there even one stat or requirement where MA beats KS? Maybe college sports scores...
That said, public schools are mandatory pass, and the kids know it.
I think the problem with education is the prepack solutions sold by politicians intentionally don't reflect reality, sometimes intentionally reflect the opposite, and are designed to be ineffective or even actively counterproductive.
MA did pass a personal finance requirement for schools earlier this year. Like many other states it doesn’t have to be, but can be a stand alone course. While it may seem like MA is lagging behind, the majority of those requirements have been put into place within the last 5 or 6 years, so this is pretty new in most places. And a lot of states have done things that seem counter productive, like allowing a personal finance course to replace core math requirements. MA typically lets schools figure out how to implement requirements, so as in most cases the wealthier areas will figure out a high quality way to do this, and the poor areas will do their best to meet the state requirements for the lowest cost, providing less benefits to the students than it should. (Yet another reason that relying so heavily on local resources for public education is a poor choice).
This makes me think an interesting metric would be total SAT points per 100k population.
If only 2% of Kansas students are taking the SAT, that's kind of shocking, actually. But maybe the state University there doesn't require it?
"One man gathers what another man spills."
I think it's far more ambiguous and less measured of a net negative, than it is a clear, measured net positive for the "powers that be" if we define them as the wealthy.
You can take a very clear, measured look at wealth distribution over the past 50 years.
On the other hand, you have a massive contingent of people who are constantly scoring own goals because their economic insight is purely an emotional surface level intuition.
A mainstream bank takes a longer term view. They offer financial literacy info for customers who are interested. If a customer overdrafts less frequently and is able to leave significant amounts of money deposited the interest spread is more profitable than collecting overdraft fees.
Don't confuse the existence of people who profit on inefficiencies as being a sign that the system works best with those inefficiencies, or that those inefficieces are even particularly profitable.
There’s a way to do this. Buy in a VHCOL area like San Francisco, wait for 3-10 years, then move to Texas, Florida, South Carolina, etc. Real estate is highly localized so you do not need to stay in the same area all the time.
The homelab guy at CloudFlare did this because the prices of real estate in Austin are actually falling.
https://news.ycombinator.com/item?id=42156977
How does this work? VHCOL does not mean that prices will appreciate or even sustain.
But they got rid of that tax while at the same time removing the ability to deduct mortgage interest. So now it makes most sense to pay off your loans.
Mortgages are different here - they are interest-only loans for usually 1 to 5 years. And when the loan expires you have the opportunity to pay off as much as possible and then renew the loan for the remainder.
However, where I live local government is wildly inefficient. So in that case property taxes should go down while property taxes go up via the expedient of competent governance. Alas.
There's some reason. City workers may need to live in the area. If housing becomes more expensive, the city may need to pay higher wages.
On the other hand, property taxes seem to be a pretty flawed system that still result in inequalities. Individual homeowners hate them and will do anything to lower their burden. More wealthy and mobile people will move to different jurisdictions specifically to save on tax burden. There are extreme examples like The Villages in Florida where the heavy demographics skew toward older residents means that minimal funding reaches services that benefit younger families who work there as service industry workers. My understanding is that this is a particularly extreme arrangement in the villages: if you lose your employment within the jurisdiction you have to pull your kids out of the local schools immediately.
Then you have issues where you get poor jurisdictions and wealthy ones based on property values. Some states help mitigate this by pooling property taxes across the state for school funding.
I’ve heard that many condo buildings in my area have a standing arrangement with a law firm to submit appraisal appeals every single year and the law firm is paid on a percentage based on the savings they achieve.
This system can’t be efficient for anyone involved. When you really think about it this is like a siphon of money that could be going into public services into a private law firm.
The thing about property taxes especially those that have owner-occupier exceptions is that they sort of work okay because they’re a good approximation for wealth. They’re still regressive but you can pretty safely assume that someone who owns a second home is wealthy enough to pay a high tax rate.
On the other hand, that arrangement passes more costs on to the lower income renter. Their property owner landlord has higher property taxes than owner-occupiers and theoretically passes those costs on to the renter.
I think someone could devise a better system and do away with property taxes as they function today entirely. We need a system that makes all the stakeholders in our society feel like every dollar they invest is a positive investment with returns.
Also did your six neurons figured out that it would also cause rent to decrease yet ?
This is so much of a thing that there was even a federal investigation into it (particularly the SaaS service used to help feed the data driving this trend).
It’s a consumer good most people want and will pay for and it retains its use for a very long time. So naturally there are fairly liquid markets and loans for it.
