Great analysis - one feature that you didn't mention is that adding square feet is one of the few things an existing homeowner can do to cause a re-assessment and huge increase in taxes. So you see lots of tiny old homes that should have been added on to, but they pay little in taxes, so adding some square footage could increase their tax bill 10-fold.

Of course people do add on to their houses- they just add 'fancy porches', not technically interior space.

Also: the solution to protect Granny is way easier and more obvious - freeze property tax increases for those 65 and older.

Even better: allow deferred tax payments that come due at the time of sale. We won't make you pay your high taxes while you're living there, but as soon as you sell, you pay back taxes out of all the profit you realized due to appreciation.

Problem with that is you are assuming ever increasing valuations. The taxes would need to be paid regardless of whether there was any "profit". You could easily have a situation where the taxes owed are considerably greater than the sales price of the house.

That situation is already, well if not common, then not uncommon, with penalties for code violations, taxes unpaid, and whatnot.

To be clear California is not alone in distorting tax revenue. Measure 5 in Oregon is even more severe. At least tax value floats with new transactions under prop13. In Oregon the tax value is forever frozen at its initial value and only floats with inflation. It's serious enough that they have an "Property Tax Fairy" to keep it all organized.

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Enacting Proposition 13 was a lazy chickencrap substitute for what should be done (in California and elsewhere): Give local government the tools and incentives to lower its costs. And that involves going deep into detail on every little piece of structural inefficiency.
I don't know about California laws, since I no longer live there. But I can provide an example from Pennsylvania, where I now live.
A major force driving up government costs is the body of law governing construction contract enforcement and administration procedures for government customers. Like when a school district builds a school, or PennDOT builds a highway.
Yep. Contract administration law.
Bored yet? I thought so.
Know any politicians who would give a crap about this? (Well, actually, I'm now working to elect one to Congress.)
But there's a million here and a million there tucked away in those laws. And contractors and their law firms like it that way.
Bit by bit, in my dream world, accountants, lawyers and pubic servants with uncanny attention spans would chip away at these inefficiencies. And the popularity of chickencrap measures would go down accordingly.

How is this analysis poor?
Your personal anecdote says that your neighbors are subsidizing you. You can't move without a huge tax penalty. Those are two of many drawbacks to Proposition 13. In 1978, my father foresaw those drawbacks and voted against it, despite his distaste for paying taxes.

I don't see why they can't just add some kind of "maximum increase" and means testing provision to Prop 13. That seems easy enough.

Property tax revenue in California has increased at a faster rate than incomes or the State budget.

Prescient legislation = Prop 13.

California is lacking fiscal responsibility, but not lacking revenue.

SF has a city budget of 10-11 BILLION. Austin Texas is larger in population and area, and has a budget of approx 1/3 of SF.

Yes, San Francisco ought to try to be a newer city like Austin in order to reduce infrastructure repair costs, and to stop being a county so they don't have to pay for jails, courts, or hospitals. They should also reduce their real estate values so they don't have to pay city workers so much. The city/county of San Francisco definitely lacks fiscal responsibility!

Really, I think you're mistaken.

Austin is older city than SF.
Austin also happens to be the County seat, the State Capital, and covers 6X the goeographic area, with accompanying infrastructure costs.

The differences you mention are absolute peanuts, within the context of the extra Billions that SF smokes through. SF reflects off-the-charts consumption.

The median age of a building in San Francisco is 91 years (1927); in Austin, 38 years (1980). Source: Atlas of ReUrbanism Factsheets. Also, Travis County, TX has a $1 billion annual budget which must be added to Austin's if you want to compare apples and apples.

Compare away. My point stands as correct.

Not really. The Austin general fund is only 2.5X less than SF's general fund, the property tax portion 3X less, housing prices are 6X less, and Austin's population is 10% more, so if Austin was paying comparable property tax to SF, it would be 5X less or if SF was paying comparable tax to Austin, it would be 5X more.

