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How does California revenue "plummet" due to a minor housing market decline Suzanne DeAngelillis 01-11-2008
Posted by Suzanne DeAngelillis on January 11, 2008, 12:27 pm
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 This statement is in today's NY Times
(http://www.nytimes.com/2008/01/11/us/11calif.html?ref=us)
"revenue in California has plummeted because of troubles in the housing
market".

Is this yet another case of the NY Times journalists stating idiotic
"facts" that are patently untrue?

I can't imagine how revenue in California can possibly "plummet" because of
what appear to be minor (if any) decline in housing prices. Can you?

For example, say housing prices stayed steady; then revenue in California
would remain the same. Say they went up (which they appear to have done in
the bay area), then revenues go up slightly because people don't sell their
house just because it went up in value. They live in their house.

Now, say they went down. Same thing. The taxes paid on the house are
roughly 1.2 to 1.5% (give or take a few). So, given only a small percentage
of the houses that declined in value (if any) were actually sold, then the
tax change is only a small fraction of that small fraction.

Hence, I'm amazed at the journalists' statement.
Are the NY Times journalists yet again guilty of idiocy?
Or am I?

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Posted by Alan on January 11, 2008, 1:11 pm
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 Suzanne DeAngelillis wrote:
> This statement is in today's NY Times
> (http://www.nytimes.com/2008/01/11/us/11calif.html?ref=us)
> "revenue in California has plummeted because of troubles in the housing
> market".
>
> Is this yet another case of the NY Times journalists stating idiotic
> "facts" that are patently untrue?
>
> I can't imagine how revenue in California can possibly "plummet" because of
> what appear to be minor (if any) decline in housing prices. Can you?
>
> For example, say housing prices stayed steady; then revenue in California
> would remain the same. Say they went up (which they appear to have done in
> the bay area), then revenues go up slightly because people don't sell their
> house just because it went up in value. They live in their house.
>
> Now, say they went down. Same thing. The taxes paid on the house are
> roughly 1.2 to 1.5% (give or take a few). So, given only a small percentage
> of the houses that declined in value (if any) were actually sold, then the
> tax change is only a small fraction of that small fraction.
>
> Hence, I'm amazed at the journalists' statement.
> Are the NY Times journalists yet again guilty of idiocy?
> Or am I?
>
From the LA Times:
==============================================================
The effects of the housing slowdown are not being felt evenly
across the nation; in states such as Wyoming, Alaska and Texas,
they're more than offset by the boom in oil and gas prices. But
in a recent survey, 24 states reported that their tax collections
had taken a hit because of the housing crisis.

The 10 most affected states, including California, Nevada and
Arizona, will lose a combined $6.6 billion in tax revenue next
year, according to a report prepared for the U.S. Conference of
Mayors.
==============================================================

and also from the LAT:

==============================================================
The mortgage crisis cuts into tax revenue in several ways.

The most obvious victim is property tax collection. Homeowners in
foreclosure don't pay taxes on time. And as foreclosures spread,
property values drop -- dragging down assessments and collections.

To take one example: In wealthy Fairfax County, Va., property
values were jumping 20% a year. Now values are flat or falling.
The number of foreclosures has exploded, from fewer than 200 two
years ago to about 4,000 this year. The resulting $220-million
budget shortfall has officials warning of significant cuts in
services, including spending on public schools.

"Instead of having a soft landing, we've crashed," said Edward L.
Long Jr., a deputy county executive.

When the housing market is flat, governments also lose out on the
many transaction fees tacked onto real estate sales. This revenue
stream is down in several states, in a few cases by 20% or more.

Even more distressing to budget planners is the decline in sales
tax revenue. If people aren't buying homes, they're not buying
refrigerators and washing machines to furnish them. Nationwide,
orders for durable goods have been flat for the last four months.
(November saw the first slight uptick: 0.1%. Economists had been
hoping for 2.2%.)

On average, states receive about a third of their revenue from
sales taxes. So it hurts -- deeply -- when families don't have
reason to splurge on the new sofa and coffee table that will make
a just-purchased house look like home.

Jacqueline Byers, director of research for the National Assn. of
Counties, said she had taken to wondering, as she drove past yet
another vacant house: "Does that translate into the library's
going to close at 6 p.m. instead of 9? Little things like that
are all affected. It's a phenomenal impact."

The fallout has been most severe in California, where officials
are grappling with a $14-billion gap. Gov. Arnold Schwarzenegger
has ordered agencies to immediately trim spending by 10%.In
Florida, the Legislature recently took emergency steps to close a
budget shortfall estimated at $2.5 billion over the next 18
months. Lawmakers raised tuition at state universities by 5%,
sliced money for long-term nursing home care for the indigent,
and requested that state law enforcement officers take their
uniforms to be cleaned less frequently.

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

Posted by Harlan Lunsford on January 11, 2008, 5:28 pm
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Suzanne DeAngelillis wrote:
> This statement is in today's NY Times
> (http://www.nytimes.com/2008/01/11/us/11calif.html?ref=us)
> "revenue in California has plummeted because of troubles in the housing
> market".
>
> Is this yet another case of the NY Times journalists stating idiotic
> "facts" that are patently untrue?
>
> I can't imagine how revenue in California can possibly "plummet" because of
> what appear to be minor (if any) decline in housing prices. Can you?
>
> For example, say housing prices stayed steady; then revenue in California
> would remain the same. Say they went up (which they appear to have done in
> the bay area), then revenues go up slightly because people don't sell their
> house just because it went up in value. They live in their house.
>
> Now, say they went down. Same thing. The taxes paid on the house are
> roughly 1.2 to 1.5% (give or take a few). So, given only a small percentage
> of the houses that declined in value (if any) were actually sold, then the
> tax change is only a small fraction of that small fraction.
>
> Hence, I'm amazed at the journalists' statement.
> Are the NY Times journalists yet again guilty of idiocy?
> Or am I?
>
You just HAD to ask! grin at William, et al!

Here I don't even know you but I can tell you that you are not the idiot.

ChEAr$,
Harlan Lunsford, EA n LA

--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>

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