Submitted by LVTfan, Dec 3, 2006 17:34

California's voters got Proposition 13 in the late 70s, which created an annual ceiling of 2% on the increase in assessed value for California's properties, and a ceiling of 1% on the property tax as a percentage of assessed value.

The results?

1. California's housing affordabilty has plummeted to the point where the realtors' group is apparently too embarrassed to report it. (Until last December, they reported it every month. At that point, they announced they would issue it quarterly. They've missed 1Q, 2Q and 3Q for 2006.) They do, however, have golf tournaments to raise money for housing affordability! (Wouldn't you, if less than 10% of the households in your state could afford the monthly payment on an 80% mortgage on the median home??)

2. Homeownership is California is among the lowest in the the US. Except in one age group: those over 65, who were already of prime homeownership age in 1978. Their homeownership rate actually exceeds that of seniors in the remainder of the US!

3. A Federal Reserve Board study reports that land value in California's cities represents over 70% of the value of single family housing -- somewhat higher than NYC's 67% -- and 89% in San Francisco, 81% in San Diego.

4. California's educational system has gone from being respected and successful to marginal.

5. They must rely on sales taxes and other taxes that burden the poor to supplement the ceilinged property tax. And new neighbors pay large multiples of what long-time residents pay.

The property tax is not a popular tax, in part because it is one of the few for which we actually write a check. But the property tax is two taxes rolled into one -- to our detriment. We tax land value and building value at the same millage rate, and that is dumb. Milton Friedman said it well : the tax on land value is the least bad tax there is. He said this in 1978, and he said it again in an interview in early November. See http://www.wealthandwant.com/ and

A tax on land value brings down the price of land. It encourages landholders to put fabulously located land to its highest and best permitted use, instead of sitting and waiting for the taxpayers and neighbors to do something to enrich them. See http://www.wealthandwant.com/docs/Root_NaST.html

New York City would be a far better place to live if we put property tax relief on the buildings, and taxed the land value. Not only would it be just, collecting for the commons what the community creates, but it would be a positive incentive to create buildings that serve us -- the community -- better.

Commercial buildings are generally sited on land far more valuable than residential property -- particularly single family homes. If the goal is to shift tax away from single-family residential and toward commercial, taxing land value generally accomplishes that, too. But it does so without penalizing those who are using their land intensively. It shifts the tax to those who are underusing their land -- those who sit and wait. Let's light gentle fires under them, rather than penalizing those who are already using their land well!

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