ACA 13 Attacks Both Proposition 13 and Direct Democracy in California

August 27, 2023 By Jon Coupal 3 Comments

Less than two weeks ago, radical progressives in the California Legislature launched the most brazen sneak attack on California’s iconic Proposition 13 in its 45-year history. Assemblyman Christopher Ward, backed by the new Speaker of the Assembly, Robert Rivas, introduced Assembly Constitutional Amendment 13 (ACA 13). It would amend the constitution to make it easier to raise taxes, by making it harder to pass citizens’ initiatives that seek to enforce Proposition 13’s two-thirds vote requirement for local special tax increases.

The specific target of ACA 13 is a citizens’ initiative backed both by taxpayer organizations and the business community. The Taxpayer Protection and Government Accountability Act (TPA) has already qualified for the November 2024 ballot, and polling shows it to be popular with voters. The TPA closes several loopholes created by the courts that have allowed special interests to work with local governments to raise taxes with a simple majority vote instead of the two-thirds vote required by Proposition 13.

For example, the California Supreme Court’s infamous Upland decision in 2017 turned 40 years of Prop. 13 jurisprudence on its head by suggesting that a citizens’ initiative could raise taxes without a two-thirds vote. The TPA ends that game.

The TPA would also provide unprecedented transparency when tax-hike measures are on the ballot, allowing voters to know what these propositions will cost them. In other words, TPA is a threat to the status quo by effectively restoring taxpayer rights.

This column has repeatedly exposed the legislature’s hostility to the tools of direct democracy. Weakening the recall power, increasing the cost to initiate a statute, changing the meaning of a referendum vote so that a “no” vote means “yes,” are all proposals to deprive citizens of political power. But these direct democracy powers remain popular with the voting public – for good reason.

Since 1911, Californians have possessed powerful tools to control indolent or corrupt politicians. The rights of direct democracy – initiative, referendum, and recall – are enshrined in the California Constitution for reasons that are just as compelling in 2023 as they were more than a century ago.

There are two ways to amend the constitution in California. The legislature can put a proposed amendment on the ballot, or citizens can collect signatures for an initiative constitutional amendment. Either way, once on the ballot, constitutional amendments pass with a simple majority vote, and always have in California, since 1849.

But ACA 13 would change that. Legislative constitutional amendments would still pass with a simple majority, but a citizens’ initiative constitutional amendment that requires a two-thirds vote for tax increases, such as Proposition 13 in 1978, would require a two-thirds vote to pass. Even Prop. 13 itself narrowly missed that threshold.

As noted above, the real target of ACA 13 is the Taxpayer Protection and Government Accountability Act. If approved by voters in November 2024, TPA will restore the original intent of several voter-approved taxpayer protection initiatives including Prop. 13, Prop. 218, and Prop. 26, all of which have been weakened by a tax-hungry legislature and a hostile judiciary.

Because the TPA initiative restores the two-thirds vote protection of Proposition 13, under ACA 13, it would have to be approved by a two-thirds vote of the statewide electorate. That is obviously more difficult to achieve and may leave taxpayers stuck paying the price for courts eroding Proposition 13.

Notably, California’s current Constitution (the California Constitution of 1879), as ratified by the voters on May 7, 1879, by a simple majority vote, contained at least two provisions requiring two-thirds voter approval including the requirement that local bonds be approved by “the assent of two thirds of the qualified electors.”

In fact, if the proposed ACA 13 standard were applied when the current California Constitution of 1879 was put before the voters, California would not have a constitution at all!  So, it is perfectly consistent with California’s constitution and history to have new constitutional amendments pass with a simple majority, even if those amendments require a super-majority vote to raise taxes.

Click here to read the full article in the OC Register

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Assembly Constitutional Amendment 13 is an Attack on Uou, the California Taxpayer

August 22, 2023 By Editorial Board Leave a Comment

Ever since California’s first state constitution in 1849, constitutional amendments have required a majority vote of the electorate.

“If the people shall approve or ratify such amendment or amendments by a majority of the electors qualified to vote for members of the legislature, voting thereon, such amendment or amendments shall become part of the Constitution,” the handwritten document states.

That provision applied to all proposed constitutional amendments. At no time in the state’s history have constitutional amendments had different thresholds for voter approval based on their content.

