Re:The $3500 Shirt – A History Lesson in Economics
by TheMiller on Sunday January 25, 2015 @10:18AM
(#8943080)
"... but those other states' property taxes rise with the value of the houses every year, ..."
In Michigan, it's a bit more complex. The assessor calculates a State Equalized Value (SEV) on which the tax is based, and that cannot rise faster than the rate of inflation, or 5%, whichever is less. I assume lots of states have odd property tax quirks.
Housing prices take into account the amount of taxes one expects to have to pay, so if they're no longer locked, and one expects prices to rise, then the price one will be willing to pay will be lower. Also, prices will fall as more supply opens up, since there won't be such a big advantage to sitting on houses anymore, and people are more free to move to less expensive areas. Currently there's a bit of a rent control situation where the low rates can be passed on to your descendants, and there's a big incentive to stay in it rather than selling it and moving farther out, even if the place farther out is half the price. This effect is more pronounced on the high demand areas where prices have risen more.
Over time, the prices would adjust and settle. People may end up paying more tax overall, but we can play with the rate, or we could decide that the schools could use more funding (in many places, they could), and that we should keep the rate where it is. As it is now, the people who are just moving to CA are heavily subsidizing people who have lived here for a long time, and the lack of liquid housing supply is causing prices to shoot up.