All of this points to another reason why Prop 13 is self-defeating…
In Texas, which already has a floor property tax rate at over 2x what CAs is (~2.2% of assessed value rather than ~1%), property values get re-assessed to market every year (with a 10% cap any given year). In California, it’s basically only when you buy the home, and it doesn’t matter whether it’s your primary home or not.
California’s incentivizes are thus all misaligned — if you’re wealthy, you buy a home and watch your tax bill get smaller and smaller every year in real dollar value. So California’s solution? Raise the income tax, state capital gains tax, and a bunch of other bandaids— the problem is, a wealthy individual can more easily move and e.g. declare their homestead in Texas, which has no income or state capital gains taxes, and California’s Prop 13 will STILL benefit the non-resident, even if they’re living out of state by allowing them to hold onto a potentially multi-million dollar property for essentially nothing.
Texas does the opposite: it says, “please— wealthy people, park your money here!” knowing that those doing so will likely buy property to gain residency status. Once they do, and taxes raise each year with the market, Texas’ incentives are aligned: there is no way for someone trying to avoid property taxes to do so without selling their property to someone else who will, and because Texas’ property taxes are so high it does not make the financial equation so obvious to hoard/keep it if the math doesn’t pencil out, compared to California where you get rewarded simply for hoarding it.
California is essentially incentivizing out-of-state (or ex-residents) who do not pay taxes to the state to hold onto a limited resource (desirable land) for decades, thus contributing to the supply shortage, while states like Texas have tax systems set up to make it financially desirable for California residents to move to all while still keeping their land in CA.
If you’re wealthy enough to own in both places, from a financial angle it’s tempting. See: Trump NYC -> Florida and Musk CA -> TX
Yes, because their high property taxes offset the need — and unlike income taxes, can’t be avoided if you still hold property in the state regardless of residency status
In Texas, which already has a floor property tax rate at over 2x what CAs is (~2.2% of assessed value rather than ~1%), property values get re-assessed to market every year (with a 10% cap any given year). In California, it’s basically only when you buy the home, and it doesn’t matter whether it’s your primary home or not.
California’s incentivizes are thus all misaligned — if you’re wealthy, you buy a home and watch your tax bill get smaller and smaller every year in real dollar value. So California’s solution? Raise the income tax, state capital gains tax, and a bunch of other bandaids— the problem is, a wealthy individual can more easily move and e.g. declare their homestead in Texas, which has no income or state capital gains taxes, and California’s Prop 13 will STILL benefit the non-resident, even if they’re living out of state by allowing them to hold onto a potentially multi-million dollar property for essentially nothing.
Texas does the opposite: it says, “please— wealthy people, park your money here!” knowing that those doing so will likely buy property to gain residency status. Once they do, and taxes raise each year with the market, Texas’ incentives are aligned: there is no way for someone trying to avoid property taxes to do so without selling their property to someone else who will, and because Texas’ property taxes are so high it does not make the financial equation so obvious to hoard/keep it if the math doesn’t pencil out, compared to California where you get rewarded simply for hoarding it.
California is essentially incentivizing out-of-state (or ex-residents) who do not pay taxes to the state to hold onto a limited resource (desirable land) for decades, thus contributing to the supply shortage, while states like Texas have tax systems set up to make it financially desirable for California residents to move to all while still keeping their land in CA.
If you’re wealthy enough to own in both places, from a financial angle it’s tempting. See: Trump NYC -> Florida and Musk CA -> TX