It's an interesting conundrum. In Australia - well, in the ACT anyway, but I think it's standard - we only pay property tax on rental properties. And it's way less than that - maybe 1/2 a percent? Even less I think (I'm trying to remember from the couple of years we rented out this house before moving in).
On the other hand, I gather your mortgage repayments are tax deductible, or at least the interest is, is that right? Which here is only the case on - you guessed it - rental properties.
Of course, we do pay rates on residential properties - covering services like garbage pickup and so on. Do you pay that in addition to property tax, or is it covered? That's another maybe 1/2 a percent, maybe less, which does have the same sorts of issues that you raise, for pensioners living in properties they've owned for decades.
Posted by Kay at October 13, 2004 02:44 AMIf prop 13 were appealed, provision would have to be made by the state to provide zero interest only loans to people on fixed income (or who otherwise could not afford the increase) to cover the annual taxes until a house changes owners.
That poor old woman has $1M in equity in her house. Assuming the increase in property taxes she would pay is $10,000 (it could be less as real estate taxes for many would actually drop!).
On average over say 40 years she would owe the state $40,000 in taxes when her house transfers title. If one of her children assumed ownership, they would effectively assume a $40,000 mortgage to pay the tax debt (plus any inheritance taxes if applicable).
I don't see this as a bad thing. Most rational people would agree that turning elderly people out of their homes to pay taxes is a very bad thing. Using the windfall equity they have built into there homes to pay their "fair share" of california real estate taxes is a good thing.
All in all, prop 13 is the single worst thing that has happened to the California economy in the past century. Individual greed may just keep the proposition alive. I hope not.
Ron