#proposition 13

[transpondster]

[ottopilott]

Watching the credits for Airplane!, I learned Howard Jarvis is the taxi customer from the start of the movie.

While this is a fine film, fuck that guy forever.

[probatelawyercalifornia]

How To Use Prop 13 While You Still Can

Other clients will definitely be impacted, so we’re implementing strategies swiftly to use Prop 13 while we still can. Know more about us. 

[gettothedancing]

Zuckerberg’s assault on Proposition 13 could wipe out small businesses in California as the tax increases from commercial real estate get passed down to small business tenants.

With a net worth of over $79 billion, Zuckerberg could replace every pipe in California and not even notice the cost. But instead the Chan-Zuckerberg Initiative, the name of the charity and political organization of one of the world’s wealthiest couples, has spent $2.1 million to raise other people’s taxes even after Facebook had used Ireland as a tax shelter to avoid paying taxes in the United States.

Wiping out property tax protections won’t hurt the big dot com firms like Facebook. But it will make it even harder for any prospective rivals to function in an area with impossible rents and the highest housing costs in the country. That’s why one startup was charging $1,200 in rent for bunk beds for aspiring Zuckerbergs who “want to focus on their startups”, but can’t actually afford to live there.

The pressures of commercial rents are already catastrophically punishing. Zuckerberg’s move to crush commercial real estate protections will significantly raise the cost of doing business for competitors without Facebook’s deep pockets, potentially reduce future income tax impacts on his own vast fortune and those of many Facebook employees, and leave behind chaos as Facebook expands elsewhere.

The downward pressure of commercial property tax hikes will turn much of the rest of California into the Bay Area with impossible rents squeezing out small businesses and the people that depend on them. If you want to see the future of California, imagine a handful of dot coms, satellite startups, and the businesses owned by them, from Whole Foods to the leftovers of the entertainment industry, and gig economy delivery services making up the leftovers of the economy. And a whole lot of poor people living in housing subsidized by dot coms like Facebook, which dumped $1 billion into affordable housing, and taking tech vans for hundreds of miles to do grunt work for the tech masters of the universes.

The California Schools And Local Communities Funding Act is a dot com trojan horse that would turn the state into a Silicon Valley ghetto while wiping out the protections that made a middle class life possible.

[fnord888]

OK, but enough about presidential politics. Focusing too much on top-line national races is unvirtuous.

So, California proposition 13. Not the one about property taxes, the new one that’s one the March 3 ballot. It

a) Authorizes 9 billion of bonds for preschool-high school education

b) Authorizes 6 billion of bonds for higher education, 2 billion of which goes to community colleges

c) Changes the way state preschool-high school funds are allocated between districts

d) Raises the debt limit for school districts issuing their own bonds

e) Reduces fees to school districts for new residential construction

Pros:

a) Appears to have wide and bipartisan support in the legislature. To the extent that California direct democracy system is bad and contributes to gridlock, a general policy of voting for propositions supported by the legislature ameliorates that.

b) Most of the things it funds seem to be good things to do (prima facie, before doing cost-benefit analysis).

c) The changes to how state funds are allocated at least sound good, prioritizing districts where the funds would do the most good. But I don’t know how gameable that is.

d) More flexibility for local government funding is probably better.

e) Reducing barriers to residential construction is good. But this isn’t the biggest barrier (since it’s just money, though apparently sometimes a large amount of money, not an actual regulatory bar), and its one that arguably makes some amount of economic sense.

f) If the state Legislative Analyst’s cost estimate is accurate, the borrowing will be relatively cheap: 11 billion in interest in 15 billion principal for 35 year maturity suggests an interest rate of ~2.2 percent, lower than 2019 inflation (though higher than the target inflation rate).

Cons:

a) Appears to be a significant amount of fiscally procyclical borrowing. Which is kind of an issue with California

b) Some amount of tulip subsidies. Mitigated by only a small portion going to 4-year institutions, and being earmarked for capital improvements, but still.

Major open questions:

a) Over what time period can we expect the money to be borrowed and spent?

b) What alternative arrangements are likely to be made in the event the proposition does not pass?

c) Are the changes to funds distribution likely to work as intended?

I currently find myself pro, but not with certainty.

[erebusvincent]

California homeowners get to pass low property taxes to their kids. It's proved highly profitable to an elite group

A generation of California homeowners enjoy a significant perk that keeps their property tax bill low. Part of that is thanks to Proposition 13, which has strictly limited property tax increases since 1978. But they also benefit from an additional tax break, enacted eight years later.

[brandondonnelly]

Thoughts on housing in the Bay Area

I was out for drinks recently with a friend of mine who is a developer in California and she mentioned a few things to me that I thought were really interesting. 

First, she talked about how virtually nothing gets built in the Bay Area “as of right.” And so the market is hugely supply constrained. She said, you’re lucky if you can get your entitlements in 2 years. It’s starting to take longer. I immediately said: “That’s Toronto.”

Second, we talked about Proposition 13, which was timely given this recent post. One of the consequences of Prop 13, beyond helping golf clubs survive, is that longtime homeowners seem to be highly incentivized not to move. 

Their property taxes are so below market that it can be more cost effective for them to stay put as opposed to downsize -- even if they have too much house. This means far less turnover in the housing market.

Third, there really does seem to be a feeling in the Bay Area that it’s at a breaking point in terms of affordability. When a successful software engineer making $200,000 a year can’t afford housing, people naturally start to look to other cities.

We hear this refrain all the time in the media, but because I’m not active in that market, it was far more impactful hearing it from a friend.

[discolawyers]

Throwing back to 1978… On June 6, 1978, California voters approved Proposition 13, or People's Initiative to Limit Property Taxation, an amendment of the Constitution of California. Proposition 13 is embodied in Article XIII A of the Constitution of the State of California. The most significant part of the act is the first paragraph, which limited the tax rate for real estate: “Section 1. (a) The maximum amount of any ad valorem tax on real property shall not exceed 1% of the full cash value of such property. The 1% tax to be collected by the counties and apportioned according to law to the districts within the counties.” Pictured: Paul Gann, co-author, Proposition 13 (photo credit: unknown)