Several colleagues, friends, and clients have asked me recently about a few of the propositions that will be on the ballot for this upcoming election. I guess with my 15-year tenure as a realtor and a graduate degree in public policy they must think I know what I am talking about. Ballots are going out in the mail this week, so I thought it would be timely to post a little information for those who are interested. Today I will explain is Proposition 19, the "The Home Protection for Seniors, Severely Disabled, Families, and Victims of Wildfire and Natural Disasters Act".
Proposition 19 is on the ballot as a result of a California State Assembly Constitutional Amendment - ACA11 (Mullin), which passed through the legislature with bipartisan support this summer. The proposition has a few main components.
(1) It expands existing law (previously, Proposition 60 and Proposition 90) to allow seniors, the victims of wildfires, and severely disabled, to transfer their existing property tax base up to 3 times, anywhere in the state, and to a property of higher or lower value. Currently seniors can transfer their property tax base, but they have to stay within the same county AND buy a home of lesser value than the home they ultimately sell. Often these individuals need to move to another county to be closer to family where it is not possible to buy a lesser priced home. For example, if you want to sell a home in Sacramento but want to buy in Alameda where homes generally more expensive you may have a difficult time buying a lesser priced home. If they buy a higher priced home, they would be able to pay a new blended rate based on the difference between the home they sell and the home they buy. Currently people who lose homes in wildfires do not have the option to transfer their existing tax base for the home they lost to a replacement property. And often disabled people need to sell and purchase different homes that can better accommodate their disabilities.
As a realtor, I encounter situations all the time where people decide to stay in homes they can not maintain or that are too large now that the kids are gone, and they do so just because they cannot afford a higher property tax bill. For example, I have an elderly client whose adult kids have moved away, her husband died, and she can't afford to downsize from her 4 bedroom home into a condo near her kids because on a fixed income she cannot afford the increase in property tax. This would allow people in these types of situations to sell and right-size their living situation with no tax penalty. And with the number of homes lost recently to wildfires, it will allow those who are wildfire victims and never intended to move to not suffer a tax penalty as well. And to allow disabled persons to buy homes that better accommodate their disability is a no-brainer.
(2) The second component is that it reforms the inheritance tax exclusion. Existing law (previously, Proposition 58 and Proposition 193) allows parents and grandparents to leave their children and grandchildren residential properties and transfer the low property tax base. It also allows property tax base transfer of commercial and other investment property with assessed value up to $1M. Proposition 19 would allow tax base transfer of inherited properties with assessed value up to $1M to family members who will OWNER OCCUPY the home. It also eliminates tax base transfer of inherited commercial and investment property.
A couple of years ago a LA Times article brought to light that actors Jeff and Beau Bridges inherited a Malibu beach-front property valued at like $20M with a tax base of a few hundred thousand. They use the property as an income-producing a vacation rental and rake in the profit while paying relatively little property tax. This "focusing event" prompted the California Legislative Analyst's Office (LAO) to study this issue of the Inheritance Tax Exclusion. The LAO report noted that MANY people who inherit properties benefit from keeping a low tax base and use the properties for income and profit substantially from this low property tax. The LAO recommended the the legislature look into this, as the original intent of Propositions 58 and 193 was to pass this tax base along to relatives who were going to live in their parents' and grandparents' properties. As a result, there was actually a proposed California Senate Constitutional Amendment (SCA3 Hill) that passed through several committees before Hill pulled it knowing it's provisions would be included with another proposal.
(3) As there will be additional property tax revenues generated as a result of these changes to property tax assessment transfers, Proposition 19 increases revenues to local governments, and for part of the additional revenues establishes the California Fire Response Fund to specifically fund firefighting efforts.
As it stands, there is a broad and bipartisan coalition of support from MANY groups who don't often see eye-to-eye on things. You do not frequently see Senior and Disability Organizations, Fire and Public Safety Advocates, Labor Organizations, Community Advocates, Education Advocates, Political Organizations, and Business and Trade Organizations support the same initiative.
So with that, I am an enthusiastic YES vote on Proposition 19. Proposition 19 addresses several problems and inequities I see frequently while funding additional support to fight California's wildfires, and providing funding local governments and schools.