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Tuesday, April 25, 2023
Stark Presents Kneecapping Prop 13 By means of The Revenue Tax At present At San Diego
Kirk J. Stark (UCLA) presents Kneecapping Prop 13 By means of The Revenue Tax at San Diego as we speak as a part of its Tax Speaker Sequence hosted by Miranda Fleischer:
Underneath constitutional limitations on California’s native property tax launched through Proposition 13 in June 1978, householders are typically taxed not on the honest market worth of their houses however slightly the property’s historic price. As residence costs rise over time, this “acquisition worth” characteristic has two predictable results: (1) it ends in vital property tax disparities, favoring longtime householders relative to more moderen purchasers, and (2) it discourages householders from shifting due to the elevated property tax burdens related to buying a brand new residence. Much less well known is the offsetting impact of a longstanding characteristic of California’s earnings tax: the deduction for native property taxes. By directing a bigger subsidy to these with increased property taxes, this provision favors current homebuyers going through market-value property taxes relative to longtime house owners with constitutionally restricted assessed valuations.
It additionally mitigates to some extent Prop 13’s lock-in impact by lowering the efficient property tax charge for many who buy new houses.
As a thought experiment, this text considers how this characteristic of California’s earnings tax is perhaps expanded to additional cut back or get rid of the differential good thing about Prop 13 for longtime householders. The article posits a hypothetical surtax on adjusted gross earnings (AGI) above a sure threshold, coupled with a credit score for property taxes paid. By advantage of the credit score, the surtax would function a de facto flooring for property tax burdens, outlined by reference to a proportion of AGI. Underneath sure assumptions concerning the relationship between earnings and residential values, such a tax might approximate a market-value property tax, thereby lowering the disparities in property tax burdens led to by reliance on the acquisition worth rule, whereas additionally moderating the rule’s lock-in impact. Considerably, it could not be essential to amend the state structure to implement this regime.
https://taxprof.typepad.com/taxprof_blog/2023/04/stark-presents-kneecapping-prop-13-through-the-income-tax-today-at-san-diego.html
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