The Economics of Polarization, or: Why the Tea Party Is Magnificently Right
A hard look at the data explains the polarization of American politics: state and local governments are increasing property taxes even while the housing market crashes, and this is killing the middle class. In many parts of the country prospective homebuyers will pay almost as much in property taxes as in mortgage interest! No wonder the residential real estate market can’t come up for air, and why the American middle class feels that it is fighting for its existence. The only solution will be the kind pioneered by Wisconsin Gov. Scott Walker, one of the real heroes of our time: renegotiate the whole relationship between the government and the government unions. But that would mean the end of the Democratic Party as we know it. That’s why the upcoming presidential election will be the nastiest in living memory.
Crunching the numbers, I was gobsmacked by the way in which the tax burden has trickled down to the state and local level and crushed the middle class. The charts and graphs are available in my “Spengler” essay at Asia Times Online this morning:
Has America become irrational? Not since the 1930s have politics been so polarized, from the Tea Party movement on one side of the spectrum to the Occupy Wall Street protesters on the other. Why does the right object so vehemently to government spending? And why does the left attack private capital with parallel passion? The answer lies not in the American psyche, but in the statistics.
America is engaged in class war, but not of the sort one reads about in the mainstream press. The truly indigent — young African-American men, for example, most of whom are now unemployed — have little to do in this war. Large corporations for the most part are bystanders as well; they will make their peace with the victor. This is a war of survival between the productive middle class on one hand, and the dependents of the state on the other.
The Tea Party’s aversion to government spending is as pure an expression of rational self-interest as we have seen in American history. Like any new movement, it attracts more than its fair share of oddballs. The fact that a movement led by amateurs continues to wield so much power proves that it has good reason to be there.
SNIP
State and local governments, though, have exhausted their tax base, and the continuous rise in property taxes through the crash in property prices has kept the real estate market more depressed than economic conditions otherwise might indicate. A further increase in tax rates would yield less revenue. In effect, the government would have to proceed from taxing private capital to expropriating it, de facto or de jure — for example, nationalizing banks and directing them to make loans to politically-favored projects, after the fashion of Latin American banana republics.
The alternative is to renegotiate pension and health benefits already promised to public sector unions.
In either case, households that considered themselves comfortably middle class, and looked forward to a comfortable and secure retirement, find themselves on the edge of calamity. During the bubble years of 1998-2007, when America imported $6 trillion of overseas capital, the ride was easy.
When the whole world brought its savings to the United States, people of mediocre skills and slack work habits could afford big houses, expensive vacations, and (at taxpayer expense) generous pensions. Why Americans expected to live well indefinitely on the largesse of foreign investors is a question for the psychiatrists, not the economists.
The crisis has called into being a political movement of the exasperated middle class, namely the Tea Party. It has erased the image of the government unions as champions of progressive causes, and exposed them as an “aristocracy of labor” (in Marx’s phrase) parasitizing the public revenue.
The outcome inherently favors the Republicans. Debt — the catchall name for the crushing tax burden — has become a hot button issue even for many Democrats. But this election will be fought more desperately, and nastily, than any other that comes to mind during the past century. This is an existential struggle, a political war of survival for the American middle class. If the government unions go down in the fight, the Democratic Party of Barack Obama will cease to exist in its present form – and that would be a beneficial outcome for the United States.
That explains why the debt issue raises emotions. Republican consultants report that in focus groups, TV commercials about out-of-control debt prompt strongly positive responses even from Democrats. Even Democrats have to live somewhere and a lot of them own homes. And there are a lot more Democratic taxpayers and homeowners than there are government workers. This is a wedge issue for Republicans that won’t quit.
Mr. Goldman, you are always a worthwhile read. I had not read or heard about the property tax squeeze before. Like many of the essays here at PJMedia I find myself pondering what is written and often unable to comment till I think things through. By the time I do, well, then the comment thread is full….
Ah well, keep up the good work!
No recovery from the housing bubble until ALL public sector unions are GONE
A confirmatory anecdote for you: Since purchasing my home about 8 years ago, my property taxes have almost exactly doubled. After refinancing my mortgage about a year ago, my Escrow payments each month now exceed the Interest payment each month. I asked around, and almost everyone in my area that has refinanced to the lower current interest rates has had a similar experience.
The math works – at least for northern New Jersey.
Your on it Shaulieh, and obviously a homeowner.
Mr Goldman shouldn’t have to explain it, but I’m glad he did.
I’ve been barking this for some time(I’m a barber) and just get blank stares.
We paid off our mortgage 2yrs ago, but we’ll never get done buying it because of tax rates. We have to buy our home a second time, this time from the government!
It’s as if the government is blackmailing us to keep our property.
Is that constitutional?
