Chappie is a senior and will soon be paying property taxes for the first time. Yes, I know: something is not quite right about the Chapster...arrested development for sure. For the time being, he can afford his taxes, but down the road? Who knows?
In California in 1978, the anti-tax people (Republicans) put over on the future of California something called Proposition 13. Chappie remembers it well. The Golden State has been sliding ever since.
When Chappie arrived in CA in 1974, Patty Hurst had been kidnapped and everything in the state seemed to work wonderfully well. California had the #1 rated public education system in the USA. Rents were affordable in SF and elsewhere, the economy made CA the world's #5 economic power. Even the arrest/rescue of Patty Hearst didn't cast a pall over that scene of possibility.
In 2015 CA public education ranked 9th worst in the country. Our other metrics are equally dismal. to dismal to list. But this post is about the original, underlying interest/issue that motivated the passage of Proposition 13: grandma and grampus cast out for unpayable property taxes.
Chappie believes that the original premise for Prop 13 was a phony from the beginning. He has reached this belief over 40 years of watching the Golden State become not so much. But the economic benefit to a large class of people (mostly Democrats now) has made them so corrupt in their acceptance that they should pay much less than their neighbors pay for properties of approximately equal market value, that there is no hope for the state. Prop 13 is said to be the third rail of CA politics, so CA is done for. But CA is just one state and this problem supposedly exists in all 48 states. 48 states? Chappie thinks that there is an obvious answer to the problem of seniors being unable to pay increasing property taxes on their fixed retirement incomes and being forced to sell their homes in any of the 50 states: a simple solution that benefits everyone.
What if retired people (or anyone) with incomes that make it prohibitive for them to pay their property tax were allowed to pay the tax later, when they sell and move out or after they die and their estates are settled? The taxing authority would have a lien on the property that would guarantee payment. In the meantime, the property owner would pay only the interest on what would in fact be a loan, a kind of reverse mortgage. The interest would be pegged to the prime rate or the cost of living or some metric that everyone could agree on. It couldn't be high. This would be interest on the unpaid tax, an amount that would climb by the tax number each year.
If the tax on a given property is $1,000 and the owner opts for the program with an interest rate of 5%, after 1 year, the tax interest bill would be $50 and the tax owed at estate settlement would be $1K. After 10 years, if the tax rate had not gone up, the tax owed would be $10K and the annual interest owed would be $500. If the homeowner remained in the home for 20 years with no change in the tax rate, the total tax bill payable on settlement of the estate would be $20K and the annual bill for interest would finally have reached $1,000, having increased by a steady $50 for 20 years. Thus the taxing authority would have a kind of investment paying interest annually.
Over 20 years, the value of this interest payment would total $10,500. The homeowner would have paid slightly more than half of the value of the outstanding tax bill in interest. Payment of the balance (the actual tax) would come from the estate. A homeowner who couldn't mange this should probably not be living in such an expensive property. Where do people get the idea that they have a right to live in the same house all of their lives regardless of ability to pay? Downsizing has many benefits and one of them is living within one's means. Republicans otherwise seem to think this a valid goal to enforce on people who don't look like their parents and grandparents. If folks don't want to pay that extra $10,500, they can downsize and move into a place they can afford and let a young family move into their big house with all the empty bedrooms. It's a choice, and meaningful choice is the essence of real freedom.
Oops--not so fast! It is unlikely that the tax number (rate compared to assessed value) would not have increased over the 20 years. In many locations the property would have doubled in value. In San Francisco it would have quadrupled in 20 years. In order to protect the elderly, the taxing authority could allow them to pay interest on only the original annual tax number during their lives, regardless of how the actual tax number had risen with increased valuation. At the time of settlement of the estate, the full value of unpaid tax increase plus compounded interest on that increase would be due from the proceeds of the sale at market rate of the vastly more valuable property. The taxing authority would always have first claim on assets.
If the greedy heirs don't like this prospect, they could have persuaded Grandma and Grampus to move to an apartment 20 years before, selling their house and investing the excess proceeds...in any rate those are individual decisions for individuals. The governing/taxing authority can offer a real and workable choice which doesn't cut into tax receipts at all.
Chappie believes, based on his years of observing stupid, short-sighted public policies allowed to run roughshod over the uncomprehending, that turning back the clock is rarely a good option, but recognizing that cycles tend forward and changing conditions will eventually lead to the undoing of myopic, recidivist policies. The way to deal with, for example, the absurd gun violence situation is not to try to pass further legislation limiting ownership, it is to allow the insurance industry and the civil law to task gun makers and owners for the full damages produced by their manufacture/ ownership of these dangerous things. People will always vote with their wallets if possible. Solutions that involve restrictions are always a limit on personal freedom. Solutions that offer meaningful options--choices--enhance freedom and its twin: responsibility.
No comments:
Post a Comment