But the new speaker of the California Assembly, Robert Rivas, has decided this is a problem. He has proposed changing the constitution to impose a higher vote threshold for certain types of amendments proposed by citizen initiatives.

Along with Assemblymember Chris Ward, D-San Diego, Rivas has co-authored Assembly Constitutional Amendment 13, which would make it more difficult to pass constitutional amendments that make it more difficult to raise taxes.

For example, if an initiative constitutional amendment would require that tax increases must be approved by two-thirds of voters, the proposed amendment itself would require a two-thirds vote.

It doesn’t work the other way, though. If a citizen initiative would drop the requirement to pass a tax increase from two-thirds to 55%, for example, it wouldn’t need 55% approval. It would pass with 50%-plus-one-vote, like all other constitutional amendments.

This is nothing more than an effort to prevent citizens from using the initiative process to limit tax increases. Under this proposed amendment, even Proposition 13 would not have passed. California’s iconic taxpayer protection act was approved by 64.79% of voters in 1978. Under ACA 13, it would have needed 66.67%, because it contained a provision that required a two-thirds vote of the electorate to pass local tax increases.

California court rulings have chipped away at Proposition 13’s taxpayer protections. In 1982, the state Supreme Court ruled in City and County of San Francisco v. Farrell that local taxes for general purposes, as opposed to “special” taxes for a dedicated purpose, could pass with a simple majority instead of a two-thirds vote.

In 2017, the state Supreme Court’s opinion in California Cannabis Coalition vs. City of Upland suggested that even “special” taxes might not need a two-thirds vote if they were proposed by a citizens’ initiative, instead of by a city council or other governing body. Cities immediately tested the limits of the court’s language and found appellate courts more than willing to allow tax increases proposed by initiative to pass with a simple majority.

A new initiative that has qualified for the November 2024 ballot contains language that overrides appellate court decisions based on the Upland ruling and restores the two-thirds vote requirement for special taxes regardless of how they are proposed.

ACA 13 appears to be an attempted kill shot aimed at that initiative, which proponents, who include the California Business Roundtable and the Howard Jarvis Taxpayers Association, have titled “The Taxpayer Protection and Government Accountability Act.”

Click here to read the full article in the OC Register

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Jon Coupal: Call your California Assembly Representative, Demand They Reject ACA 1

August 20, 2023 By Jon Coupal Leave a Comment

Prior to the successful passage of Proposition 13 in 1978, Howard Jarvis tried several times to bring property tax relief to beleaguered California homeowners. While coming close, it wasn’t until 1978 when voters overwhelmingly passed Proposition 13 over the opposition of virtually every political institution and newspaper in California.

As they say, timing is everything. What changed the political dynamic so abruptly in 1978 was the fact that thousands of California homeowners were being taxed out of their homes. That also explains why, to this day, Proposition 13 retains its popularity even as the state has become more “progressive.”

Last week there were two competing press events over Assembly Constitutional Amendment 1 (ACA 1), a proposal that would erase part of Proposition 13. As the head of the Howard Jarvis Taxpayers Association, I was joined at a news conference on the Capitol’s west steps on Wednesday by several legislators who have unequivocally expressed their continued support for Proposition 13 and opposition to ACA 1. Also present were several representatives of other taxpayer groups as well as business organizations suffering under California’s excessive tax burdens.

ACA 1 is a direct attack on Proposition 13 because it would cut the vote threshold needed to pass local special taxes, dropping it from the current two-thirds vote required by Proposition 13 to only 55%. That change would make it easier for local governments to raise taxes.

Since Proposition 13 was enacted in 1978, voters have continued to support the important two-thirds vote protection. That support was reaffirmed with the passage of pro-taxpayer initiatives in 1986, 1996 and 2010.

Many people may not know that the two-thirds vote requirement did not originate in 1978. It has been in the California Constitution since 1879! For more than a century, local property owners have been protected against excessive bond debt by the requirement that local bonds – repaid only by property owners – need a two-thirds vote of the local electorate.

ACA 1 repeals the two-thirds vote protection for tax increases to support “infrastructure,” a term so expansive that local governments would be able to raise taxes for almost any purpose with a vote of just 55% of the electorate. This is a hatchet that chops away at the taxpayer protections in Proposition 13.