Chiefparker, thanks for the background. When I ran the numbers, I couldn’t believe it at first, but it really is the case that aggregate payments for property taxes are in the same ballpark as aggregate mortgage payments. And that’s an outrage.
Being a relatively young property owner (35), it was an unpleasant realization that you never truly own your home or land. You are simply renting it from the State. The property tax will never go away unlike the mortgage.
Sadly yes, the Constitution forbids the Federal government from taxing property, but it imposes no such prohibition on the States (and by extension, their subdivisions).
Dear Spengler, some questions to classify your predictions.
In case you support the notion of some kind of parallel history between Western and Roman-Greek civilisation like your German namesake: What will be the severity of the upcoming conflict between the group? Will it be like the Roman Civil War between Optimates and Populares, this time with property taxes in focus instead of veteran matters? Or just more Youtube baiting videos and camping around Wall Street?
And what is the “Democratic Party of Barack Obama” which is about to end? Do you mean the Chicago Machine or the entire party? Who will replace them?
The fight is cultural as much as it is economic. There is so much nervousness these days, because the identity of America is at stake: A nation of the proud, engaged in the individual pursuit of happiness, vs. a nation of the demoralized, waiting for the goodies to be handed out by big brother. That’s why the Republicans have to appeal to the positive aspirations in order to gather the vote for an American resurgence.
I have argued all along that part of the support for the housing bubble was the boon to local property tax coffers. Here are some supporting facts:
School systems are almost universally supported by property taxes.
In California, the state constitution requires that 40% of state budget, that’s right, 40% of the state’s annual budget, regardless of size and shape, be spent on schools.
At a national average of $10k per student (not counting physical plant and busing) where is the money going? (that is $300k per classroom). In many states administrative overhead exceeds 35%.
Similarly, in higher education, administration staffs are now approaching a 1:1 ratio with teaching staff. (Hat tip, Victor Hansen Davis).
Professors in universities rarely teach. When part of a university based research operation, I taught so professors could picket admin building to get the same pay for the dime a dozen xxx studies PhD’s as the hard to find engineering and science PhD’s.
The requirements for the first 8 or 9 grades have not changed. We still start to read in grade 1 through 3 and peak at grade 8. We still learn multiplication tables in grade 3, etc. So why do we still tinker with curriculum? To find ways to simplify teachers work, not to improve student performance.
Please spare me the ‘some teachers are good…its just their union’ tripe. If it is Their Union, take it back and fix it. Teaching has become a part time job for middle class housewives, who want to go to the neighborhood party and, when asked “What do you do?” answer, with angelic look to the heavens, “Oh, I teach”. (Oos and aahs to follow)
Rant off.
ta
You either need to get your Constitution changed, or you need to break up California so that the productive people can secede from the moonbats.
Otherwise, the rest of the US will have to secede from California, just to save itself.
I helped get petitions signed for Howard Jarvis and his Prop.13. Taxpayers need to quit voting for public education spending. It is a proven waste of money. There is no correlation between lavish budgets and results. Education vouchers for private schools are a must. Alumni should stop contributing to left wing colleges. Universities should have their budgets slashed, until they stop teaching socialism. We have too many college graduates as it is. We need to target college money for needed professions where there are real jobs waiting. Our next bubble will be when our college graduates can’t repay their loans. Obama has already foreseen this with his twenty year debt limit on college loans.
Interesting that one of the most deeply indebted states, California, has some protection against rising property taxes in our famous Proposition 13.
Had we never passed such a constitutional amendment, we might not have been in a better place financially since expenditures at the state level always seem to rise with revenues.
Without the power to raise property taxes, the state and local governments in California nickel and dime us on fees and borrow to cover the remaining.
When are the politicans going to get the message and adjust to reality? Cut spending!
Let’s be clear about what prop 13 did.
It regulated the rate of INCREASE in property taxes to 1.5% per year.
Initial home valuations were pegged at about 1973 or so (IIRC).
Then, when the home sold, it was re-valued at the higher of 100% of sales price or property valuation, which ever was higher. (Thus preventing low ball sales from parents to children) The 1.5% inflation then restarted.
New homes, after about 1975, then were required to pay proffers or other up front fees. For example, a building permit for a home in California costs about the same as anywhere else, about $1,000 each. However, prior to getting the building permit you have to pay the Park and Recreation Impact Fee, the Elementary School District Impact Fee, the High School District Impact Fee (High School and Elementary School Districts are separate, not co-termenous, and not jointly funded, at least in San Diego County), a water and sewer Impact Fee etc. This usually amounts to 40 or 50k or more, 20 to 25% of the price of the home.
