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Old 01-30-2011, 10:31 PM   #61
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Originally Posted by eridanus View Post
The link that Gumby posted has per capita rankings. Alaska is #1 in Federal Spending Received; North Dakota is #5.
Thanks, I must be going blind, it was right in front of me but all I noticed was the yellow highlighted columns inn the excel spreadsheet.
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Old 01-30-2011, 10:56 PM   #62
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I'm a Californian and this deficit is disheartening and completely the fault the electorate and our dysfunctional legislature. I sincerely hope we can get down to business and get this to a more manageable level this year, but am not holding my breath.

I will say that certain states seem to be taking a bit too much pleasure in our downfall. A bit of schadenfreude I guess. This is not a reference to any of the posters on this thread.
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Prop 13
Old 01-30-2011, 11:45 PM   #63
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Prop 13

Getting rid of prop 13, and raising taxes on property would probably have some unintended consequences like lowering property values and creating a zero net gain for the state.

An early retirement forum is the last place I thought I would find people who want to raise taxes...on anything. You should all be so lucky as to have a prop 13. It limits the amount they can raise your property taxes each year to 2%...very fair I would say. They shouldn't be able to tax you out of your house because the values suddenly rise. Example...Rich foreigners bid up housing prices and drive up taxes, forcing elderly people on fixed incomes out.
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Old 01-31-2011, 12:02 AM   #64
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California resident here. Gov Brown recently announced that he'll be closing the budget gap by cutting gov't spending and having special election in June to extend the increased sales, income, and vehicle license tax. I doubt this will pass in the special election. They'll have to reduce pension obligation but, under the current law, they can't retroactively change the pension promises.

Lets see... I'm just waiting to see what happens to CA this year and see if I should move out of this state.

I'm in the same boat (CA resident). I'm waiting to see what happens on the state's financial front. A lot of things up the air at 54 yo - can almost RE, currently out of work, kids in college, waiting to see where they will end up. Optimally I'll stay a few more years, but if the tax rates go much higher I will strongly consider out of state relo. Also possible if a kid settles somewhere else or I get a j*b somewhere else. I know a few other higher income people who would also consider moving. I believe that much higher taxes will drive a lot of the higher earners out of the state, so they will never get as much revenue as they expect from higher rates.
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Old 01-31-2011, 12:04 AM   #65
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Originally Posted by Pete View Post
Example...Rich foreigners bid up housing prices and drive up taxes, forcing elderly people on fixed incomes out.
You're describing 1980s Hawaii, and somehow we all managed to survive that experience.

Got a link for the unintended effect of raising property tax rates causing lower tax revenues?
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Old 01-31-2011, 12:10 AM   #66
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Getting rid of prop 13, and raising taxes on property would probably have some unintended consequences like lowering property values and creating a zero net gain for the state.
Yup. Looking at property taxes paid by county, it turns out that most California counties rank in the top half of the counties in the US.

The Tax Foundation - Property Taxes on Owner-Occupied Housing, by County, 2005 - 2009, Ranked by Property Taxes Paid (PDF and spreadsheets available here)

Raise property taxes significantly, and you'll find home prices magically dropping to look like some of the Northeast US market.

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Originally Posted by Pete View Post
An early retirement forum is the last place I thought I would find people who want to raise taxes...on anything. You should all be so lucky as to have a prop 13. It limits the amount they can raise your property taxes each year to 2%...very fair I would say. They shouldn't be able to tax you out of your house because the values suddenly rise. Example...Rich foreigners bid up housing prices and drive up taxes, forcing elderly people on fixed incomes out.
I know folks back east, living on pension + SS, who are now faced with having to move in their 80s, as taxes have gone from $3,000 annually up to $16,000 on the latest bill. They just can't afford it.

California passed it's property tax cap specifically because this was happening. Older folks were being taxed out of their homes. Of course, a desire to 'starve the beast' also played into that. We can all see how well that worked out.
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Old 01-31-2011, 12:16 AM   #67
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Try your hand at solving the CA budget crisis here:

Los Angeles Times: California budget balancer - latimes.com
The LATimes link is a political exercise. On that exercise you can cut EVERYTHING they give an option for and you still have to raise taxes to balance the budget. They don't break out the pensioners and a lot of sub-items, so they make it look like tax increases are inevitable. With the amount of spending that California is doing, I refuse to believe that spending cannot be cut more. It's just that nobody wants to face it. Sort of like Medicare and SS at the Federal level. It's a train wreck not quite happened yet.
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Old 01-31-2011, 12:53 AM   #68
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You're describing 1980s Hawaii, and somehow we all managed to survive that experience.

