MarkDaSpark wrote:Except in my last posts, I tried to get into why it was wrong to use current value for PT.
Yes, my home has more "value" than yours, but the only time I gain $$$ is if I sell it. There is no monetary gain to me unless I sell my home. So basing PT on purchase value is completely equitable.
You are trying to charge me more for something I have no control over, and don't get anything back from. How is that equitable?
I'm bringing up the expenses to show that there is a trade-off in long-term home ownership with regards to PT.
But basically, even though my home has more "Value" than when I purchased it, I won't see any $$$ unless I sell my home. So why should I pay more in PT when I don't see any $$$ in my bank account?
Edit: And I still don't see where it's a "favor" to use purchase price vs. current value. Nor the "inherent inequality".
If I'm not gaining $$ currently in my bank account, why should I pay more? Yes, my home has gained in "value", but I don't see any money from it. And when I sell my home, I have to pay taxes on any "gain" I make.
It would seem more inequitable to make me pay more in PT when I'm not getting anything more.
Sometimes when I decide to jump into a conversation that has raged for a while without me, I miss some details. Forgive me if I do so in this case. I’m quite confident I have, in fact.
Living in South Dakota, I’m no expert in California property taxes, and I’m not going to delve into Proposition 13. I’ll ignore California-specific issues and just talk about property taxes in general. Property taxes being fairly similar everywhere, here goes.
When you realize any gain from increased valuation is irrelevant. Property taxes are based on valuation, not cash flow. If you don’t like it, try to get the law changed. I’m sure there are people in this country who live in houses that have been passed down through several generations – would it make sense that one person pay taxes based on a sale in 1936 at $3,000, while someone in a similar home next door be taxed on a recent sale at $200,000? Why? And a house 4 miles from the beach in Southern California can never be “identical” to a house in Nebraska, unless you ignore the mantra of real estate agents everywhere – “location, location, location”. A house is not just the boards and bricks.
Using purchase prices as the basis for fixing valuation is, for at least some period of time, very sensible. Sales price is a direct measure of value, after all. Over time, though, that sales price no longer measures value, as overall prices change, land use changes, and the condition of the property changes.
Eventually, absent another sale, indirect measures of value must be used. This can start with the sale price and then add or subtract a general valuation factor, but changes to the house also have an impact on value. Additions presumably add value to the house, and so they should factor into the valuation process. Any indirect measurement of value is inherently imperfect, though, and there comes a point at which adding “perfection” isn’t worth the cost.
When it comes to the usage of government services (referenced in a previous post), you have to ask again whether measuring usage is worth the cost, and whether a reasonable substitute can be found. In a company I used to work for, they decided to charge for copier use based on the number of copies made; everyone had to punch in a department code to get the copier to work. Eventually, it was decided that charging based on head count was close enough and much easier to calculate. In many ways, the size of a house can be a reasonable proxy for usage of services, because the number of people in a household is the most significant variable in measuring that usage, and smaller houses usually have fewer people living in them. Not for every house or for every type of service, of course, but for a lot of them.
All that said, politicians do enact favors for current residents on occasion () by altering the valuation principle in those residents’ favor, such as by using outdated sales transactions as the basis for valuation calculations. This is a political ploy, though, not an effort to make taxes more equitable.
It was also suggested that property taxes be based on other variables, such as acreage or square footage. One problem with this is the unintended consequence of people building houses with the tax consequences in mind. There would have to be a set of rules defining what is considered square footage – does the garage count? How about outbuildings? Does a basement count, but not a crawlspace? It seems that we could run into situations such as there was in the U.K., when they had a window tax instead of a valuation-based property tax (you actually were assessed taxes based on how many windows your house had). Houses were built with windows that could be easily removed and replaced with wood sections for when the assessor came around. The other problem, again, is that houses with identical square footage and land are not really identical if, say, one is in central Detroit and the other is waterfront property on Mackinac Island.
By the way, when you sell your home, you do not pay taxes on the increase in value. If you flip houses and never lived in it you will pay income taxes on the gain, but those provisions are for people who buy houses solely as investments for income generation, not to live in. I presume you do not fall into this category of homeowners.
I started out on Burgundy but soon hit the harder stuff. Bob Dylan, Just Like Tom Thumb's Blues
How on earth did I get 7 QPs?