Further, builders are required to pay Proffers of 40 to 100K per home in order to get the subdivision permit. In many jurisdictions, developers must improve the entire subdivision prior to selling the first house. Normally, builders are allowed to develop, say, 25 to 50 homes, then open the next section etc. Not in most jurisdictions in California. This is sunk cost adding to Interest During Construction (IDC), another cost borne by the buyer. I have even seen the requirement for the developer to build the elementary school and improve the feeder roads as a prerequisite to getting a permit.
All of this is property tax paid in advance and made part of the mortgage payment. Then, the home owner, living in an over priced house, gets to pay full property taxes on the inflated purchase price of the home.
A mid range home, today, (less land) costs a builder $100-$125 per sqft to construct. This is fairly consistent nation wide since most of the residential labor is illegal. A land-home package needs to sell at 1/3 land cost and 2/3 building cost. When land values are increased by all the fees the home must get bigger to make sense. All of this feeds the bubbles.
So, my widowed mother-in-law lives in a University City home purchased new in 1960 and long since paid for. It has four bedrooms and is too big for her to manage. If she sells for the current value of $750,000 and moves to a $500,000 condo, the reasonable thing to do, her property taxes, on a paid for condo, are very large compared to her property taxes on a proposition 13 protected paid for home. The income on the $250k gain does not cover the difference. Hence, with no significant reason, in her mind, to make the change, she decides not to decide. At 87 who can blame her.
I lived through several housing boom/ bust cycles in SoCal. I am soooo glad I left.
Hope this helps, a little.
ta
Question:
Given that a new subdivision will bring in more people to the area, then these new people will need new schools, new water (liquid gold in arid Southern California) supplies, new sewers and sewage treatment, and so on. Who, in your mind, should pay for these new services and things; people like me that already paid for our stuff and don’t need any more, or the new people who do need the improvements? Not requiring the developer to pay for the necessary improvements is just money in his pocket paid for by the taxpayer. Prop 13 is a godsend. It prevents “Flush-It-Down” Brown from engaging in the same massive theft he got away with the first go around.
In California, new property developments need to pay the cost of the new public infrastructure needed to serve them. The developer pays for the new streets then deeds them to the City or county. The developer pays for the gas and electric service then deeds them to PG&E or SCE and so on.
When I was at Cal Poly, I took a class on local government from the professor who was also mayor at the time.
He remarked that residential property didn’t bring in enough tax revenue to pay for the services rendered by the city of San Luis Obispo. Commercial property development also generated sales taxes that went, in part to local government making zoning commercial much more attractive for local governments.
Of course, the notion that the state’s voters might have wanted LESS “services” from their government never crossed the professor’s lips.
I don’t know anything about California, but I think it’s generally true that where developers have to pay high up-front costs for new public infrastructure (schools, recreation facilities, etc.) it helps support housing bubbles by pushing up the price of new homes. It benefits established home owners in the short term. But in the long term, if a society instead shares broadly in the cost of new public infrastructure, tit will be encouraging immigrants and new family formation and so it will have people to keep things going when the established get old and after any smaller bubble bursts. Maybe you can have a housing bubble or pensions, but not both.
Mr. Hoskins – Your comment is mostly right but requires some corrections and clarifications.
1 Property taxes in California can go up 2% per year (not 1.5%). It depends on the amount of house price inflation.
2. The building permit, sewer, water hook up, etc. fees only apply to new homes, not existing older homes.
3. Prop. 13 is also a circuit breaker on taxes going down, not just up. So local government does not have its property tax base decimated when the market collapses under Prop. 13.
4. Tax revaluation occurs upon resale – but contrary to your statement, parents can transfer property to their children without it be reassessed IF the property is in a Trust. If in a Trust, there is no change of ownership, hence no tax reassessment.
5. Your mother could sell and move to another county in California to downsize without higher taxes IF that county has a reciprocal agreement to transfer the Prop 13 property tax limitation.
6. Another option is moving out of State. I recently helped an 82-year old lady sell her $1.5 million home in San Marino and move to San Antonio. She had to accept an offer $200,000 under market value – or $1.3 million – to sell her 3,700 square foot California home but bought a 5,100 square foot home in an upscale neighborhood of San Antonio for $560,000 (assessed at $800,000). So she lost $200,000 on California home but bought for $240,000 under Assessed Value in San Antonio for a home in mint condition. We may be seeing more of this in the future.
The property taxes in Texas are typically higher (2% to 3% of assessed value compared to 1% in California) but there are no income taxes in Texas and sales tax is very low also.
So in California the property tax on a $1.3 million home would be $13,000/year while the tax on a $560,000 home in a school district with 3% school tax would be $16,000. But if an older person reaps a windfall on the sales of their California home they can set aside, say, 10 years of taxes or $160,000, for future property taxes.