Got a link for the unintended effect of raising property tax rates causing lower tax revenues?
Congrats on surviving. I wonder if everyone did?

No links, just common sense. People can only afford so much a month. If the taxes go up the P+I must go down.

Taxes, at least in LA county, are based on 1.25%. With houses going for 300 to 500K, taxes are somewhere in between 3750 and 6250 a year. Plenty. In addition we pay extras like Mello Roos which aren't even tax deductible.
Mello-Roos - Wikipedia, the free encyclopedia
On top of that, many homes now come with association fees used on roads, sidewalks, lighting, and other things the county used to provide. Add on almost a 10% sales tax, high registration taxes... well you should get the picture we pay plenty.

Over the past few years there have been many take aways too. We now pay for school busing, school sports, band... They've introduced toll highways. Many state park fees have tripled. We pay some of the highest gas prices in the country.
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Old 01-31-2011, 01:00 AM   #69
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California passed it's property tax cap specifically because this was happening. Older folks were being taxed out of their homes.
Thanks...My parents were gonna lose their house. They still sing the Howard Jarvis praises.
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Old 01-31-2011, 01:16 AM   #70
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California has long been a net giver of federal tax dollars. West Virginia and Kentucky have long been net receivers.

One has to wonder what would happen if the most egregious net receiver states (Alaska, ND, and WV are perennially near the top) were to stop receiving handouts from the net givers (NJ, California, and Illinois among them).
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I knew that CA sent a lot more to the Feds than they received but if I'm reading this right it is about $47B/year. (Is this right?)

I think that the budget deficit is about $26B.

Ergo, all we have to do is stopping sending our money to those spendthrifts in WV and KY and we'll have a multi-billion $ surplus.
I think I know what is meant by the "Federal Taxes Paid". It must be the Fed income tax collected from the residents of each state, and any Federal excise tax.

But what is the "Federal Spending"? What does it include? SS and Medicare or welfare assistance, funding for insterstate system? Those are probably included. How about defense spending, or any other commercial-type of purchases? I am simply curious.
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Old 01-31-2011, 04:39 AM   #71
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An early retirement forum is the last place I thought I would find people who want to raise taxes...on anything.
Raise your taxes, not our taxes.
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Old 01-31-2011, 06:10 AM   #72
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The issue with Prop 13 is that over time your taxes have less and less relation to the value of your house. Whereas new owners pay all the property taxes. Prop 13 (paraphrasing from memory) only allows 2% increases per year, and if the property value goes down and is reassessed, that is a new basis from which increases can only be 2% per year.

There are special programs in states like Texas that help fix this problem for seniors. For instance, allowing them to let property taxes go unpaid until they die, and then take the taxes from the value of the house.

Some California counties have agreements to allow people to buy a house in a different county, even, and they maintain their low property tax basis. I have a friend who held one of the two highest positions at a University of California school. They had owned their house for a long time and paid very little property taxes. After he retired and started drawing his pension (presumably over $250,000 inflation adjusted per year for the rest of his life), they moved to a different county and maintained their very low property tax basis on their new home. (how nice!)

Warren Buffett mentioned this before, on his place in Mailbu that he had owned for a long time, he was paying a fraction of the property tax of his neighbors.

I would be for a revenue neutral change back to a normal system. Prop 13 also had the unintended effect of cities and counties refusing to approve new housing and creating stringent zoning laws -- this has been the primary cause of housing inflation in California. They favor approving business real estate that generates reliable sales tax revenue.

However, the business unfriendly policies of California has chased businesses away and has started to erode the tax basis.
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Old 01-31-2011, 08:21 AM   #73
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An interesting Op-ed piece in today's NYTimes:

Within Our Means

Quote:
In the next two months, Gov. Andrew Cuomo and the Legislature will have to make very difficult decisions about how to close a $10 billion budget deficit ó which state offices to shutter, which services and aid to cut, which employees to lay off and which taxes to raise. There are no easy fixes left.

