Grab and Keel

Property taxes are used to pay for all the public services we get citizens. They include, but are not limited to:

Universities and other public schools, roads, bridges, state parks, city parks, regional planning, flood abatement, street lights, sewer maintenance, libraries,  busses, mass transit, public swimming pools, the state and local governments,  police, firefighters, social services, hospitals, state and local fairs, etc. The list is endless. The list also represents a wide variety of jobs, paid through state funds, with equal opportunity and health benefits.

Now it is true the some of the money for these services comes from other places, like sales taxes and Mello Roos Fees. In addition, for state funded projects, like schools, the Federal Government will pay from a matching fund a certain  amount. When I worked in public service the Feds were paying 10% of my project.

However, the bread and butter, the engine of any state economy, is the more stable property tax.

As you will see from the Wiki, California Proposition 13 limited the amount of property taxes one paid on one’s home to 1% of the assessed value. Sound reasonable? One of the arguments was that older folks shouldn’t be taxed out of their home. (this was in 1978, before Boomers, like me, were close to retirement.)

Another argument was that people were being subjected to wild swings in taxation because, assessed home values were rising rapidly, but the jump in taxation might only come every two years or so, thus surprising us poor dears and leaving us unprepared to pay. (notice the word “swing” is used, even though rates were only rising at that time.)

Both of these arguments were canards. In the first place, property taxes are deductible. So, yes, you might have to pay the money out, but then that would be counted as a federal and state deduction on whatever you taxes were for that year. That’s if you itemize. Guess who does that? It’s generally not the fixed income retiree or the economically disadvantaged, who might be more inclined to need public services. If you don’t itemize, a proportion is figured, but it might not reflect the same percentage of deduction that your wealthier neighbor got. 

In the second place, while it is true that it can be tough to budget the unpredictable, It  isn’t really so hard to find out the current assessed value of you home and plan. If it were hard, the banks wouldn’t have been giving out all those equity loans in the last few years.

If we itemize, we also get to deduct the interest on our mortgage payments. If we are on fixed income and followed the dictates of our 40-50’s upbringing, we have paid our our house load, or are close to it, and thus, have nothing to deduct. However, if we recently bought a house, we do. Since I ran a home business, I was able to deduct my relatively small amount. however, I personally know many who considered this deduction and subsequent tax return equivalent to a yearly bonus.

Maybe at the surface, to us it can feel like there is no difference. If we itemize, we are paying out money and  getting deductions either way. However, who really gets the  money when we take out a loan? It’s the  mortgage institutions, of course! While some of us might get some money back at the end of the year, they have held that money throughout the year and earned interest on it. 

We pay the interest on our loans, most of which are far greater than 1%, those houses keep going up in price, and we send less money to public service, our state and local government. Banks and credit brokers represent a restricted list of community jobs; many of them no longer even in the state, or country. The mortgage institutions have a vested interest in rising prices, and not just for the maintenance of the home investment capital.

Some of us were able to make a profit on our homes in this economy, but for most, homes are consumptions, and our abode. If we sold and remained in the  state we turned that profit right back over to the next house, since devalued, with an upside down, or underwater loan. If we wait long enough, we might get it back. Or we might sell and get a loss deduction. In the mean time, none of this money will go to public service or the state.

Now, what has happened in California, is a general gradual reduction in services; Schools are a good example.  The State of California has been feeding off of what it built in the 40s, 50, and first part of the 60’s, without adequately being able to maintain it. It’s the perfect example of the slowly cooking frog.

If we want to save our state, we must get rid of the laws enacted under Propositions 13, and 218, and the two thirds majority requirement. We must generate and buy bonds. These things will trigger additional federal funds, and stimulate the economy by reinvigorating public works and jobs for the entire state. Then we must do that in which we have do far failed; allow the state to set money aside in good years, for the lean.

I Own My Vote, PUMA, The Denver Group, The New Agenda