Note: Property taxes and special assessments can be as high as 3% in California also in a new subdivision with Mello-Roos improvement bonds for parks, fire station, sewer plant, water extensions, etc.
If Goldman is correct, and his evidence is compelling, it’s still a bitter pill for a lot of Americans. Writing off the nation’s public workers as “people of mediocre skills and slack work habits” is petty and disingenuous at best. There is patronage and incompetence, but there are also dedicated hard-working individuals, same as there are in the private sector. There are social costs to the elimination of public employee jobs – teachers and social workers come to mind.
During the boom times, public unions did quite well securing additional compensation and benefits for their workers and now they will have to give back much of what they gained. Pressing for their elimination is not a magic solution that will make everything better, but finding a better balance might work. There are good reasons why unions came to be and eliminating them will just result in the same level of exploitation and unrest we had a century ago. That would not be a beneficial outcome for the United States.
I did not mean to characterize all public sector workers as mediocre and slack. Apologies if I gave offense. But it certainly is true that some of the proceeds of the real estate bubble spilled over into government pay and benefits. Nor do I particularly blame the government unions for grabbing as much of the pie as they could for their members while the bakery was operating. That’s what they are supposed to do. The trouble is that they do not want to give back much of what they gained, and will fight desperately to keep it, with potentially disastrous consequences.
There is a ray of hope. A public union is not a unitary actor and budget cuts have created discord between older members and new hires. The latter are disproportionally affected and demand the burden be shared equally. Younger union members are increasingly aware that they will not share the generous benefits acquired by those near retirement and may lose their jobs as a result of limited funding. Given the democratic nature of unions sanity may yet prevail. Once the majority realizes they stand to lose everything, they might support compromises necessary to keep their employers solvent and their jobs. Good faith negotiations by both sides can save the public sector. I remain an optimist.
Thess::
Perhaps your optimism (and kindness too) are predicated on making private sector and public sector unions out to be the same thing; fatal error.
This gives rise to the idea that justification of public unions is not needed, even though the private sector effort has obviously outlived its original benefit itself — the unions of govt workers and the workers themselves have little concern for the failure of government or the need to do a good job — that is the main problem and the origin of the bogus idea of too big to fail.
It is but another structuring for money laundering at the highest levels and nothing more.
The division of labor in our society today is most heavily occupied by non-producing govt. ensconced at all levels and for that is unsustainable even to the maximum of borrowing, which is where we are now; even if this particular unconstitutional excess of govt power were eliminated (as all can be) with a mere stroke of the pen.
True optimism would be in seeing an early collapse of such a dysfunctional system.
What’s the downside to getting rid of state- paid social workers? It wasn’t a real job even 100 years ago. It was a hobby for middle- class married women who didn’t have the stones to become nurses or teachers.
I’d be fine with getting rid of them.
The easy money induced a mania that went global. That it would end in a train wreck was obvious – by 2003 — yours truly.
The resolution of the folly must result in the deflation in these ‘sub-bubbles’: education ( higher, middle and low ) — the health guild ( all forms except elective surgeries ) and Marxist redistribution in its various guises. ( premature retirements across the board — Feminist / sexist wealth transfers — the list seems endless )
What these bubbles all have in common is anti-economic outcomes — even anti-natal outcomes.
Obama is the purest political expression of these bubbles.
Unwittingly he has gutted the economic engine that feeds his dependent voter base — particularly low income Americans.
The staggered, staggering taxation implicit in Obamacare has to shrink payrolls as millions of newly marginalized employees get the axe.
Free health care came at the cost of employment. An extra $ 5.00 per hour is not a deal breaker for high wage employees — but it’s unbearable if the market only supports $ 12.00 per hour.
Re-norming public employee wages will probably require massive use of Chapter Nine bankruptcy petitions. I can’t see any politician achieving the required roll-backs with jaw-jaw. For the last decade unionized wage bumps of six to eight percent have been too common — whereas private sector incomes are flat to down. This creeping inequity is the source of much of the budgetary implosion.
It’s really going to get ugly.
The Tea Party are a bunch of angry old white people — who are angry because they realize that the time of white hegemony is (soon) coming to an end…and because they understand that they will soon be a minority — and a shrinking minority at that.
The white racist Tea Partiers are fooling themselves if they think that their efforts will change anything. We are taking over this country — and we will soon be a majority in Texas, and when that happens you white racist Republicans will be out of power, FOREVER.
The Tea Party is the last gasp of white America. They know that their time is nearly up, so they are panicking. 2010 was the last hurrah for the Tea Party. The white racist Republicans will soon be extinct. And not a moment too soon.
Our Reconquista is nearly complete. You gringos can’t stop it. It is too late for you gringos. You gringos will wind up in the dustbin of history.
