Relative tax values
We hear it everyday. Taxes are too high in California. I believe it, too.
But there is a bright red state that taxes real estate much higher than California’s Proposition 13. Good ole South Carolina’s higher property tax rates actually play a huge role in lowering their cost of living, because South Carolina taxes non-owner-occupied single family homes triple what they tax an owner-occupied home.
This alone eliminates a slew of would-be investors, thus suppressing real estate values. Lower real estate values means lower mortgage payments, and subsequently lower housing costs since rents usually mirror monthly mortgage payments. South Carolina’s higher property taxes lowered the state’s cost of living and made it more attractive for multi-nationals like Boeing, BMW and Michelin to be in South Carolina.
When I was back there in 2007 through 2009 part-time, bargain-hunter me, bought three houses — a 2,400-square-foot brick house on an acre of native hardwoods with a full basement for $40 a square foot, a 1,400-square-foot ranch fixer on 0.7 acres for $26 a foot in Richland County that needed new rear siding, and a 1,600-square-foot hodge-podge trashy mess on a country 0.25 ac. flag lot for about $2.50 a foot that didn’t have an easement for the flagpole-shaped driveway to it.
All three were arbitrarily assessed a much higher tax basis value that had nothing to do with what I paid for them. And since two of them were non-owner occupied, they were triple-taxed.
For me that meant four months rental income to pay the property taxes. I soon learned why there were so few buyers for those bargain priced houses.
Here in Southern California, a home’s sales price is usually the tax basis assessed value per Proposition 13. We are taxed at one percent for investors or owner-occupants alike, which attracts more buyers.
More buyers means higher values meaning lower tax rates are needed to generate the same revenue.
Housing costs in California have skyrocketed since 1978 when Proposition 13 went into effect and are up nearly 10 percent in the last year statewide.
But for Boeing, BMW and Michelin, higher housing taxes in a red state meant lower wages were needed for their workforce due to lower cost of living ironically due to higher property taxes.
Apparently Republicans do like higher taxes. Just not on Boeing, BMW and Michelin. And so it goes.