Mr. Cuomo has vowed to balance the budget without borrowing or using any of the accounting gimmicks that helped dig New York into this hole. Thatís good news.

But we are skeptical of his no-new-taxes pledge and his promise to let a surcharge on high earners expire. ...

... So the stateís most vulnerable citizens ó the poor, the sick, the elderly and schoolchildren ó will inevitably bear the largest burden. ...

None of these choices will be easy. Governor Cuomo has set up several commissions to recommend ways to cut costs and streamline government. We hope the process will promote an honest, transparent debate. New York canít go on this way any longer.
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Old 01-31-2011, 08:30 AM   #74
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What causes high property values in CA? I worked for a CA bank in the mid 90's in their appraisal department. That was a question I ask my self. While zoning had an effect on value, it goes deeper than that. I saw that raw land around SF was not that out of land with other areas. However, there was a huge difference between raw land and land that had been platted. The process of platting the land for development was generally very expensive. Once platted, all sorts of fees were incurred. Often the cost of schools and other development options were added to the platted cost of a lot. Add this the increased cost of construction brought on by generally higher prices, locations closer to the city, and before you know it you have a million dollar 1,800 sq ft home.

By the way, Texas has prop 13 (not called this) for all school taxes and for city and county taxes if they choose to freeze them. I believe only 24 of counties currently freeze property tax. I live in one of those. They also have portability, i.e. if you move you can take your exemption along to a more expensive dwelling. Texas law is to keep seniors on fixed income in their homes.

While Texas has high property tax, they generally have lower property values.
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Old 01-31-2011, 09:13 AM   #75
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Originally Posted by Pete View Post
Getting rid of prop 13, and raising taxes on property would probably have some unintended consequences like lowering property values and creating a zero net gain for the state.
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No links, just common sense.
It's neither common sense nor common arithmetic.

First, many (most?) municipalities use the assessed value to determine how to split a pre-determined tax bill. The assessed values have zero affect on the total amount collected, just how the total bill is divided.

Second, even if the tax was set directly by assessed value, the arithmetic doesn't work. If they doubled your tax rate, the home value would need to drop to half of it's current value for a net zero gain. Seems extreme.

Third, a non-Prop13 wouldn't affect the resale value (which is the only 'value' that matters) because the tax benefit can't be passed on anyhow.

In fact, by splitting up the bill across everyone more evenly, it would proportionately reduce the tax bill, (or reduce the proportional amount of any increases) on the homes that are sold. This would raise home values.

-ERD50
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Old 01-31-2011, 10:11 AM   #76
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Some California counties have agreements to allow people to buy a house in a different county, even, and they maintain their low property tax basis. I have a friend who held one of the two highest positions at a University of California school. They had owned their house for a long time and paid very little property taxes. After he retired and started drawing his pension (presumably over $250,000 inflation adjusted per year for the rest of his life), they moved to a different county and maintained their very low property tax basis on their new home. (how nice!)
Those would be the Proposition 90 'tax treaties'. Only 8 counties allow portability between counties. They were set up for precisely this case, where a retired person was 'downsizing' their home and taking out some of the equity from the old home for retirement. Proposition 60 allows 'portability' within a county. There are a bunch of eligibility requirements:
Quote:
  1. You, or a spouse residing with you, must have been at least 55 years of age when the original property was sold.
  2. The replacement property must be your principal residence and must be eligible for the homeowners' exemption or disabled veterans' exemption.
  3. The replacement property must be of equal or lesser "current market value" than the original property. The "equal or lesser" test is applied to the entire replacement property, even if the owner of the original property purchases only a partial interest in the replacement property. Owners of two qualifying original properties may not combine the values of those properties in order to qualify for a Proposition 60 base-year value transfer to a replacement property of greater value than the more valuable of the two original properties.
  4. The replacement property must be purchased or built within two years (before or after) of the sale of the original property.
  5. To receive retroactive relief from the date of transfer, you must file your claim within three years following the purchase date or new construction completion date of the replacement property.
  6. Your original property must have been eligible for the homeowners' or disabled veterans' exemption either at the time it was sold or within two years of the purchase or construction of the replacement property.
The proposition appeared after California lost a case involving the taxation of withdrawals from tax-sheltered retirement accounts, wherein the state lost it's attempt to tax withdrawals from accounts made in other states of funds originally earned in California. Yeah, really. Something about inhibiting a pesky constitutional right of free movement among the several states.

