Among the numerous California state initiatives cleared for circulation and likely to be on the November 2018 ballot is Initiative Constitutional Amendment and Statute #17-0013A1, originally named The People's Initiative to Protect Proposition 13 Savings, and renamed by the California Attorney General, Changes Requirements for Certain Property Owners to Transfer Their Property Tax Base to Replacement Property. The initiative’s circulation deadline is March 26, 2018, and 585,407 signatures are required for inclusion on the ballot. The California Association of Realtors is the initiative’s sponsor. The Howard Jarvis Taxpayer Association is its major supporter. Summary is as follows:
Removes the following current requirements for homeowners who are over 55 years old or severely disabled to transfer their property tax base to a replacement residence: that replacement property is of equal or lesser value, replacement residence is in Specific County, and the transfer occurs only once. Removes similar replacement-value and location requirements on transfers for contaminated or disaster-destroyed property. Requires adjustments to the replacement property’s tax base, based on the new property’s value.
So, the main objectives of this initiative is to extend Proposition 13 property tax limits to seniors 55 and over and severely disabled persons when they purchase a replacement primary residence 1) in another county, 2) for a price higher than the primary residence they sold, and 3) as many times as they need to move.
The changes would take effect January 1, 2019, if the proposed ballot measure secures enough signatures to appear on the November 2018 ballot and is approved by voters.
Why is this Initiative Important
The rise of unelected bureaucrats that implement policies and taxation by which voters need to abide gave rise to the grassroots movement exemplified by the Nine-County Coalition. When increases in taxation, proposed by elected or unelected officials, enable degradation of voter control by way of funding central planning and regionalism, the NCC opposes it. Therefore, although the NCC is not “anti-tax,” we see that too much taxation goes towards strategies we oppose.
However, there are perils in all proposals, including proposals that limit funding to unbeneficial strategies. So, let’s go over first cited objections to The People's Initiative to Protect Proposition 13 Savings, then the benefits cited by supporters.
First, the Opposing Arguments
* Fiscal impact on state and local governments estimated by the California Legislative Analyst and Director of Finance:
“Annual property tax losses for cities, counties, and special districts of around $150 million in the near term, growing over time to $1 billion or more per year (in today’s dollars). Annual property tax losses for schools of around $150 million per year in the near term, growing over time to $1 billion or more per year (in today’s dollars). Increase in state costs for schools of an equivalent amount in most years.”
* Dependence of state and federal funding for schools and other city and county services:
Prior to enactment of Proposition 13, schools and other city and county services were primarily funded by property taxes. In the “he who pays the piper picks the tune” fashion, these services were directed by residents. As city funds decreased, state and federal funds increased to fill the void – and so did state and federal influence.
* Eroding of Decision-Making Process of Cities and Counties
Under current law, the portability limits expanded by Proposition 90, a Proposition 13 amendment approved by voters in 1995, apply only to California counties that have accepted such portability: Alameda, El Dorado, Los Angeles, Orange, Riverside, Santa Clara, San Bernardino, San Diego, San Mateo and Ventura. Initiative #17-0013A1 would impose the limits on all counties, whether they liked it or not.
* Increasing departure from traditional concepts – short excerpt from an email submitted by a Nine-County Coalition participant.
“When people could not pay property taxes historically, the county would take a piece of that land to grant to others in payment of delinquent taxes. Today they take the whole parcel. Why is the assessed value not based on what the county requires for that year? Where is the limit on how much the county can take from us if the ‘taxable value’ of our land goes up with each ‘transfer.’ Who is going to be able to afford this amount of tax? The older folks get a pass and the newer folks are stuck with a very large bill. Is this fair?”
Now, Arguments Cited by Supporters:
* Unlimited taxation is untenable
Without the protections of Proposition 13 and its extensions, seniors, often on fixed incomes, would be taxed out of house and home. The extent to which California legislators are willing to tax real property is exemplified by the proposed Assembly Constitutional Amendment 4, Local Government Financing: Affordable Housing and Public infrastructure, presently in committee process. The amendment aims to exempt funding for housing and infrastructure from the limits of Proposition 13. That’s a lot of funding!
* Portability eliminates the fear of moving
Proposition 13 and its extensions have the same effect as rent control. A result of rent control is fear of moving out of a rent-controlled unit and having to face paying exorbitant rent in an uncontrolled unit; therefore, tenants stay put, sometimes in homes that no longer adequately serve their needs. Controlled property taxes have the same effect on property owners. “Empty nesters” fear leaving, while growing families search for homes. Portability of property tax limits would ease the fear of moving and give newcomers a better chance of finding homes.
* Schools and other services suffer more from residents’ neglect than from lack of funds
Although money always comes with strings attached, those strings can be controlled by residents. Forty years ago, residents were much more involved in their school districts, fire departments, and hospitals. Today, what the California PTA sees as parental involvement is having apps that access school news issued by school administrators. No involvement, no say so.
* The “fairness” issue
Indeed Proposition 13 and its amendments benefit seniors and persons with severe disabilities. Therefore, it is assumed that healthy younger people are treated unfairly since they need to pick up the tax tab. From a different perspective, the young and the healthy want government-funded K-college schools, job training, subsidized child care, and worker housing – service used by few seniors. Fairness in paying for government-funded services is a tricky issue.