More importantly though to this particular article is that SF property tax is only 29% of their general fund, while in Austin its 40%. Add in sales tax (which SF doesn't separately classify) its 65% of Austin's budget. Property tax is only 29% of SF's budget and falling, while 'other taxes and fees', which includes sales tax, hotel tax, etc, is like 23% of their budget and rising. So in the next decade or so, SF will be a city paid mostly by sales tax and hotel and occupancy tax, not property tax.

Which will shift the development goals of the city even farther, ie: more hotels and more AirB&B and whatnot, less homes for people. Los Angeles is the same way; Austin doesn't even really keep track of AirB&B.

SF has a $10b budget vs Austin's $3B so that is true; but over $5b goes to things like the airport and sea port and other fixed expenses that are not really comparable to Austin - and are separately revenue generating & expending; not applicable to the city's general fund.

Your dive into minutiae is off track in many ways. The main point being that SF has an established pattern of living beyond its formidable means.

"SF property tax is only 29% of their general fund, while in Austin its 40%."

But SFs' 29% is larger than Austins 40%, and it's not even close. Get this: Two roughly comparable cities. Both left-leaning. One has its feet on earth. The other is off in some fantasy universe, baffled by its lack of fiscal foundation.

I hate to say this but these are really bad visualizations. It's not clear at all what they're trying to show.

I think the concept, that tax collection is wildly unequal, is easy enough to understand without the graphics. It would probably be more useful to show two heat maps next to each other where one was like "real value per lot" and the other was like "taxable value per lot", which presumably would show that the real value was consistently high and spread out over a large area while the taxable value was a shotgun smattering of mostly low values with a few spikes.

Every tax regime has it's own set of advantages and disadvantages, incentives & disincentives creating all sorts of market distortions. Prop 13 has different distortions than other tax regimes, but it's really hard to quantify if/when one is better than another.

In Wisconsin (and most places), corporate & personal state income taxes don't return to the municipalities where they were earned, but rather in a formula based mostly on where folks live. Under this regime, it's optimized to only have residential with minimal jobs & certainly no industry. Of course, what we see are the most propersous communities - in terms of income per household - are exactly that... just residential. It's the winning design under the current tax regime. However, we need jobs somewhere, but it's a losing strategy to take on all those commuters, policing, thick roads for trucks, etc. The revenues (tax off of incomes) are totally misaligned with costs (services needed to generate incomes).

One of the problems is that California has rent control, so if you just got rid of Prop 13 you've got a built in issue there. That's why Massachusetts got rid of rent control. It was holding down property values and gutting schools. But building owners had to fight their assessments every year.

A few parts of CA have rent control. 90+% of the state does not.

Yes, only the two most populated cities have rent control. Barstow and Fresno do not.

What built in issue? California has Prop 13 and rent control, which is not holding back property values so I'm not sure what vague issue that you are suggesting is. Massachusetts also does not have have problems with property values in general - its property is among the most expensive in the US, and often the most expensive in terms of rents.

Rent control absolutely holds property values down. In Los Angeles a studio apartment in the city (an subject to RSO) might cost about $130,000 while the same apartment across the municipal boundary might cost $150,000. It's a bigger delta for small properties as your average duplex buyer wants to pick their neighbor.

I've been eying a duplex offered at $350,000. With $150,000 invested in the eviction and conversion to single family it would be worth $800,000.

That's what rent control does to property taxes.

Now, if you removed Prop 13 and kept rent control you would have properties where the assessed value rose by several thousand percent, while the rent goes up only 3% per year. That is an issue.

I get your issue now, but I'm not sure it would work out the way you say. Removing Prop 13 would have a huge effect on existing home owners at least temporarily, so holding home prices constant in your scenario would not be correct.

3. Replace the 2% annual assessment increases with inflation + 0%. This allows the tax to fall during times of deflation. Or give individuals the option to change it ONCE.
4. Allow people to opt-out of Prop 13 protections in exchange for a lower tax rate, perhaps 0.5% instead of 1%.