Viva La Raza!
Considering that Herman Cain seems to be Tea Party favorite, it seems churlish and doctrinaire to complain about its whiteness. Color has nothing to do with it; economics has everything to do with it. The trouble, as the Pew Institute reports, is: “Some 41% of Hispanics ages 20 and older in the United States do not have a regular high school diploma, versus 23% of comparably aged blacks and 14% of whites.” If you want to run the US, you’d better be able to read the instruction manual.
The Tea Party “likes” Herman Cain for obvious reasons… That doesn’t prove that they’re not racist. If Cain was white they wouldn’t like him. They only “like” him because he’s black…
We are taking over this country whether you gringos like it or not. We are taking over by sheer numbers. We are already over 50 million strong and united — rising to 135 million by 2050. And you crackers are down to 63% of the population and extremely divided — and will be only 46% by 2050. We will soon be an outright majority in the Southwest. When we are a majority in Texas, you white Republicans will be out of power, FOREVER.
The Tea Party is the last gasp of white America. They see that their time is coming to an end so they are panicking… It’s too late for you gringos. Our Reconquista is a done deal. We are reoccupying the land that you gringos stole from our ancestors in 1836 and 1848.
Viva La Raza!
The thing that scares the groups like La Raza to death about the Tea Party is that for the Tea Party race isn’t the primary concern. Peaple like La Raza can not comprehend anyone to whom race isn’t paramount.
You are probably part Spanish as well as part Indian, as I am. The Spanish invaded North America, of which Mexico is a part. Other Europeans also invaded and conquered North America, taking from the native Americans and their Spanish oppressors. Mexicans who don’t understand basic history have made up this false and stupid narrative. Anyone who believes it displays their ignorance.
Now we are all Americans, not hyphenated. Some do not deserve to be here, and should be deported. If the Tea Party is successful we will shut our border, and only then, will decide who can stay.
LOL. You’re still having trouble conquering Mexico. LOL
Please dont respond to LaRaza Mr. Goldman. LaRaza is a mindless troll who copies and pastes the same tripe over and over on many articles here at PJM. Responding to him/her is pointless.
So, we will become like Mexico and other Latin American countries, where racial discrimination against AmerIndians is endemic and the Hundred (White Spanish) Families rule the country as their private fiefdom.
You are so caught up in seizing power for yourself that you haven’t, and probably are incapable of doing, any serious homework. I bet you are an Hispanic descended Norte, with no knowledge of how Mexico in particular and Latin America in general are ruled. After taking power, you too, will be a standard barrier for familial corruption. Look at the leaders del Sud. All are European.
Go for it, Viva La Raza, indeed.
We are taking over this country. If you don’t like it go back to Europe. The 21st century will be our century. We will reverse the 19th century. Our Reconquista is nearly complete.
Viva La Raza!
It really would be funny if it was not so pathetic.
Since you are posting on David Goldman’s blog, perhaps you read his book. Where are all the Hispanic reconquistadors going to come from, now that Mexico has a negative population curve?
Really, you should be worrying about assimalation of your next generation – I know several young people who grew up in Spannish speaking homes who have no intention of speaking it their home on a regular basis. Regardless, given population trends in Mexico, you might want to worry about future American immigration into a depopulated rural Mexico resulting in another TEXAS style land grab….
Viva La Who?
We already have over 50 million of our forces in this country and we are gobbling up more territory every single day.
By 2050 there will be 135 million Reconquistadors in the country concentrated in the Southwest — that borders Mexico with 150 million people.
Our ethnic, cultural, social, demographic, and linguistic takeover of the Southwest is nearly complete.
Viva La Raza!
So, answer the questions. You are none responsive. What will you do with the Navajo and Hopi in Arizona and New Mexico? How will you organize an economy? What do you plan to do about the drug cartels?
Come on now, you are the future in the 21st century and Anglos like me need to know what to do. Are you going to fill all jobs on some ethnic basis?
Sheesh.
We are taking over this country. If you don’t like it – go back to Europe.
We are the future. You gringos are finished. You are fading away. You gringos are powerless and irrelevant. We will dominate you. If you don’t like it – leave!
When we are numerous enough we will deal with you gringos appropriately…
Viva La Raza!
I rather suspect that La Raza is a Moby.
“La Raza” is the textbook definition of a troll. Rule #1 of Internet dialogue is “Don’t feed the trolls.” Ignore the idiot.
And if that doesn’t work, ¡Viva la segunda enmienda!
Of course, the Mexicans are doing a stellar job of killing each other off south of the border, so their irrelevancy increases with each new massacre.
Hilarious. I’ve happened to notice “la raza” at Dr. Hanson’s PJM place.
