Hidden California Tax Bomb
Although not directly real estate related, this is very important in the outlook for values of all real estate in California. Because, it seems certain to me, that in the very near future, California will be raising the statewide sales tax to not only cover the tremendous unfunded pension liabilities but also the unbridled spending on all sorts of social benefit programs.
Interview with Jim Righeimer, the former mayor of Costa Mesa. He will offer his insider insight into the public pension liability crisis and what it means for the future of Californians’ retirement.
Many police officers & fire fighters have pensions over $100K. These are MULTI-MILLION dollar pensions. It is a scandal and no one is doing anything about it. ALL government employees (incl. public safety) need to transition to 401K type plans. The situation is completely ridiculous.
Hidden California Tax Bomb
I did a quick search, and and according to transparent California, that’s a website that tracks public pensions and salaries, one pensioner last year received $418,608 in pension payments! Just in case you wonder what the cause is of California’s unfunded $1 trillion pension liability is, I also noted that over 340,000 public employees receive over $100,000 per year, in retirement payments!
Besides his pension crisis being nonexistent in the major news outlets, the fact that California is now paying for full medical care for illegal aliens, (between certain ages), not paying for insurance but paying for the full medical care these illegal nonresidents may require.
One result of this need by the state of California for ever-increasing tax revenue, is this November’s ballot initiative to split the proposition 13 real estate tax protection law. Yes, gather going to tell you that this does not affect personal residence property tax in California. Although this is true, it will affect almost all commercial and industrial property throughout the whole state. But, don’t be full by thinking that you may not own commercial or industrial or retail property, you will not be affected! That’s the big lie that’s going to be pushed by the unions backing this proposition. The truth is, this new proposition will cause huge increases on all the commercial properties affected. What do you think owners will do of warehouse properties, small strip shopping centers, and major malls will do when their property taxes skyrocket? Yes, they are going to be forced to raise their rents to cover the increased taxes. This is why all Californians will be affected. Let’s say your hairdresser, dentist, warehouse outlet or CPA has their rental cost dramatically increased, you can surely expect that their cost for services will have to rise to cover their increased rent. So if a woman’s haircut is about $70 today, I would bet it would be hard to find the same service for under $100 should this proposition be passed in November!
Lastly, I’d like to say that I think if this proposition passes by a wide margin, it’s only a matter of time before they’ll be a new proposition eliminating proposition 13 property tax protection from all residential properties that are over a certain arbitrary resale value. In other words, the next future proposition 13 attack, may say properties that have a value of over $1 million are NOT covered by proposition 13!
But even if this is not the case, just the fact that Californians are always taxed to death, will ultimately negatively affect real estate values throughout the state. Are you aware that right now, many cities in California have a sales tax rate over 10%? A quick check shows that the city of Santa Fe Springs California, has a sales tax rate of 10.5%! Just in case you think this is a fluke, there are many, many other cities in California at or over 10% in sales tax rates. Just to name a few, Burbank 10 1/4% Gardena 10 1/4%, Glendale 10 1/4%, Huntington Park 10 1/4% Long Beach 10 1/4. San Francisco 10% San Gabriel 10 1/4% Huntington Park 10 1/4%!
Unless California gets their pension system under control, I would say it’s just a matter of time before all cities in California are well over 10% in their sales tax rates!
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