Posted on 07/11/2023 12:52:04 PM PDT by nickcarraway
For decades, economists and analysts ignored the racial effects of how the government raises taxes. Now the introduction of race into the tax equation has blown things up a bit.
This month marks the 45th anniversary of Proposition 13. Although the impact of Prop 13 on the state’s public finance landscape is far-reaching and mostly negative, the capping of property tax assessments is its signature element. It creates a property tax subsidy that increases the longer you own your home. As long as the value of your home grows faster than 2% a year, you come out ahead. As a result, homeowners living in the same neighborhood can pay vastly different amounts in property taxes.
On Zillow, I found, in San Rafael (Marin County), a pair of 3 bedroom/2 bath houses are part of a 1960s development. They list at an identical 1,416 square feet and are one block apart. A new homeowner paid $14,500 in taxes their first year (2021). The other owner—whose family bought the house in 1985—paid a whopping $9,000 less, with a property tax bill of $5,500.
That difference is what people like me call a subsidy. Meanwhile, other Californians pay more in taxes to offset that difference.
Now, comparing tax bills off the internet isn’t systematic. So, my colleagaues at the Opportunity Institute and Pivot Learning collaborated “Unjust Legacy,” a report examining Prop 13’s impact across racial and ethnic groups. Their investigation found that the Prop 13 subsidy is larger for whiter, older, wealthier Californians.
The finding isn’t very surprising. California’s population is larger and more diverse now than it was in 1978. And the subsidy grows the longer you own a home.
Nonetheless, the reaction to the report has been swift and hot. Jon Coupal, who heads the Howard Jarvis Taxpayers Association, responded by arguing that was the rationale for the ballot initiative in the first place: The cap on property taxes enables low-income homeowners to stay in their homes. His evidence? A woman in Texas was forced out of her home because of high taxes. As evidence goes, it is pretty thin. In fact, in the 45 years since Prop. 13 passed, we haven’t seen systematic analysis supporting this contention.
Dan Walters, a fixture of Sacramento politics who now writes for CalMatters, also rejected the findings of the report by arguing that income and wealth disparities among Californians “stem from multiple reasons that have nothing to do with Proposition 13.” He goes on: “White homeowners benefitted heavily from property tax limits because they were more likely to be homeowners in the first place.”
It is a position that feels a lot like the country club president defending a lack of diversity among membership by arguing that people of color don’t really like to play golf and tennis in the first place.
What is notable about the responses is the sense of attack embedded in their rush to defend the status quo. “The policy wasn’t designed to be racist” isn’t an acceptable rebuttal, particularly in a state such as California, where “colorblind” policies and analyses do not align with our laws and values and will continue to exacerbate inequities.
The findings of the “Unjust Legacy” report was one of a recent string of analyses on the intersection of race and taxes. A group at Stanford, working with IRS researchers, found that the IRS audited Black taxpayers at 2.9 to 4.7 times the rate of non-Black taxpayers. The Tax Policy Center calculated that Black couples pay more in individual income taxes if they are married and white couples pay less.
We can argue about legislative intent, but the fact that a tax system systematically benefits one race or ethnic group over another is, at best, problematic. What could be done to change that in the case of Prop. 13? An obvious place to start: assessing commercial properties at market rate, like every other state does. Other options include limiting the Prop 13 subsidy to a person’s first home or assessing vacant lots and homes owned by investment funds at the market rate. Another option: eliminate the assessment cap while expanding the state’s homeowners’ exemption—a tax break for first homes—but shielding the first, say, $250,000 in home value from taxes, making the whole property tax system much more progressive.
At any rate, I think many Californians can agree that reexamining how government collects revenue through an equity lens is long overdue.
Patrick Murphy is director of resource equity at the Opportunity Institute and a professor at the University of San Francisco.
Prop 13 was passed to prevent people from having to sell their homes just to pay for the property tax after California's real estate boom made long-time owners (i.e., middle class owners) targets of the wealthy who wanted their properties.
It was the classic "the property was too good for the people who owned it," which was a similar refrain heard about the people who bought Florida Intracoastal Waterway property in the 1960s and 1970s who were then targets for people who wanted to build yacht clubs or waterfront mansions for the wealthy.
-PJ
We bought in 2019 so our taxes are way higher than some of my neighbors who have been in their homes for decades. That's the law and that's how life works. We knew that going into the purchase.
What's really unjust is the idea of property taxes that are based on assessments. That's what people like me call a tax on unrealized gains.
Translation of article:
Low Taxes bad.
High Taxes good, unless you are a minority and non Asian.
Shall we charge less for Everything? Ie clothing, food, restaurant food, cars, rent, houses...just cause you are certain race?
“That difference is what people like me call a subsidy.”
That’s because you’re an idiot, Patrick.
L
It's not so much who is being audited, but why. Unless, of course, the IRS is engaging in racism.
But, most likely, the IRS selects returns to be audited based on factors such as source of income, deductions and credits for child care, etc. And, the term "audit" can mean different things; a question about a particular item is not the same as a demand that the taxpayer come into the office with documentation for a number of different items.
OK, I'll grant that there's a discrepancy, arguable but we'll go with it for now. Why is the automatic presumption that any discrepancy must of course be resolved IN FAVOR OF THE GOOBERMINT and against the productive member of society??? Shouldn't the presumption always start in favor of the guy with a job minding his own business (i.e. LOWER the inappropriately high rate instead of screwing the taxpayer)? I never understood why Prop 13 allowed the property taxes to reindex after a sale in the first place.
Think about it. They have the same number of roads to maintain as before. If home prices skyrocket far in excess of inflation in the labor market and what they have to pay for asphalt, etc., and we increase property taxes, THAT'S an windfall to the goobermint. Why should people who live off the labor of others ever get such a windfall?? That's the true inequity.
EXACTLY-—
Calif Assessors were driving older home owners out of their homes.
People who had lived in Calif in the 40’s/50’s/ 60’/s and who never earned fabulous money were being attacked each year with property taxes.
MOST were persons who NEVER caused any trouble & kept their homes as nice as they could.
They had spent most of their working lives in Calif & wished to retire there-—around places & people they were familiar with.
they were literally being taxed out of their homes.
IF they did sell-—moving & finding a home they could afford when facing retirement-or already there-wasn’t feasible.
Prop 13 passed strongly because of all these reasons & more.
Trying to restructure Prop 13 & the reasons for it is useless. It is also downright nasty.
Most people today have no idea what it is to retire on $760 a month Soc Sec. That is what I got at age 63+.
Typical s**tbag liberal who believes that any dollar of your earnings requires a strong argument in defense of you keeping it versus the government confiscating it.
When everything is “racist” then nothing is racist.
$14,500 in annual taxes on a 1400 sq ft house? Fourteen Thousand Five Hundred dollars annually for a three bedroom two bath house.
Now that is the travesty.
How in God’s name can they justify that?
‘Property taxes’ on their face are worthy of an armed revolution.
This house is in a very wealthy area Marin County.
California property taxes are 1% of the assessed value ,plus small additional amounts for bonded indebtedness.
So a 14,500 tax bill means they paid $1,450,000 for the house.
So that’s how this tax bill is Justified.
I was around after prop 13 passed...State dems went ballistic and stated they would gut our firefighting, libraries and such...They proved Howard’s point....The pols were going after all the money they could squeeze out of people.....
It’s at least twice that in NJ.
True.
Property taxes ran us out if CA in 1970 when I was 10. We couldn’t even afford to rent a house.
Especially when “they” do the assessments.
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