Three property and tax-related propositions appear on the November ballot. Proposition 15 proposes to change California’s popular 42-year-old Proposition 13, which limits property taxes. Proposition 19 expands some property tax exemptions and eliminates others. And Proposition 21 is a do-over of a rent control ballot measure that California voters soundly defeated two years ago.
Voters should reject Propositions 15, 19 and 21.
Proposition 13, a landmark property tax cutting initiative passed by voters in 1978, has become the “third rail” of California politics. Just suggest overturning or changing the limits on assessing property tax in California and a politician can see his or her political future go up in flames.
But after about five years of trying, tax reform advocates have come up with a scheme that will equalize some of the inequities and curb the cash-starving consequences of Proposition 13. It is on the November ballot in the form of Proposition 15. Bummer, it goes before voters as the coronavirus pandemic is decimating Californian’s economy.
Advocates say this is now precisely why the proposed reform is needed. State and local government budgets are starved for money and this will capture millions more in tax dollars. Opponents rightly note that passage of Proposition 15 will kick California businesses while they are down and likely will result in even more job losses.
No doubt Proposition 13 created many property tax inequities. For example, with the tax rate capped, the owner of one home that does not change hands can pay substantially less in property tax than the owner of one next door that recently sold.
The same applies to business properties, giving some businesses an unfair competitive edge over new startups that recently bought property. And then there is the “corporate loophole,” where large, publicly traded corporations have gamed the system to avoid tax increases by simply characterizing stock ownership to their advantage.
Proposition 15 would create a “split roll,” where business properties would be taxed differently – more equitably – than residential properties. Proponent Ben Grieff, campaign manager of Evolve California, argues, “Chevron is getting the same deal as Grandma. That doesn’t make any sense.”
But as all businesses – including Chevron – are reeling from the economic impacts of the coronavirus pandemic that are expected to drag into the next decade, making such a fundamental change in the property tax system at the ballot box during these chaotic times will have unexpected and possibly dire consequences.
Proposition 15 is a far-reaching reform presented at the wrong time. The Legislature should look for ways to close loopholes – such as the corporate loophole – rather than asking voters to approve a massive change to a popular property tax law during the chaos of a pandemic. Vote NO
Proposition 19 will allow eligible homeowners to transfer their tax assessments anywhere within the state and allow tax assessments to be transferred to a more expensive home with an upward adjustment. Presently people over 55 years old, or with severe disabilities can transfer their tax assessments only once. This would increase it to three times.
But the downside is that inherited property – homes not used as principal residences, second homes or rentals – and business property will not be allowed to transfer to heirs without the value being reset.
The millions of dollars realized from the increased tax would create the California Fire Response Fund and County Revenue Protection Fund to support local governments.
While it would give a tax break to some seniors and people with disabilities, Proposition 19 would increase inequities in the state’s property tax assessment program created in 1978 by Proposition 13.
The inheritance provisions likely will stimulate more home sales for the real estate industry that is supporting the proposition. Fewer homes and business properties will be able to simply pass from generation to generation without tax implications.
The ability for parents to transfer property to their children without triggering a reset of the tax value was approved by voters in 1986 with Proposition 58. That same year, voters approved Proposition 60, which allowed property owners 55 and older one chance to purchase a cheaper home (downsize) in the same county and transfer the tax value of the property they were selling. Counties were later given the option of accepting transfers from other counties.
The Legislative Analyst’s Office estimates that the repeal of the “intergenerational transfer protections” guaranteed by the earlier proposition will result in 40,000 to 60,000 families getting hit with higher property taxes every year.
Proposition 19 is another do-over on the ballot. Two years ago, the real estate industry spent $13 million on a similar initiative campaign to expand the program statewide and enhance the benefit for eligible homeowners. Sixty percent of voters rejected the initiative. They should do the same this year. VOTE NO
Proposition 21 is a watered-down version of a rent-control ballot measure Californians rejected in 2018 with a 59 percent vote. After conducting focus groups and making some modest changes to their proposal, advocates placed it on the ballot again, hoping voters would be enticed to support it.
The problem is that the economics of California’s housing shortage hasn’t changed. And this seemingly “simple” solution will only aggravate it.
Proposition 21 will allow local governments to enact rent control on housing that was first occupied more that 15 years ago, with some exceptions. Presently about two dozen California cities impose limited rent controls with rental rates increasing at the time of vacancy.