I understand how this would be infuriating to other locals. But it shows the power of community organization. They don’t win because America is systemically pro Hasidic, they simply turned out the vote (after years of non-participation.). This is an encouragement to be active in your own community. If you don’t, someone else may do it for you.
The cult leaders tell them how to vote and then bus them to the polling station. They also largely are unemployed or work for others in the cult, so there is no obstacle there.
It's a scientology level cult, not a "community", and while certainly impressive knowledge and coordination to hijack tax payer money, it's still nakedly fraudulent.
I've seen people completely change their attitudes about things once they own a home. I know a self-proclaimed liberal who claims to care about people suddenly go all NIMBY because they are buying a $2M house and now they don't want duplexes in their neighborhood and don't like the idea of more housing being built ("we're full"). They feel entitled to a high (and increasing) property value in a desirable area.
I hate it so much
If all of the sudden the neighborhood behind you gets rezoned to industrial and you get a datacenter nearby, everybody understands you're up in arms.
If at the same time the neighborhood behind you gets converted from 200 single-family homes to 200 8-plexes, complaining is NIMBY. Even though it has the same dramatic impact on the quality of life you bought into. Way more noise, way more street parking, cars racing late at night etc.
So absent of that, I think your personal incentives also lead you to your current housing policy preferences. Don’t you?
In the guise of 'paying your fair share to be a part of society', property tax is essentially the institution of serfdom to the royalty of state bureaucracy.
Property tax is effectively the same as rent, but the one collecting rent also has martial and lawfare capabilities. Not to mention effectively unlimited funds with which to crush anyone who doesn't fall in line.
If what you have can be taken by another if you don't meet some set of conditions, you don't really own that thing, do you? It's more like a loaner than it is 'I own this thing'.
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I'll offer a blanket alternative for state and federal taxation: no taxes on individuals, their income, or their property. Instead we tax exchange. States levy a 10% VAT on all transactions. Federal government levies taxes on interstate commerce, imports, and exports only.
All other forms of taxation are barred. New taxes may not be levied. If the state needs additional funds it may issue short or long term bonds accordingly.
Money printing is shifted away from being owned by an international banker's consortium, re-pinned to durable goods or precious metals.
It makes me uncomfortable too actually but I can’t see any alternative that does not get back to a similar spot or violence. In addition if we shifted to a land value tax, it would push taxes onto the very dense developed areas encouraging better use.
This is absurd. There's absolutely no benefit to you if the value of your house increases if you have no intention of selling it. That's exactly the point of treating owner-occupied homes differently from commercially owned property. The author should be embarrassed that he, as a an economist, doesn't know that in economic theory, households do not optimize for profit on some balance sheet, but for personal (subjective) utility. That's econ 101.
But even if you were right for the majority of home owners: feel free to tax collateralized homes as commercial property based on the volume of the mortgage. Case solved.
I can take a loan against or collateralized my home value.
I can have greater operational flexibility if I know I have a deep financial backup.
There is something to it, even if overstated
Regime in charge: Enjoy these property tax reforms that will lead to higher housing costs and (further) transfer of wealth towards people who already own homes. Let us know what else we can do to keep people in lower classes trapped and vulnerable to exploitation.
https://nicholasdecker.substack.com/p/the-median-voter-is-a-...
I'm a multi-homeowner and I'd love it if house prices fell, or at least stopped rising.
What does the phrase "Be the change you want to see" mean to you?
"America, where you can spend your entire life paying off mortgage and then still be one missed tax payment from losing it all."
Is that true and how is this not perpetual serfdom if you can't ever really own a home?
https://en.wikipedia.org/wiki/Allodial_title
Could someone go off the grid to some "commons" land and build a log cabin there or something?
https://phillipslytle.com/a-review-of-new-yorks-response-to-...
Until 2023, some (many?) would sell off your house and pocket the difference, even if it exceeded the tax liability!
Miss on two points: there are exemptions for retired that freeze prop tax and equity is wealth that’s rare to access before death
> The proposition adjusted the property tax rate, pegging it at 1% of the purchase price of the property.
That sent me down a rabbit hole of trying to understand why property taxes go down while home values go up, and why raising property taxes is so damn hard in so many states (it’s largely because of caps etched into law by Boomers in the 70s and 80s). It’s also why I have the strong opinions on the issue I hold today.
