Saturday, July 9, 2011

Much Ado About Property Taxes

The topic of property taxes seems to be buzzing (somewhat) in California these days. First up is a piece of news to remind us that, while they're a reliable voting bloc, California's seniors are not part of a union: Jerry Brown just vetoed a bill that would've given them a tax break. According to the Riverside Press, Brown rejected a bill yesterday that would've revived a deferral program, suspended in 2009, and given thousands of low-income seniors and disabled residents of the state a chance to postpone payment of their property taxes without the risk of foreclosure. It would've created a $10 million fund from repayments of earlier loans, using that money to pay the tax bills of enrollees; the program would've guaranteed the fund's money by placing a lien on participants' homes, and selling the homes after they died. The Governor's reason for continuing the moratorium, unsurprisingly, is money; his office estimated that the general fund would've lost over $19 million in the current year, and $30 million a year from then on.

Of greater concern: LA Times columnist Steve Lopez is moving away from the embarrassing hackery of his work on Costa Mesa politics, and is back to the embarrassing hackery of his work on Prop 13. Today, he writes that Los Angeles Mayor Antonio Villaraigosa is getting involved in efforts to reform the landmark property tax measure. While the famously wishy-washy Villaraigosa offered few specifics, it appears he'd prefer to start by going after commercial properties first via the so-called "split roll" reform; he's also interested in exploring plans to phase in sharper tax increases for younger homeowners, while exempting everyone over a certain age. We may learn more next month, as the mayor is mulling a pitch for Prop 13 reform at a press club speech in Sacramento.

Until these proposals are well and truly dead, we suppose we're going to have to keep refuting them. The idea of chipping away at Prop 13 by phasing in tax hikes for younger homeowners is ludicrous on its face: we're going to correct the law's regressive tendency to favor older, wealthier homeowners by . . . hiking the property taxes of younger, poorer homeowners? As far as the split roll, there are two problems with removing Prop 13's protections for commercial property. One is illustrated by this analysis from Wayne Lusvardi and Charles Warren at Cal Watchdog: the assumption that a split roll would produce a flood of new tax revenues into the government doesn't hold up when actual data are examined. The crash in California real estate values has hit commercial properties just as hard as residential ones, effectively wiping out the gains from assessing these properties at their market value. The second problem is the continued weakness in the state's economy. If you're like Lopez, and you only view this as a technical problem of extracting more money from the private sector for the benefit of the government, the split roll might make sense. But if you're concerned about the ongoing recession and the poverty and struggles it continues to create, you might not think that a massive tax hike on employers at a time of 12% unemployment is a good idea.

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