There was a concern that retirees would flee California for some strange reason...
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Old 01-31-2011, 10:24 AM   #77
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Yup. Looking at property taxes paid by county, it turns out that most California counties rank in the top half of the counties in the US.

The Tax Foundation - Property Taxes on Owner-Occupied Housing, by County, 2005 - 2009, Ranked by Property Taxes Paid (PDF and spreadsheets available here)

Raise property taxes significantly, and you'll find home prices magically dropping to look like some of the Northeast US market.



I know folks back east, living on pension + SS, who are now faced with having to move in their 80s, as taxes have gone from $3,000 annually up to $16,000 on the latest bill. They just can't afford it.

California passed it's property tax cap specifically because this was happening. Older folks were being taxed out of their homes. Of course, a desire to 'starve the beast' also played into that. We can all see how well that worked out.

I think your link just doesn't prove what you state.. maybe top half of actual taxes... but their percent is WAY down the list... Marion County ranked 635 (of 775) in percent of tax... from what I can see, they should be paying 2X or even 3X... I doubt that raising taxes from $5K to $10K per year will result in a 50% drop in value... maybe 10%... heck, let's say 20%... but you still collect more in taxes...


Now, if you have a problem with older folks getting taxed out of their homes... pass a law freezing taxes for them... that is what we do here... Heck, if the senior does not want to pay taxes... so be it.. they accrue until they die and then are paid when the house is sold... so nobody 'has' to move because of taxes...
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Old 01-31-2011, 10:30 AM   #78
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Congrats on surviving. I wonder if everyone did?

No links, just common sense. People can only afford so much a month. If the taxes go up the P+I must go down.

Taxes, at least in LA county, are based on 1.25%. With houses going for 300 to 500K, taxes are somewhere in between 3750 and 6250 a year. Plenty. In addition we pay extras like Mello Roos which aren't even tax deductible.
Mello-Roos - Wikipedia, the free encyclopedia
On top of that, many homes now come with association fees used on roads, sidewalks, lighting, and other things the county used to provide. Add on almost a 10% sales tax, high registration taxes... well you should get the picture we pay plenty.

Over the past few years there have been many take aways too. We now pay for school busing, school sports, band... They've introduced toll highways. Many state park fees have tripled. We pay some of the highest gas prices in the country.

I don't think people are saying that Californians are not overtaxed...


What I would say (and I bet I am not alone), is that they should pay for what they want... and not expect the rest of the country to bail them out.. so as long as it remains a fight inside the state... I am happy not to be involved... when the Gov goes to DC and asks for a bailout... I will not...
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Old 01-31-2011, 10:48 AM   #79
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...even if the tax was set directly by assessed value, the arithmetic doesn't work. If they doubled your tax rate, the home value would need to drop to half of it's current value for a net zero gain. Seems extreme.
The tax is set directly by assessed value here. Example-tax on a 500K house in LA County is (500K x .0125 (1% plus some voted indebtedness)) $6250. Double my tax to $12,500 and my monthly cost would be more than $1000 in just taxes. And yes, common sense says that would affect the sale price. The high taxes didn't seem to have an effect recently because of the housing mania, but they sure are part of continuing drop back to reality.
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Old 01-31-2011, 11:24 AM   #80
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The tax is set directly by assessed value here. Example-tax on a 500K house in LA County is (500K x .0125 (1% plus some voted indebtedness)) $6250. Double my tax to $12,500 and my monthly cost would be more than $1000 in just taxes. And yes, common sense says that would affect the sale price. The high taxes didn't seem to have an effect recently because of the housing mania, but they sure are part of continuing drop back to reality.
The state does NOT have a revenue problem. The state has a spending problem. As mentioned previously, how can AZ or TX have 50%-66% of the per capita spending of CA? I'd like to see the same categories of spending broken down in per capita terms across all three states. Let's see where CA is way overspending, and then tackle THAT problem.
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