Thing is, “la raza”, or “the race’ as it should be said- you have the dimwitted notion that ethnicity trumps everything else.
FAIL. Hey, I happen to live in the US and I see things. I see plenty o’ Mexicans living here- and speaking English. That is, they are culturally American, not whatever failed culture you tediously yammer on about.
Sucks doesn’t it? I note you continually pester everyone with tales of your fantasy future- jeebus, haven’t you even noticed you’re trolling in English? English MOFO do you speak it? Well, you do. Why is that, if your pals are taking over? Oh, I know. They ain’t.
FAIL FAIL FAIL. Just stop embarrassing yourself, OK?
If you are going to write satire, at least make it amusing.
Awesome! La Raza indeed…not to respond to the troll as he appears to be incoherent at best but…but it appears that the core of the reconquista is that most Mexicans support it in a soft way. And that is mostly occurring after a few cervezas with some oompas music thrown in. While they get lip service by the mestizo power structure in CA what they do NOT get is actual power.
Mestizos are the future of the southwest as they are in power in Mexico and all the south and central American nations. Indios are ignored and degraded but are large in number and “pure” latinos are few on the ground. The whitefaces (sorry Hispanic speak here) are hated but still in power and the black skins (again Hispanic speak) are equally degraded. A reconquista is occurring and amazingly enough it may simply be that La Raza as a dupe is facilitating the old southern dream of the dominance of the United States in Mexico. The reconquista mostly consists of parties and beer and pickup trucks financed by US banks. The true tiny number of La Raza fanatics couldn’t organize a bun fight in a bakery without falling out among themselves. Marxism and other creeds contaminate the La Raza movement until it is a fractured parody of itself which is amazingly funny.
The whitefaces (sorry Hispanic speak here) => los blanquitos…….’>……..
Exactly, And the actual slang racist word for black folks by Mexicans can’t be used in polite society……the hatred one raises when a Hispanic of another country descent (different language idioms you see) tries to aid a person of another group can be amazing. Having a loving close relationship to the entire Hispanic community where I live I am amazed by the selective virulent hatred toward “Indios.” The amazing racist myth is that some Hispanics have no indios in them (or not enough anyway) BUT history tells us there were NO mestizos in American before the Spanish showed up so virtually EVERYONE (except PROUD descendents of “racially pure” recent immigrants) has some Indian in them. The language differences alone in various barrios are downplayed by La Raza as if there is one solid race of Hispanics BUT La Raza is often derided by various Hispanics as “loud and obnoxious” or irrelevant.
Thanks to you, and the others, for your edifying comments on the Mexican American conundrum. My grandmothers family came from southern New Mexico, possibly Juarez before that. I look like many New Mexicans, but have always had a European name. I grew up in Los Angeles, and my aunts and uncles were all quickly assimilated, and did not speak Spanish. This was the norm for Californians in those days. If Mexicans want to stay here, they should be assimilating as quickly as quickly as possible. If they want to be Mexicans, that should be arranged ASAP.
Thank you for this article. I think the problem may be worse. My annual property taxes are GREATER than my annual principal & interest payment. I pay taxes to Travis County, Austin ISD, the City of Austin, and Austin Community college. In effect, I rent my home from the local governments. In 2010, I was laid off from my job after 31 years. (All 1,100 jobs were exported to India.) The job I found pays 40% less. I will soon sell my home because I cannot afford to live in it. I didn’t buy a home that is too expensive for me even at my reduced salary. I have been taxed into a home that is too expensive for me. When I bought the home in 1993, the taxes were $5,700. Now they are $13,000.
TFR, thanks for the color, and sorry for your troubles. There’s quite a varied pattern across the country, and as an independent economist, I don’t have the resources to collect data at the county level. Perhaps one of our conservative thinktanks with some eager young staffers could do that job. But the fact that at the national level, overall property tax payments are roughly in the same range as overall mortgage payments is a disaster for the middle class. As you point out, in many cases it makes the difference between keeping one’s home, or not.
you might want to go gripe to the city council. I had an interview with the head of scholarships at ACC. She was pretty complacent about the tax base.
Exactly. People don’t own real estate, they own a lease from the county. And the rent went up. The rent’s too high guy was right, but he should have been talking about the ‘rent’ paid to local government.
The fly in the ointment of the author’s analysis is that there is an inverse correlation between home prices and property taxes. I made this analysis before deciding where to retire. For instance a mansion in Salina, Kansas costs $500,000 but the property taxes were $8,000. A comparable house in my town in Colorado would be $2,000,000 but the property taxes would be $7,200. Likewise, in Texas which has no income tax, the prices are relatively low but the proprety taxes are high to compensate for the lack of a state income tax.
I’ve lived in my house for 25 years. My property taxes have gone up an average of 15% per year. I live in Northern NJ.
