As a modified thought experiment, I thought it might be interesting to see what the California decrease in median home values would mean in Minnesotan tax system terms. (I say “modified” because I didn’t have the endurance to track down the exact homestead rebate amount or population levels. The below numbers are estimates based on the linked articles and Census 2000) Here are my rough calculations, using the tax slide from Wednesday’s class and the magic of Excel. (Apologies for the small tax slide picture, blogging pictures is not exactly my forte)--
STEPS MN EXAMPLE CA 2004 CA 2009
#1 120000 474370 304000
#2 0.01 0.01 0.01
#3 1200 4743.7 3040
#4 1.15 1.15 1.15
#5 1380 5455.255 3496
#6 0.001 0.001 0.001
#7 120 474.37 304
#8 1500 5929.625 3800
(#9 - 10 skipped)
*Difference of CA total gross tax 2004 - 2009 = -$2,129.63*
CA gross tax loss in MN terms = Difference of CA total gross tax 2004-2009 * MN 2000 18+ population ===========> -$7,736,043,830.63
As I warned earlier, the estimate is very rough but it’s interesting nonetheless to see how a market downturn could quite effectively clean out state coffers (among other things)…
And in case you’re still contemplating escaping to California one of these days, here’s a handy tool to figure out how much more California would ask of you in terms of taxes. Note the marked increase in sales taxes instead of income taxes – a nice way to spread out the burden, or a political saving grace? I guess we’ll find out soon enough.
Two thumbs up for the post!
ReplyDeleteI am not totally agree on the following sentence though:
"Even if California did not have a property tax cap, it seems that any potential tax revenue gains would have been offset by the record-setting low home values regardless."
Without a cap on property tax rate, low home values will not automatically translate into decreased property tax revenue, because local governments can adjust property tax rates accordingly to get the same tax revenues, as was the traditional mechanism of property tax levy before the "tax revolt."
However, things changed in CA after 1978. Among other things, the proposition 13 holds that "The maximum amount of any ad valorem tax on real property shall not exceed One percent (1%) of the full cash value of such property." (See http://en.wikipedia.org/wiki/California_Proposition_13_(1978).) This makes all the analysis meaningful here.