CA's - Can you explain Warren Buffet's property taxes?

[alcuno]

I keep hearing that he owns a home worth 4,000,000 and has a property tax bill between 2 and 3 thousand. Is that true? How can that be?

[Booberdawg]

1. I've seen his home

He doesn't live an extravagant lifestyle and I would guess his property far under 1 million, maybe less than half. I don't know exact figures. He lives in Omaha Nebraska in a modest residential area.

[dofus]

2. I understand that he lives

in a rather modest home in Nebraska. Lincoln? Omaha? If he doesn't live in a huge expensive mansion he doesn't pay a lot in property taxes. Simple as that.

[alcuno]

3. No, I'm talking about the one in California.

The one in Omaha is worth about 500,000, but they said the one in California is worth 4,000,000.

[felix19]

4. Simple: Proposition 13

Buffett bought a house in Laguna Beach in 1971 for $150,000.

Proposition 13 was passed in 1978, basing property taxes on 1% of 1973(?) values; for that house in Laguna, that might have been 1% of $150,000 or $1,500. According to the provisions of Proposition 13, those taxes could increase no more than 2% a year, regardless of the increase in property value, so long as the property did not change hands. So his property tax on this property is not much more than $2,000 today. Every time it changes hands, the property is reassessed at current market value, and property tax of 1% of assessed value kick in again.

For example, Buffett bought a house 2 doors down for $1,130,000 (he said) in 1996, and he would have been taxed at 1% of that price.

The market value of real estate in Laguna has skyrocketed since then. The house he bought in 1971 for $150,000 is easily worth $4,000,000 today, but he would pay property taxes based on his original purchase price, with infinitesimal annual increases ever since.

Nice, don't you think?

(Thanks to Grannyc at Bartcop for doing this research.)

[alcuno]

6. Thanks. That explains it. What a racket!

So even his $1,130,000 home would only have an $11,300 tax bill to start with and increase at a very small rate. Those are unbelievable property taxes for homes of that value. He's right. They are too low. Who came up with this scheme?

[SyracuseDemocrat]

9. I don't think they are too low.

Raising the property taxes would be very detrimental to seniors on fixed incomes, and Arnold is stupid for even suggesting raising the property tax rates.

[alcuno]

11. That can be handled. Seniors can receive tax credits or

have increases greatly limited. It's done all the time.

[newyawker99]

15. Hi felix19!!

Welcome to DU!! :toast:

[Dagaz]

5. He's on to something

In Nebraska he owns a main home valued at $500k and pays $14k in taxes. He also owns an abode in Laguna Beach valued at $4 mil yet only pays $2,264 in property taxes (from Sunday's Sf Chronicle). Can someone tell me why it's fair to give tax breaks to the rich who own mansions in California?

[felix19]

7. Howard Jarvis {n/t}

.

[pfitz59]

8. It's worse than that!

If the house has an orange grove or some cows its now a "farm" and pays even lower taxes than regular homeowners! Reagan used that dodge to avoid full taxation on "Rancho de Cielo"! California tax structure is scandalous! Also, don't neglect the "expatriate" Californians who keep homes in WA, NV, TX or FL to avoid paying CA income taxes! CA is stuck in a doo-doo vortex! No one will win!

[alcuno]

10. Well one thing now makes sense. They are always talking about

how high California's income tax is. So instead of getting the money from property owners, it comes from workers. No jobs, no money.

[cally]

12. The bigger problem with Prop 13

is that it has shifted the property tax burden from longtime homeowners and corporations to younger families. Commercial property does not turn over as quickly as homes, so many commercial properties are still paying prop 13 rates. Also, long time homeowners pay low rates while new owners pay higher rates. I have no problem with those on fixed or low income paying a fixed property tax until resale, but folks like Buffett and corporations like Chevron should be taxed at the same rate new families and businesses pay.

[alcuno]

13. That's worse!

Commercial property is included? And Buffet pays 2000 something while someone with a home of the exact same value would pay 40,000. Unreal.

[Yavin4]

14. Imagine Trying To Run A School System on That

Property tax structure. Geesh!

I know one thing. The days of the $120K a year, single, computer progammer in Silicon Valley are over. They'd better find some revenue somewhere and quick.

[slackmaster]

19. And to make up for that loss of funds they gave us the Lottery

:eyes:

[radwriter0555]

16. PROP 13, 1978, Jerry Brown. Keeps property taxes from increasing

so your property taxes never go UP. They stay at the price you bought the house, not on the improved value.

Lady I bought a house from, had bought it in the 70's, was paying $220 a year for a house I paid over $150K for.

Rich get to pay less taxes, while us new homeowners assume majority of the burden. If there was no prop 13, the income to the treasury from taxes on par with market values seriously would have helped us avoid the budget problems.

[Democat]

17. It's not rich people who are paying less taxes, it's longtime owners

Think about it, it's the older people who are paying less taxes.

The longer you have owned your house, the less you pay relative to what the appraisal value of the house is.

It's not rich people so much as longtime homeowners who are paying less.

You will not always be a "new homeowner", and as time goes on, the longer you own the house, the less you will pay relative to the value of the house.

Some people may think it's too low, but it doesn't favor rich people - it favors those who keep their homes for a long time.

[slackmaster]

18. Prop. 13 limits increases and caps the top rate for property tax

so your property taxes never go UP. They stay at the price you bought the house, not on the improved value.

Not quite correct. Here are the specifics and spin by the group that originally advocated Proposition 13:

"Proposition 13 limits property taxes by setting the property tax rate no higher than one percent of property value. Initially, the one percent tax rate was measured against a property's value as of 1975. When a property is sold or new construction takes place, property is reassessed at one percent of its current value. Property assessments can increase to inflation yearly, but no more than two percent. This has the practical value of limiting property tax increases to two
percent annually and allows homeowners to know what their taxes will be in the future so they can budget accordingly." Source: http://www.hjta.org/calcommentary018.htm

The taxes on my house in San Diego have increased from about $1,200 per year in 1995 to over $1,800 at present. When I got divorced and my ex-wife signed a Quit Claim Deed, that was considered a sale for tax purposes. Because the assesseed value has gone up, I got hit with a significant property tax increase. That $1,800 is well below 1% of the MARKET value of the house, and at 2% tax increase per year even if the appraised value kept up with market value (which it cannot because of limits on re-appraisals), my property tax is likely to DECREASE as a percentage of the market value of my house. Add the effects of inflation (assuming it's more than 2%) and government loses even more as time goes by.

Of course government and anyone interested in the size of the general fund hate this, but many homeowners love it. Homeowners who vote. A lot of Californians remember Proposition 13 as the initiative that saved Grandma's house, and although support for it is not what it was 15 or 20 years ago it may still be political suicide to advocate against one of the most significant taxpayer revolts in the history of the USA.