Bill Clinton Scandal - SANITY CHECK Message Board

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Politics : Bill Clinton Scandal - SANITY CHECK

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To: mrknowitall who wrote (4722)	9/22/1998 4:32:00 PM
From: MulhollandDrive	Read Replies (1) of 67261

OTOTOT mrknowitall I agree with your post. But I think Michelle may be making a point inasmuch as the supply/demand has been skewed by the current tax policy. Basically, it appears to give financial incentive to remain in your current house instead of selling. We had a similar problem in our state before they passed the re-assessment laws. It wasn't exactly the same, but had more to do with new vs. old housing. You could have an individual buy a million dollar "older" home from the seller and pay a much lower tax, say when it was originally constructed the appraisal was at 400K. The problem was for the new housing developers. If they built a million dollar home today, it would be appraised at that cost so there was an unfair differential in the taxes that would be assessed to the owners. The way things stand today, real estate taxes are a very small part of the purchasing equation since the million dollar home is going to be taxed at the same rate irrespective of when it was built. What did happen is that once the rates were equalized a lot more million dollar homes started being built! It also caused people to trade up and out of their older homes without the unfair tax consequence. I still don't think I understand the underlying reasoning for Prop 13 as it was implemented. But it seems that a fair argument could be made that it has exacerbated the real estate problem in CA (as an unintended consequence). It just make sense to tax the real estate based on the current valuation of the property. BUT, as a economic conservative, my view would be that in order to do so, you would need a dramatic rate cut to offset the economic effect on those who choose to remain in their homes. I remember when the re-assessment laws were passed here, people had their "hissy fits" over how much more their real estate taxes would be, and one effect was that real estate prices fell to a certain extent, but eventually supply/demand equilibrium prevailed and we now have a very stable real estate market. bp

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