The other side of the coin is that our nation could afford to give all workers a decent 1950s style pension, not just government employees.
Instead, the crony capitalism that has developed over the since the 1980s has landed us in a place where more and more of the wealth flows to the top. OWS is right to be angry about this.
No it can’t. Ponzi schemes only work as long as you have an increasing population. That’s why all these Ponzi schemes are imploding now. Populations, particularly in Europe, are stagnant.
The “1950′s style pension” was a Ponzi scheme.
No it wasn’t. A modern advanced economy can afford pensions for everyone. Germany does it (the payout is about what gets paid in). The German government does not get its hands on this money, the pensions are required by law, but are essentially privately run with gov’t oversight. Americans are getting screwed, but most aren’t aware of it, or they are blaming the wrong people.
Mr Goldman,
“If the government unions go down in the fight, the Democratic Party of Barack Obama will cease to exist in its present form – and that would be a beneficial outcome for the United States.”
What if they win?
best regards
Thank Goodness for Prop 13. I purchased my home 24 years ago. The property taxes have remained stable, enabling me to stay in my home now that I am retired. Before Prop 13 my parents were beginning to have difficulty paying the property taxes. They were lucky.After 13 the taxes stopped the yearly increases of 5-10% so they were able to stay in their homeuntil they died. Many of their friends had to sell their homes to pay the taxes and lived the rest of their lives in apartments.
CA has one good law on the books.
Speaking personally, and from the famous tax hell known as Wisconsin, only mortgage principle and groceries cost more than my real estate taxes per month. Funny thing though, I have yet to notice a commensurate increase in services, quite the opposite. And thanks to LaRaza, it’s always illuminating, and hilarious actually, to have a racialist explain what a TEA partier thinks. Here’s a hint amigo, it’s called the constitution, not that big or complicated. Give it a read, or have someone translate it for you.
And Jerry Brown wants to change California law so that it’s EASIER to raise our property taxes. (Essentially, he wants to repeal Prop 13 — which, not incidentally, was adopted during his first tenure in office in the 1970s, largely as a revolt against his tax-and-spend policies.)
The California counties haven’t been able to raise property taxes in 4-5 years, because property values have declined in virtually all of the state (or at most leveled off). Meanwhile, with by far the nation’s largest inventory of foreclosed homes, the California counties have suffered dramatic losses in revenue. Many properties go for months at a time with no taxes being paid on them.
So Brown wants to be able to raise the property tax base on the hundreds of thousands of homeowners hanging onto their devalued, underwater homes by the thinnest thread. Way to go, Brownie! That’s just what the economy needs.
Mr. Goldman or readers,
Maybe you can clarify something for this Canuck. At the start of the AT piece you write “In part, that is because states and localities cannot run budget deficits, unlike the federal government” Then later, you give us Exhibit 7 on the worst state budget deficits. Just what are the rules and wiggle room for state budget deficits in the US?
Thanks!
There has in the modern era been a trimverunate of taxation at the state and local level. You may ease by with low property taxes, but you alternatively will be socked with higher sales taxes and income taxes. Two of these conditions will generally exist, meaning you will have two of them usually, but rarely three and, even more rarely, one. California has low property taxes, relatively speaking, but high income and sales taxes. The unspoken rule in local politics has been that governments should not touch this third rail. When such transpired in California years back, the resultant was Prop 13 and the sacking of Jerry Brown the first time around, but the question now is how profound is Brown’s support for the unions vs. how much a whomping at the ballot box is his party willing to endure once voters figure out that middle class and unions are mutually exclusive entities especially in California where you are middle class if you send your children to state schools and you work for the government if you send you children to private ones.
Speaking of triumvirates, this in a way is the genesis of the issue at hand. It is not by chance that we have only two political parties in the country, it is simply infeasible for three to exist, and it it is equally impossible for only one to reign. In the same fashion, each party finds itself a blend of two factions, namely the party itself and one dominant school of political/economic thought. Any one party cannot exist by feeding the needs of more than these two things, muchless a multitude of competing interests, such as when the Democrats were undone by Jimmy Carter constricting American economic and military might while also seeking to maintain the status quo of the average American’s premeinent standard of living. As it stands today, the Republicans have found renewed political vigor by aligning themselves with the Tea Party (escaping the near collapse of the party precipitated by Bush Jr, a fate that nearly was ironically foisted upon them by Bush Sr), so the question is who will the Democrats align themselves with – the politically favored classes (and most likely spelling their electoral doom) or wrest the momentum from the Republicans by wooing the rest of the middle class?