ACA 1 proponents are aware of Prop. 13’s enduring popularity, so not once in their over one-hour press event did they mention Proposition 13 by name. Instead, they talked about “protecting democracy,” “local control,” and taking on “right-wing interests.” (Are Californians “right wing” for wanting to keep their home instead of being taxed out of it?) Nor did the supporters of ACA 1 provide any specific example of exactly what lowering the two-thirds vote would purchase, other than to claim that it was essential to address California’s dual crises of housing and homelessness.

Opponents of ACA 1 have noted that making it easier to raise taxes makes no sense in one of the highest taxed states in America. No other state comes close to California’s 13.3% top marginal income tax rate, and we also have the highest state sales tax in America as well as the highest gas tax, not to mention gas prices. And even with Prop. 13, we rank 14th out of 50 states in per capita property tax collections. Californians pay enough.

This is a critical time. As of this writing, ACA 1 has cleared one legislative committee and may be heard by the full Assembly as early as this week. However, its main proponent, Assemblymember Cecilia Aguiar-Curry, admitted at her press conference that she didn’t quite have the votes yet. For that reason, the time is now for all defenders of Proposition 13 and advocates for limited taxation to contact their Assembly representatives and let them know that a vote for ACA 1 is a vote against Proposition 13.

Click here to read the full article in the OC Register

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The Supreme Court’s Warning About Prop. 13

June 1, 2023 By Shayak Sarkarand Josh Rosenthal 14 Comments

A decision in a Minnesota case revives questions about injustice and California’s tax revolt law.

Late last week, the Supreme Court unanimously ruled that a decades-old Minnesota property tax law was unlawful when it allowed the government to seize wealth from an elderly Black homeowner. The decision in Tyler vs. Hennepin County serves as a warning about legal defects in other property tax laws that unfairly harm communities of color, including California’s own Proposition 13.

The Minnesota case began when Geraldine Tyler failed to pay the taxes on her longtime Minneapolis home. Over several years, the tax debt accumulated to $2,300, exploding to $15,000 when penalties and fines were added. The county seized her condominium and sold it, keeping the entire proceeds — $40,000 — not just the $15,000 she owed.

The Supreme Court proclaimed that this money grab was unjust and unconstitutional under the 5th Amendment’s takings clause. It rejected Hennepin County’s legal reliance on the 13th century Statute of Gloucester, a law that Justice Neil M. Gorsuch characterized during oral arguments as being “about lands owned by the feudal lord and what happens when a vassal fails to provide enough wheat to his lord.”

The court’s determination that what happened to Tyler didn’t meet constitutional standards echoes and revives a concern raised in the 1990s about Proposition 13.

California’s tax-assessment limits demand radically different property taxes from owners of similar properties, based only on their time of purchase. Thirty years ago, Stephanie Nordlinger balked at paying nearly five times in property taxes for her Los Angeles home as longer-settled neighbors. An unmoved Supreme Court majority held that the differential treatment had a rational basis, but Justice John Paul Stevens disagreed.

In his dissent, Stevens concluded that Proposition 13 created “a privilege of a medieval character: Two families with equal needs and equal resources are treated differently solely because of their different heritage.”

The Supreme Court’s blessing in Nordlinger vs. Hahn upheld Proposition 13’s legality and established its feudal — and unfair — nature.

Proposition 13 raises race discrimination concerns. Assessment caps benefit long-standing homeowners — who are often white — at the expense of their more diverse neighbors who arrive later. The effects of such property taxes on homeownership’s demography suggest violations of the 1968 federal Fair Housing Act. Recent estimates show that Proposition 13 gives the average homeowner in a white neighborhood of Oakland, for example, a tax break of nearly $10,000 each year — more than triple the break provided to average homeowners in Latino neighborhoods, and about double those in Black and Asian neighborhoods in Oakland.

Ironically, people just like Tyler were the original faces of the battle to enact Proposition 13 in California and similar measures around the country. Activists in the 1970s and 1980s invoked stories of elderly widows losing their homes to convince voters that property taxes should be based on a home’s purchase price and allowed to rise just 2% a year from there, regardless of market value.

But such assessment limits have not lived up to their promise to protect homeowners. Michigan also limits the amount that an owner’s assessment can rise. Yet as real estate values declined in Detroit, those limits did not ensure that assessments fell to match, leaving low-income Black homeowners with inflated, unaffordable taxes. Like Tyler in Minnesota, many residents were forced out of their homes through tax foreclosures.

