By Jon Coupal, President, Howard Jarvis Taxpayers Association
The assaults on California property owners and taxpayers never stop. And once again the California Legislature has advanced a massive tax increase at the last possible moment when they thought no one was paying attention.
Assembly Constitutional Amendment No. 11 (ACA11), approved by the California Legislature, takes away Proposition 13 protections that California families have under current law and replaces them with a billion-dollar tax increase. Voters will have an opportunity to reject this scheme come November, as ACA11 will appear on the ballot as Proposition 19.
After the historic passage of Proposition 13 in 1978, Californians finally had certainty about their future property tax liability because increases in the “taxable value” of property were limited to 2 percent per year. Property would be reassessed to market value only when it changed hands. To prevent families from getting hit with huge tax increases, voters overwhelmingly passed Proposition 58 in 1986, changing the state constitution to ensure that transfers of certain property between parents and children could occur without triggering the sticker shock of reassessment.
Under Prop. 58, a home of any value and up to a million dollars of assessed value of other property may be transferred between parents and children without reassessment. Proposition 19 (2020) would repeal Proposition 58 (1986) and force the reassessment of inherited or transferred property within families. The only exception is if the property is used as the principal residence of the person to whom it was transferred, and even that exclusion is capped.
The Legislative Analyst’s Office estimates that the repeal of the “intergenerational transfer protections” guaranteed by Props. 58 and 193 will result in 40,000 to 60,000 families getting hit with higher property taxes every year. Prop. 19’s massive tax increase has been included in this initiative to offset another proposed constitutional change: the expansion of the ability for older homeowners to move to a replacement home and transfer their base-year property tax assessment from their previous home to the new property. While this “portability” expansion has some merit, voters rejected this idea in 2018. Oddly, the backers of the proposal think they can sell it again by adding a tax increase.
As ill-advised as Proposition 19 is as matter of policy, the contortions executed by the California Legislature to place it on the ballot were nothing short of bizarre. The primary sponsor of ACA11 was the California Association of Realtors (CAR) which first wrote a similar proposal as an initiative and gathered signatures to put it on the ballot. It appears CAR is motivated by the desire to churn more home sales, even at the expense of a multi-billion-dollar tax increase.
For reasons related to placating progressive Democrats in the Legislature as well as labor unions, CAR wanted to withdraw its previously qualified initiative and have the Legislature replace it with a similar tax increase proposal.
But something funny happened on the way to the ballot. CAR missed the constitutional deadline for withdrawing its initiative, so as a matter of law, it appeared that there would be two nearly identical measures on the ballot, causing confusion, not to mention additional costs. So, Secretary of State Padilla dutifully took the CAR measure off the ballot even though he had already certified it under the procedures set forth in the California Constitution.
Our current political establishment ignores all rules and laws when it comes to achieving a desired political end. And, as usual, the desired end here is billions of dollars in higher property taxes.