What if California defaults on its debt?

I've only been in CA for almost a year so these are the observations of someone from the "outside."

1. I've lived in six states - including some very corrupt/dysfunctional ones like NY & IL - and CA if the worst run state I've seen.

2. Prop. 13 is crazy - I get the idea of not punishing those on fixed incomes, etc, but this ties government's hands way too much and shifts the tax burden in ways that are grossly unfair.

4. The entire proposition systems is very strange and, IMHO, should be scrapped. I might buy a major overhaul if someone could present some compelling arguments for keeping it and propose solutions to its obvious deficiencies.

5. A 2/3rds vote for a budget? Really?

6. Voters seem to blame only politicians for the many problems CA faces. People need to look in the mirror. Given CA's proposition system, both voters and politicians share the blame.

7. Reform is essential, but (I'm a cynic) unlikely. Too many people, including voters, have a stake in the present system.
 
If Prop. 13 is abolished, the # of short sales/foreclosures would go through the roof: think about all those on a fixed income that would be faced with a very high tax bill. The Law of Unintended Consequences.



I firmly believe that one of the driving forces of California real estate is Prop. 13: one can plan financially around a certain tax bill, not one that varies from year-to-year.
 
I assume home prices will fall statewide as Cali continues to lose some of its shine and attractiveness to businesses and individuals. The long time pillars of California (great schools and infrastructure) will take quite some time to recover (if ever). Probably an unfortunate culling of the herd effect will occur too as more folks pack up and head to Texas, Southwest, Colorado (ect.) and other places where cost of living is much more affordable.



My family's not going anywhere, although we do wish TIC would build some new homes some time soon. We've been waiting quite awhile for those one-time "Coming Soon" projects. Will wait a bit longer--otherwise Laguna Niguel or Newport Coast--here we come!
 
[quote author="hedgehog" date=1244857292][quote author="Geotpf" date=1244856352]

But due to prop 13, other taxes have to be higher to make up for the shortfall, or you get less services (police/fire/schools/road repair/prisons). It's just the way it is.</blockquote>


That's wealth redistribution of the worst kind, don't you think? The people who benefit from prop.13 are generally wealthier and financially stable (well, they should be, if they didn't waste it all through HELOCs). And you're shifting the tax burden to younger taxpayers and to low-income taxpayers who are renting.



Abolishing Prop.13 is a tax hike I could get behind, of course, with the presumption that it would lead to lowering of other taxes.

I'm wondering whether that might become politically viable after 2-3 more years of declining property values...</blockquote>


Feel free to attempt to pass a proposition to repeal it. I would vote for it personally, but it would fail 70/30.
 
[quote author="GeorgeW" date=1244949008]If Prop. 13 is abolished, the # of short sales/foreclosures would go through the roof: think about all those on a fixed income that would be faced with a very high tax bill. The Law of Unintended Consequences.



I firmly believe that one of the driving forces of California real estate is Prop. 13: one can plan financially around a certain tax bill, not one that varies from year-to-year.</blockquote>


There is a way to repeal portions of prop 13 but not all of it to prevent grandma-who's-been-in-the-house-for-thirty-years from losing her home:



1. Repeal it completely for commercial property. That's right, prop 13 applies to the Walmart down the street.

2. Keep it in place for people making, say, under $50k a year single/$100k married, with a phase out up to $75k/$150k.



90% of the problem would be solved, with no significant ill effects.
 
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