'Prop 13 like' proposed change to WA property tax structure

[MtnSurfer]

Originally Posted by Avondalist

Lower property taxes for seniors and people with disabilities don't require you to lower property taxes on everybody. Prop 13 is too distortionary, especially since the tax basis can be inherited.

Prop 13 is an interesting beast. It is actually one of the most studied tax laws in US history. I don't think Prop 13 should be duplicated in WA but rather the state should pick the best parts and leave the rest. Even within CA, they are trying to revise it since there are a number of aspects which don't make sense or are too extreme.

The inheritance aspect is one which they've already made changes to. I would just get rid of that part. Perhaps the worst part they're trying to change are the caps and limits on commercial and industrial properties. So there are wealthy corporations getting huge tax breaks, some of them even foreign owned. I think a new proposition focused on those in greatest need would be best. People of lessor means should not be taxed out of their homes. And putting 'some' limits on annual increases makes sense. I personally like the caps as well with some exceptions like properties over $4 million, for example.

On another interesting note, did you know that CA now receives 50% of all income tax from the richest 1% of its residents after a new law passed after the Great Recession. So, that has helped with state funding including education which was underfunded especially in middle to lower income districts.

Derek

[texasdiver]

Originally Posted by MtnSurfer

Prop 13 is an interesting beast. It is actually one of the most studied tax laws in US history. I don't think Prop 13 should be duplicated in WA but rather the state should pick the best parts and leave the rest. Even within CA, they are trying to revise it since there are a number of aspects which don't make sense or are too extreme.

The inheritance aspect is one which they've already made changes to. I would just get rid of that part. Perhaps the worst part they're trying to change are the caps and limits on commercial and industrial properties. So there are wealthy corporations getting huge tax breaks, some of them even foreign owned. I think a new proposition focused on those in greatest need would be best. People of lessor means should not be taxed out of their homes. And putting 'some' limits on annual increases makes sense. I personally like the caps as well with some exceptions like properties over $4 million, for example.

On another interesting note, did you know that CA now receives 50% of all income tax from the richest 1% of its residents after a new law passed after the Great Recession. So, that has helped with state funding including education which was underfunded especially in middle to lower income districts.

Derek

Every single exemption or cap that you impose to favor some existing land owner means higher rates for everyone else to compensate.

For that reason I would always be very loath to dish them out like candy. Tax deferrals for poor elderly who are living in their home? Sure. They can defer the taxes and pay them out of their estate when they die. But everyone else?

If you want to do social engineering, grant more generous homestead exemptions for people actually living in their primary homes. So that speculators and investors pay more. But beyond that?

We mostly do vote on our property tax levies anyway, for schools, fire, police, local parks and roads, etc. It is a lot more fair if everyone pays the same rate rather than having greatly disparate rates based only on how long you have owned that property.

[ohio_peasant]

Originally Posted by MtnSurfer

On another interesting note, did you know that CA now receives 50% of all income tax from the richest 1% of its residents after a new law passed after the Great Recession. ...

I don't have the exact numbers, but this wouldn't surprise me. Also note that CA has much higher tax rates on single filers than on married. And if the top 1% is paying that much, imagine what portion of total state "revenue" comes if we expand from top-1% to top-10%. A young professional, no spouse and no kids, making $200K/year in tech... that poor (and I do mean poor) individual is getting soaked.

Then there's the issue of people who work for cash, or contractors and gig workers of various sort, who have the luxury of under-reporting income.

Thus the reason to consider alternative schemes of taxation, to broaden the tax base. How? Move away from taxing income towards taxing consumption, including the biggest consumption item of all: residential real-estate.

[texasdiver]

Originally Posted by ohio_peasant

I don't have the exact numbers, but this wouldn't surprise me. Also note that CA has much higher tax rates on single filers than on married. And if the top 1% is paying that much, imagine what portion of total state "revenue" comes if we expand from top-1% to top-10%. A young professional, no spouse and no kids, making $200K/year in tech... that poor (and I do mean poor) individual is getting soaked.

Then there's the issue of people who work for cash, or contractors and gig workers of various sort, who have the luxury of under-reporting income.

Thus the reason to consider alternative schemes of taxation, to broaden the tax base. How? Move away from taxing income towards taxing consumption, including the biggest consumption item of all: residential real-estate.

One advantage of property taxes is that they are the least easy to evade. You can't hide real estate or move it to another state. And if you don't pay the state can just take your property. So you don't need some giant enforcement body to do audits and such.

Although for urban non-residential property I'd advocate for a land tax, not a property tax. In order to encourage the highest use of the property and to prevent speculators from stockpiling blighted properties and doing nothing with them for decades.

[grega94]

Has the Washington legislator ever considered or studied a land value tax (LVT)? I know it has its issues, such as incentivizing renters and punishing SFH owners with large lots of land, but it seems like many agree it’s the “best” tax. It gained a lot of notoriety in the late 1800s with the Georgism/single tax movement, to replace all taxes with an LVT, since land is a fixed and finite commodity.

https://en.m.wikipedia.org/wiki/Georgism

[ohio_peasant]

Originally Posted by grega94

Has the Washington legislator ever considered or studied a land value tax (LVT)? I know it has its issues, such as incentivizing renters and punishing SFH owners with large lots of land, but it seems like many agree it’s the “best” tax. It gained a lot of notoriety in the late 1800s with the Georgism/single tax movement, to replace all taxes with an LVT, since land is a fixed and finite commodity.

My impression is that this would only exacerbate the trend for huge McMansions on small plots of land. And as you say, it would punish homeowners of older structures on larger lots. It might have been a good idea say in Manhattan in the year 1900 to encourage high-density growth. Or in a city-state such as Singapore or Hong Kong. But for most parts of the US, it's the opposite of what I'd prefer.

Instead, and directly to the contrary, tax square footage of living space (or commercial space), leaving the land per se alone.

[texasdiver]

Originally Posted by ohio_peasant

My impression is that this would only exacerbate the trend for huge McMansions on small plots of land. And as you say, it would punish homeowners of older structures on larger lots. It might have been a good idea say in Manhattan in the year 1900 to encourage high-density growth. Or in a city-state such as Singapore or Hong Kong. But for most parts of the US, it's the opposite of what I'd prefer.

Instead, and directly to the contrary, tax square footage of living space (or commercial space), leaving the land per se alone.

It doesn't have to be applied universally. Just in commercial and higher zoned areas where you want to encourage more density.

Why, for example, should the owner of this property pay 50-times less property tax



Than the owner of this property when they are the same size lot on the same block? All that does is provide a tax incentive to land speculators (who are often out of state) to sit on their urban land and not do anything to develop it. Tax both lots the same and you light a fire under those land owners to do something more productive with that land. Maybe a surface parking lot is the highest and best use of that land, but I frankly doubt it. If we had a land value tax we would actually find out. And we would find out what the true market rate for parking actually is if we stopped giving them a tax subsidy in this manner.