Opponents who delight in blaming Proposition 13 for many ills that befall California even jump on property tax related issues related to Prop 13 that were actually created by the California legislature.
The transfer of principal residents from parents to children while retaining a current property tax assessment is a law created in the legislature and passed by voters. Definitions of change of ownership for commercial property owners to determine if properties should be reassessed are the result of legislative decrees. Both issues are open for debate and even reform—if political agendas don’t get in the way.
The 40-year-old landmark property tax reform Proposition 13 has been in the news lately what with the talk of a ballot measure this November to extend Prop 13 benefits for seniors who buy a new home and the potential for another initiative qualifying for the 2020 ballot to treat commercial property differently from residential property for tax purposes.
Lately, attention has focused on the ability to transfer property between parents and children because of a lengthy Los Angeles Times article focusing on the use of inherited property as rental property while maintaining old property tax assessments. This inherited property situation was not found in Proposition 13. The legislature placed Proposition 58 on the ballot in 1986, eight years after Prop 13 passed, to allow children who inherited property to keep the same property tax. The idea was that children living in homes with parents or living in homes that had a parent’s name on the title would be able to retain the home without facing a “change in ownership” situation that would trigger a property tax boost.
The proposed constitutional amendment passed both houses of the legislature unanimously. The ballot argument in favor of Proposition 58 was signed by the measure’s author, Assemblyman Tom Hannigan and also by Lt. Governor Leo McCarthy, both opponents of Proposition 13. They clearly hadn’t lost their animus toward Prop 13 given that the first sentence of their ballot argument read: “It’s time to fix another mistake made in Proposition 13.”
In addition, Assemblywoman Lucy Killea added a second supportive argument. Voters backed the measure 75.7% to 24.3%.
The Times article focused on many children who inherited homes who now used the houses as either rental property or vacation properties. The attention grabber was placing the spotlight on a celebrity and the wealthy who did not use the inherited property as a principal residence.
There is also the situation to consider of “just plain folks” who do not fit in the celebrity or wealthy category who supplement their incomes with rents from inherited properties.
Still, if the voters supported Proposition 58 with a mind that the inherited property would be used as a principal residence might they consider a correction to the Prop 58 provisions to limit the property tax pass-through for only a principal residence? We may find out for the legislature could consider such an amendment in the next session. Or one might paraphrase language quoted earlier from the 1986 ballot booklet, ‘It might be time to fix another mistake made in the legislature.’ Of course the voters would have to agree and that may be easier said than done.
Another change the legislature was asked to make of previous legislative action is the definition of commercial property change in ownership.
With the help of creative sales deals that involved multiple partners some properties changing hands have avoided change of ownership reassessments of the property. When an egregious example of this came to light with the sale of a famous Santa Monica hotel a bill was carried to redefine change of ownership to quash these types of deals. However, politics got in the way.
Public unions and spending interests derailed the bill. These interests want even more revenue from most all commercial property through a split roll system that would tax commercial property differently than residential property. Opponents decided a legislative fix would undercut one of their arguments to voters when the split roll appears on the ballot. A second effort this year by Senator Pat Bates to correct the situation also failed with a split roll measure moving toward qualification.
Changing any aspect of Proposition 13 will be hard. Even some of the legislative measures attached to Proposition 13 have some of that Prop 13 protective shield surrounding them.
As a recent CALmatters report pointed out voters have consistently and strongly supported Proposition 13 despite changing demographics and changing political attitudes. Even the supposed incongruity highlighted in the article shows strengthening of the mindset toward Prop 13.
The article notes that when asked in a May 2008 PPIC poll how voters felt about the fact that a recent home buyer would pay greater property taxes than owners of a nearby identical home who bought years before, 41% supported the idea while 51% opposed. What was not revealed in the article is that a decade earlier when a similar question was asked only 35% supported with 59% opposed so the circumstance has seemingly gained acceptance. Further, there were no follow up questions that explained the certainty in taxation this provision of Prop 13 provides all taxpayers no matter when they purchase their homes.
Of course, these poll responses were years ago and only a snapshot of the times.
New tests to add or subtract from the Proposition 13 protections are on their way to voters. As constant support for the measure over four decades show, changes will be hard to make.