This shows the personal income per capita per state.
The average is $37,742 per capita.
The standard deviation is $6,304.
(Note that this average is not the true national average though, since some states have more people than others and I'm not adjusting for that.)
Pure green is two standard deviations above the average.
Pure yellow is the average.
Pure red is two standard deviations below the average.
D.C. tops the list at 3.63 standard deviations above the average (not shown), followed by Connecticut at 2.55, Massachussets at 1.77, New Jersey at 1.76, New York at 1.49, Maryland at 1.32, Virginia at 0.63, Colorado at 0.63, Nevada at 0.61, New Hampshire at 0.59, and California at 0.59.
Generally, personal income and home prices are clearly linked. However, one has to wonder how California can justify its lofty prices. I do think Rob Dawg makes a good point that "Proposition 13 has created a market of slower turnover in many places."
Proposition 13
A large contributor to Proposition 13 was the sentiment that older Californians should not be priced out of their homes through high taxes.
Behold the power of unintended consequences. Now the younger Californians are being priced out. It brings me back to the point of this blog. We can't all get something for nothing. Eventually somebody must pay.
Source Data:
BEA: State Quarterly Personal Income
U.S. Census Bureau: State and County QuickFacts
This post inspired by russell120's comments involving personal incomes and Rob Dawg's comments involving Proposition 13.
For all Prop 13s faults age discrimination is not one of them.
ReplyDeleteThere's even a rationale that says Prop 13 makes it easier to own. 1.1% property taxes guaranteed means that lenders can more assured that what they approve now won't become unaffordable later.
If I understand it correcly, Proposition 13 limits assessment increases to 2% per year. That's below the inflation rate. Therefore, I would argue that it benefits those who have owned their homes the longest more than it benefits those who have owned their homes the shortest (especially if inflation picks up).
ReplyDeleteOr am I missing something?
Prop 13 is a lot more complex than would get justice in a blog reply but here goes.
ReplyDeleteI've owned my primary residence for 12 years. in 15 I paid property taxes of 1.00% of the purchase price. I current;y pay 1.25% of my purchase price. A very long time neighbor is paying 1.76% this year. Someone to purchase today would pay 1.00%. Kind of a lowered barrier to entry eh? It also protects new buyers from stupid neighbors. Say you buy for $500k and a month later some idiot using neg/am 100% teaser illegal cashback pays $800k. In other states you'd be assessed at $800k for a 60% surprise property tax increase. In California it is the deal you make that matters not what the dumbest guy in town does.
It isn't all good. Because everyone uses this math there is a price increase reflecting this increased value. That's natural for any feature that saves money or insures stability in the future. New roof? Lower costs for set asides the next 10 years mantainence. Strict zoning? Value preservation against incompatible land uses.
As a throttle on government doesn't this act as an inflationary brake? There's no incentive to do things that won't return commensurate revenue. I'm not defender of Prop 13, just an explainer of some of the subtleties.
Rob, what happens if a couple die and one of the children inherits the house and wants to live in it? Is the tax paid on an estimate of its market value?
ReplyDeleteI current;y pay 1.25% of my purchase price. A very long time neighbor is paying 1.76% this year. Someone to purchase today would pay 1.00%. Kind of a lowered barrier to entry eh?
ReplyDeleteBut you are paying 1.25% of your original purchase price, and one would assume that is far less than the 1% a person buying an identical home today would pay on his/her purchase price. Correct?
Therefore, you have a fantastic deal by comparison, do you not? Further, you will always be paying less than that person, should you have identical homes and you both live there forever.
And If I have that right, then your tax burden has been pushed onto those that follow after you.
This isn't intended to give you a hard time about it though. It isn't like you single handedly dreamt up the system in place. Further, you've done the smart thing clearly by taking advantage of it and not moving every few years.
It just seems a bit like a ponzi scheme to me in the sense that those that start early are rewarded by those that follow. Granted, the people that move in right now will eventually be passing that onto those that follow them, and so on.
And lastly, it must play out very strangely in a property bust.
Let's say I buy a house for $1,000,000. In two years it is only worth $750,000. If my property taxes are based on my original price I should sell my house and buy another. That way I can reset my purchase price down a bit and not be stuck with property taxes based on $1,000,000. Correct?
dearieme said...
ReplyDeleteRob, what happens if a couple die and one of the children inherits the house and wants to live in it? Is the tax paid on an estimate of its market value?
A subsequent, 1979, law said spouses now (partners), children, grandchildren was not a transfer/sale and not subject to revaluation.
This is a kind of split decision. The idea was in part to allow people to not be taxed out of their homes but it wasn't supposed to establish a landed gentry either. Understand that by inheriting and staying these people are also not cashing in on that same appreciation.
Stag Mark adds;
But you are paying 1.25% of your original purchase price, and one would assume that is far less than the 1% a person buying an identical home today would pay on his/her purchase price. Correct?
What of it? How about if you score a great deal on a Wii and pay only $199? You gladly fork over the sales tax. Then some a-hole desperate to please his kid (and piss of the mom who has custody) pays $400 just to score a machine? You think it is okay for the State to come back to you and and insist you pay double the sales tax you agreed upon?
There are pluses and minuses to every form and application of taxation.
What of it?
ReplyDeleteMy point is purely that the people who bought a long time ago clearly pay less than those who bought recently. The burden therefore has been pushed onto those that follow.
As for your particular situation, it obviously wouldn't be fair to suddenly jack up your payments to what your neighbor pays (and risk forcing you out of your house through payment shock) any more than it would be to suddenly lower the interest rates on treasury bonds bought at 15% in 1980 just because the expected inflation didn't arrive.
There are pluses and minuses to every form and application of taxation.
There are pluses and minuses to every change in taxation. If one person stands to gain in a tax change, then someone else stands to lose. No matter what, the government will get its cut though. *sigh*
dearieme,
ReplyDeleteThanks for the comments. I too was curious about the answer.