We left California and moved to Texas. Here we make the same income but pay no income taxes and now own a fine home. I think that we are not the only ones to do this. It seems to me, California is loosing its upper middle class and replacing it with illegal immigration. Thus, California looses tax payers and gains state service consumers. We are seeing the inevitable consequence of this.

You get less what you tax and you get more of what you subsidize.

Who is John Gault?

You raised 2 very good points:

1. Prop 13 was passed when inflation was starting to get high and housing prices have sky-rocketed.
2. Prop 13 included businesses.

The 2nd point needs no argument.

The 1st point shows precisely where the flaw is. Inflation has seldom run below 2%, in fact in 70s and 80s it ran to well excess of 10%. So while keeping those already purchase a home in their home, the rest have to pony up more money to cover the costs of education/healthcare/etc. And this has gotten so much out of whack now that those enjoyed such a tax break for 20 years are still in their home while the rest can no longer have a home are still paying their taxes!

The stock appreciation argument is only true if you are require to pay annual fees proportional to the stock price, the reality is that you pay nothing, so it is fair to everybody, those who bought early and those bought recently. And remember selling a stock that has appreciatedly greatly still incurrs taxes, while selling a home that has been subsidized with other people’s money often incurrs little.

If Prop 13 is ammended with taxes that you cannot get away with $500k capital gains exemption then it makes it more fair. In bad times like now it will help to balance the deficit, in good times it should be used to rebate back the high state taxes.

The wikipedia has a pretty good article on this, especially the effects of Prop 13. I think it is very much true.