Tiresome provincialism and self-righteousness

[34f3f3f]

There’s me thinking all anyone cared about in Hawaii is surfing. This is a very good article (albeit slightly old), and focuses on the impact of the tax deductible from mortgages, an oft over-looked area.

http://the.honoluluadvertiser.com/article/2005/Jun/24/op/op07p.html

[34f3f3f]

Absolutely no one interested in this subject. Well I am and this is why. It reduces supply, stifles mobility, and acts as a disincentive to buy suppressing demand.

There must be quite a few people who have cash available for an outright purchase, either from the sale of a previous home, or from inheritance or any other number of reasons, and who may be too old to obtain a mortgage, or who don’t want debt anymore to feature in their lives. Nothing wrong with any of that, yet it seems one is penalized for this, with a substantially higher rate of tax than other’s who bought just a few years ago. So you either swallow your pill and pay it, or you are compelled to take out a loan for the sake of the deductible. The argument I have heard in favor of Proposition 13 is that it is fixed, so as the years pass the rate effectively reduces. Sorry, I just don’t buy it. This was the goose that laid the golden egg for state coffers, a windfall based on short-termism and a logic subservient to the axis of iniquity and makers of this crisis. I have heard many people, who have owned their homes for years, say that they simply could not afford to pay the current level of taxes on their homes. If they were to cash in their homes to release equity, say in order to retire, they would need to downsize drastically to offset the increase in taxes. There must be many large homes, occupied by elderly couples or singles that are effectively tied to their homes, and it makes you wonder what effect it is having on supply. Why not fix taxes according to rentable values. It beggars belief to base it on market values in this climate, and must act as a disincentive to buy. It is very similar to the “wealth taxes” in Europe.

[Bugs]

The reason for Prop.13 was to prevent the seniors from getting taxed out of their homes. They can take their tax basis with them if they decide to move, so there is some portability.

If anything, fixing the tax rate effectively encouraged higher pricing because a buyer didn’t have to worry about further gains beyond their purchase price increasing their cost of ownership.

It does limit the tax revenues to the state and local governments, though, and is a leading cause of the increases in fees, bonds, and development hurdles the cities place in front of the developers.

The annual tax bill for a $500,000 at 1.5% would amount to $7,500, or $625/month. If the property values doubled over a 3 year period as they recently did, EVERYONE’s property tax bills would likewise double. Obviously, that would cut into refinancing options for a lot of borrowers, and all buyers would have to consider the risks of those increases when they bought.

[CBad]

“There must be many large homes, occupied by elderly couples or singles that are effectively tied to their homes, and it makes you wonder what effect it is having on supply.”

If you’re over 55, you can transfer your prop 13 basis to another property.

[SD Realtor]

You can transfer that basis once and only once and the property you purchase must be of lesser value then the property you sold.

SD Realtor

[sdrealtor]

I believe its actually 103% of the property you sold and that you have 2 years to do it after you sell. In a declining market it could be a bonanza.

[hugo]

As a relative newcomer to SD prop. 13 feels unfair. There is a way to lower the carrying costs for long term homeowners and still tax neighbors at the same rate. Compute the “savings” on a property due prop. 13 over the years and then have the town recover that money when the house is sold. The town should also lower the overall tax rate to make this revenue neutral. This would require some good money management by the town because of fluctations in the number of sales/year.

[CBad]

Haha, yeah, it’s unfair until YOU are an owner. Then it’s your God given right! 😉

I actually thought it was up to 110% if you did it at two years and 105% at 1 year. It’s definitely only a one time deal. If I were in that age range, I’d definitely think about the possibility of selling now and buying up in a declining market 2 years from now.

[HLS]

PROPERTY TAX basis transfer has its restrictions and is not reciprocal between every county. It’s proposition 60 AND 90.
You CAN transfer within the same county when following the rules. Realize that it is the county assessor giving up income for their county.

Here’s the scoop:
http://www.boe.ca.gov/proptaxes/faqs/propositions60_90.htm#2

[Author]

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