I would venture this, that Barack Obama had pitched his tent down amongst the other tents at those “Occupy (insert name)” events long ago. He is reflexively a creature of left wing Democrat political street theater, even before he is a politician, and the only thing that will shift the Earth beneath him will be an outright revolt of his own party of such magnitude that it won’t be a question if Biden will occupy the other half of the ticket, it will be one of whether or not Obama will himself be collecting his much vaunted 99 weeks of unemployment benefits well before inauguration day 2013.
ChiefParker, re: “We paid off our mortgage 2yrs ago, but we’ll never get done buying it because of tax rates. We have to buy our home a second time, this time from the government!It’s as if the government is blackmailing us to keep our property.” CP, got some bad news for you: you do not own your home, you only think you do. In most of the common-law Anglophone world, your land is owned at the sufference of the crown, or in our cases, the government. Such an arrangement is called “in fee simple” title of ownership. We do not have allodial title, but if we did, it would permit true ownership of land and any dwelling upon it. Allodial titled-land, homes, etc. are yours and cannot be confiscated by the govt. for any reason. Under our present system, you home is “yours” only as long as you pay govt. for the privilege. Refuse to pay your taxes, and govt. can legally (if not morally) take your home and land.
“Is that constitutional?” Not sure. Any lawyers in the house? My guess would be that the constitution does not comment on this issue one way or another, at least not directly.
Mr. Goldman
I have scoured the Fed Reserve website for total amount of mortgage interest IN CALIFORNIA circa 2010 but unable to find.
If you have a link that would help it would be appreciated.
I live in Westchester County, NY, which has the nation’s highest property taxes. No, property taxes on homes, even here, are still less than mortgage payments, for anyone with a loan-to-value ratio of 50% or more. But the problem is that property taxes continue to increase due to public employee raises and unsustainable pension obligations. The solution would be truth in advertising: when any public employee wage contract or pension agreement is negotiated, require tat the full cost of the contract, including all the pension obligations, be disclosed in clear language to all taxpayers in the jurisdiction. Anything less is fraud.
La Raza — cuando estamos hablando en Espanol, la idiomia de los conquistadores — legalizar todos los indocumentados Centroamericanos en Mexico. Y los chinos afuera del barco en los ciudades Pacificos tambien que quieran trabajos desde el fracaso del economia chino porque el economia estadounidense esta fracasando?
Dice que por su raza todo, por las otras nada? Los chinos tienan armas nucleares, amigo. Buen suerte si no hay una estados unidos para defender este hemisfera.
This concludes your lesson in the real world. I’m a guero and I speak your language just fine, it’s the exploitation of your pathetic false ‘racial consciousness’ by a bunch of old white guy globalists who want to exploit your people to suppress wages in this country while keeping your country a narco-ruled hellhole that I find ludicrous. They’re using your people as cannon fodder just as much as Juan Lopez de Santa Anna, who was defeated by the real Tejanos like De Zavala who wanted nothing to do with Mexico’s weak claims to territory it held for less than a dozen years after inheriting from the Spaniards who claimed it (but couldn’t take it) from the Apaches, Kiowas, and Comanches.
All property is really owned by greedy bankers who extort money from the slightly richer elements of the working class by threatening to take away their homes. Property taxes should be tripled, except those who live in the homes should not be required to pay them, the property tax bill needs to be sent to the greedy bankers who hold the mortgages, since after all, they are the real owners of the property. If we did that, everything would be fine.
Master of Disaster, re: “The other side of the coin is that our nation could afford to give all workers a decent 1950s style pension, not just government employees.”
Hate to break it to you, Master, but the social welfare state is in crisis all across the western world. Germany is in better shape than most, but only barely. If you mean by “govt.-style pensions,” retirement programs that begin as young as 45-50 years old, and pay out generous pension and medical benefits until life’s end… no, we can’t afford them. Even now, they are breaking budgets across America in places like Vallejo, CA. That municipality was forced to choose between paying police and fire pensions and going broke, or declaring bankrupcy. They choose the latter. Seriously, do the math yourself – don’t take my word for it. And it isn’t only pensions that will break the bank, but social security, medicare, medicaid, and the like. Visit the site “PensionTsunami.com” for articles and information…
You are exactly right, Mr. Spengler. I recently looked at purchasing a modest retirement home in depressed northern Ohio and was shocked to find that the annual property tax would indeed be equivalent to the annual mortgage payment.
Germany does not currently allow retirement at 45-50, more like early to mid-60s, barring a serious disability. I don’t think that the German pension system is in trouble, it pays out, on average, what was paid in by the worker and his/her employers. I agree that the many other social benefits are unsustainable, as currently structured. I live in California, and am unhappy that my taxes support people who won’t work or game the system for benefits they don’t deserve. I don’t mind paying to support people who can’t work (the disabled, elderly people with no means of support etc.)