In 1978, Californians voted overwhelmingly in favor of Proposition 13, the Howard Jarvis Tax Initiative. The measure garnered broad support largely in response to the continuous increases in property taxes during that era which in some instances, were forcing elderly residents on fixed incomes out of their long-time homes because they could not afford to pay the ever-increasing property tax assessments.
Fast forward forty years to the election this November when Californians will once again be asked to weigh in on a property tax measure designed to provide some relief for senior property owners. On November 6, Proposition 5, the Property Tax Transfer Initiative, could result in an amendment to Proposition 13 that will provide property tax benefits to the state’s elderly who sell their homes and purchase new ones.
A “yes” vote will allow California homebuyers over the age of 55 and those who are severely disabled to transfer the tax-assessed value (with a possible adjustment) from their old home to their new home. The transfer would apply regardless of their new home’s market value or location or the number of times the senior buys and sells. A “No” vote on this measure will maintain the status quo.
Currently, those over 55 can only transfer their tax assessment value when the market value of their new home is equal to or less than the value of their old home. In addition, counties, not the state decides whether those values can be transferred across county lines.
As you might imagine, as a senior myself, I have a vested interest in this legislation and I am certain I am not alone. California’s elderly population is expected to grow more than twice as fast as the state’s total population in the coming years.
Not surprisingly, there are those who oppose this legislation despite it being tailored to benefit the elderly. The primary argument against it? It does nothing to alleviate the state’s housing crisis. They also argue that it means less local revenue for the state’s public schools. To these individuals/groups I would say we lost that argument 40 years ago when Proposition 13 was positioned on the bases of protecting the elderly widows and widowers but also included commercial property owners in the bargain.
Under Proposition 13 property owners are taxed no more than one percent of their full cash value shown on the 1975-1976 assessment rolls and annual increases of the assessed taxable value of their property is limited to the inflation rate or two percent—whichever is less. It also provides some protections to new property owners. Property taxes for new property owners are assessed at one percent of the cash value of the property and then the inflation rate or two percent cap kicks in.
The tax protections Proposition 13 afforded commercial property owners made them the greatest beneficiaries of this protection over the last 40 years, while property tax revenue dollars available to support local schools and other municipal needs were seriously impacted.
The property tax relief Proposition 5 will provide seniors who sale and then purchase new homes will pale in comparison to the potential billions in property tax dollars saved by corporations over the last forty years.
For those who oppose Proposition 5 out of concern for lost revenue to the state’s public schools, I suggest rather than opposing this measure they instead, consider focusing on and supporting a measure possibly headed for California’s 2020 ballot.
The measure would overhaul Proposition 13 and increase local property tax revenues by taxing commercial and industrial properties based on their current market value. I make this recommendation because, as those who oppose Proposition 5 have proclaimed—the state’s schools can really use the money.
Of course, this is just my opinion. I’m keeping it real.