Residential taxes w Prop 13

Palo Alto -- true story about Residential taxes in 'our town'


The Proposition 13 disparities are unusual, not found in any other state of the union (and for that matter, not found in much of California, just the high-growth segments).   To give a poignant illustration, check Zillow for the tax bill for five homes, side-by-side in Palo Alto.  These homes are on Walter Hays Drive, a couple of blocks from the library -- simple three or four bedroom one-floor tract homes built in the 1960s by Barrett and Hilp.  Nothing fancy, all 1700 square feet or so on one-sixth of an acre (7000 sq. feet).  Addresses 109, 111, 113, 115, 117.  All homes are virtually identical to the casual eye.  Full disclosure -- we owned 115, sold it in January 1989 for $505,000.  It has been lived in by the same family since.  Next door (113) is the original owner.  111 sold in January 1998 for $772,000.  And 109 sold in 2010 for $1.65M.  117 sold sometime in the early 2000's but I don't have the exact date.

Zillow today 'values' the five homes at $1.824 M (109, 4 bdrm), $1.601M (111, 3 bdrm), $1.796 M (113, 4 bdrm), $1.901 M (115, 4 bdrm), and $1.755M (117, 3 bdrm).  So, all homes are within 8.6% of $1.75 M.  Here's the kicker: Taxes are, in order, $20,144, $$11,667, $1,167, $9,423, and $18,017.   The average tax bill is $12,083, but the disparity in terms of percentage is enormous -- certainly bears no relationship to the relative values of the homes.

The good news for the owner at 113 is that his taxes are miniscule; the bad news for the owner at 109 (with virtually the same home, in terms of lot, bedrooms, age, size, and value) is he is paying 17.3X (that is a whopping 1730%) what his neighbor pays.

This, while a boon for seniors and oldsters, is a crime that mitigates against people improving their home (because it makes it subject to reassessment) or selling; it instead encourages withholding homes from the market and passing them through to family whether they live in the area or not, and it robs schools, fire and police, and local roads and parks just to name a few.

Granted this cannot be 'fixed' easily, or without some pain for those who get by today without paying much share.  But we could (except for the two-thirds rule passed at the same time) probably make it harder to pass this along in perpetuity.  It isn't exactly that these are 'family farms' with historic significance or small family businesses being threatened by the Big Box stores.  These are tract homes, make no mistake, that with the Silicon Valley innovation craze have inflated because of the land value, not the home value.  At least in one generation, there would be 'catch-up'.

Used to be in America we all carried our fair share.  Now, between the Caymus Islands protection for the rich, and shifted tax burdens for the newly arrived, it is a double whammy.