Tax displacement is a very real issue, but one that theoretically should be solved by a liquid property market where you can sell your home at FMV and downsize to another one you can afford. Americans, special creatures that we are, instead demanded we get the McMansions without the property tax valuations, while also deciding what housing gets built regardless of demand, while also keeping the distorted value of the home should we sell it for a retirement nest egg.
In other words: homeowners keep all the money, while paying decreasing to no taxes on it. This has been a significant contributor to the housing crisis of today, with shitbox properties in major cities selling for upwards of a million dollars but families pulling in not even a tenth of that in yearly income. The typical soundbite responses of “we need more housing” and “we need to reform or loosen regulations”, while technically correct, ignore the root incentive structure crafted back in the 70s with these sorts of inverse taxation schemes, and therefore leave the problem intact. We’d have to build so much housing, so quickly, that property values halve nationally for there to be any long-term fix to this problem, and nobody seems inclined to do this given the ponzi scheme we’ve discovered suburbia to be (just look at new developments in CA with dirt roads as an example of homeowners having to foot the bill and realizing it ain’t worth it given the thin density of suburbs).
And thus we arrive back at the beginning: we need to raise taxes on homes to reflect their high assessment values, which would displace existing homeowners who couldn’t afford said bill, which is leading to the same demographics as before demanding the same solutions as they enacted in the 70s and 80s: caps, limits, or shifting costs onto less-advantaged demographics (like renters via commercial real estate). As perverse as it sounds to most Americans, the actual solution is to finally let property taxes “float” with valuations in their entirety, no caps or cuts, and let the market sort it out. Will that lead to some folks becoming homeless? Yeah, and that’s a whole other ball of wax we’ve ignored dealing with precisely because we catered to homeowners as a political group, but that’s infinitely more solvable than trying to build our way out of a housing crisis engineered by lower taxes and controls on builds.
We gotta eat the pain up front to find a better collective tomorrow for everyone.
For one thing, in the 1970's lots of true "baby boomers" were still too young to vote.
Maybe what you mean is old folks in general, they were the ones in California who were desperate enough to support the proposition which might be able to save their homes.
They should know, lots of them had been through The Great Depression, and were so much older than boomers they could be their grandparents, well they actually were if you do the math.
And they did the math, getting by just by the skin of their teeth while those just a little bit older who had been on a fixed income earlier had already been taxed out beyond recovery before the proposition.
They already ate the pain, I guess it's difficult to remember how up-front it was if you never spent that many years among Depression survivors.
Nobody ever wanted a depression again, and losing your home through no fault of your own was one of the most visible outcomes that ordinary people could do something about before it got out of hand.
This was supposed to be big, and it is bigger than ever, this is by design.
The problem comes from trying to work against it when the entire economic system surrounding "real estate" was supposed to evolve by now to where nobody pays more tax by now than the most proposition-protected properties.
The idea was for it not to end up making any difference as the years went by, nothing could be more fair than that.
The pearl-clutching comes from the failure of following generations to evolve away from taxing properties or wealth, with all levies eventually falling exclusively onto commerce instead so that only those who are actively making big transactions at the time are logically expected to be able to afford anything at all at the time.
Otherwise things are going to stay as medieval as they can, and the torture will continue until the attitude improves.
Well at least your property value will go up endlessly. No bubble there. Totally not based on speculation.
Actually that often is how local governments see it in many places.
Local bond issues, which are paid for by property taxes, are often not a fixed rate. They are often a fixed amount (e.g., $2 million/year for 5 years) or a fixed initial amount with some growth allowed (e.g., $2 million/year for 5 years with inflation adjustments, often capped at some maximum adjustment).
With these each year the rate changes to keep the amount collected on target. If aggregate property values go up the rate goes down and if aggregate property values go down the rate goes up. If everyone's property values went up or down by the same percentage the amount of tax each person paid would stay the same.
Your share of the tax is proportional to your share of the aggregate property value, so our individual taxes can change regardless of any changes in aggregate value. For example if aggregate value goes up 5%, but your assessed value us up 10% and mine is up 3% your tax for a fixed amount bond will go up and mine will go down.
The government should face a punishment for targeting constant inflation.
Government is not a borg. We elected the dumbest motherfucker in the country, he consolidated power, and we got incredibly inflationary (among other things...) policies. Local government is just along for the ride.
But I agree that pinning all hopes of class mobility or comfortable retirement on perpetually increasing housing costs cannot work for very much longer.
Also, economies can grow rather than just inflate
This isn't something special with taxes.
Piece of cake really, compared to getting lucky trying to lower taxes.
not my downvote btw