In California, Proposition 13’s overbroad system protects the propertied at a high cost to more diverse, first-time buyers. People may stay put to hold on to a tax advantage, limiting inventory and driving up home costs. Parents can also pass low tax assessments on to their children, exacerbating the problem.

The California Housing Finance Agency notes that “for the entire 2010s, California’s Black homeownership rate has been lower than it was in the 1960s, when it was completely legal to discriminate against Black homebuyers.”

While Proposition 13’s precise inequitable effects are complicated, more inclusive and less legally tenuous alternatives exist.

There are other tax reforms that could protect low-income and elderly homeowners without hamstringing cities’ tax bases and enriching wealthy owners.

Philadelphia allows low-income senior citizens to freeze their property taxes, and low-income families to spread rapid assessment increases over several years. In Massachusetts and some Connecticut towns, low-income homeowners can defer part of their property tax bill, which is paid off upon the home’s sale. California has its own property tax postponement program, which it should expand, instead of relying on Proposition 13.

The Supreme Court’s rejection of Minnesota’s greediness reminds us that the courts are watching as states tighten the vise of property tax systems on the poor and racially diverse. To be sure, Proposition 13 does not result in unconstitutional “takings.” But the concerns that motivated the court in Tyler vs. Hennepin County also apply here. And given the court’s willingness to reverse long-held constitutional precedent, perhaps the Nordlinger decision itself will be due for reconsideration.

Click here to read the full article in the LA Times

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Ignore the Naysayers, Proposition 13 is Still Working After All These Years

February 6, 2023 By Jon Coupal 5 Comments

In most of America, one of the worst impacts of high inflation is a sharp rise in property taxes. But that’s not the case in California.

True, housing prices are some of the highest in the nation, due mostly to government policies restricting supply. But existing homeowners are protected by Proposition 13’s cap on annual increases in assessed value of 2%. According to the California Taxpayers Association, Californians would have seen their property taxes increase more than 7 percent this year without Prop. 13.

It is understandable why the political left – which wants all your money – has it in for Proposition 13, but we were surprised when the normally credible Tax Foundation, based in Washington, D.C., fell for some of the same falsehoods advanced by the “tax-and-spend” crowd. The Foundation is advising other states not to adopt Prop. 13-style reforms. We disagree and believe all states currently struggling with out-of-control property taxes should take a good, long look at California’s system based on acquisition value. It is vastly superior to one based on market value.

While the Tax Foundation admits that “Proposition 13 and other property tax assessment limits have done their job, keeping incumbent property owners’ taxes in check,” they assert that those systems result in “hidden costs.”

One clearly false claim is that assessment limits “discourage homeowners from renovating or adding onto their homes, for fear of incurring a dramatic tax increase.” In general, remodeling and repairs that are part of normal maintenance or cosmetic are not considered assessable. New additions that increase the square footage of a home or add new improvements that didn’t exist before are assessable—but that’s true everywhere. The difference is that in California, the reassessment is limited to the value added by the addition, with the rest of the assessment unchanged. So what you would pay under Prop. 13 is still less than what you would have paid in a market-based property tax system.

Next, the Tax Foundation claims that property tax assessment limits “make it less attractive for growing families to move past their starter homes or for empty nesters to downsize.” This isn’t true in California. Older homeowners (age 55 and up) can move and take their Prop. 13 base-year value with them to a new home. For younger homeowners, moving to a larger and more expensive home means higher property taxes — but again, that’s true everywhere. All homeowners benefit from Proposition 13, which capped the tax rate at 1%. Before Prop. 13, the statewide average tax rate was 2.67%, applied annually to the current market value. That means a young family’s property tax bill would be more than double in the first year of homeownership without Prop. 13.

Next, the Foundation states that assessment limits “interfere with efforts to change a property’s use.” That’s a polite way of saying that the land upon which your home rests is being “underutilized.” Does this mean you should be taxed out of it so it can be sold to someone who can build something deemed a better use, like a sales-tax-revenue-producing used car lot? No thanks.

Another myth is that acquisition value systems gradually “shift costs to newer, younger homeowners — the rising generation that [state] lawmakers want to keep in-state.” But under Prop. 13, all homeowners are taxed according to what they voluntarily pay for their property. The worst thing that could happen to a young family is to be taxed out of a home they just purchased because their tax bill is based on the vagaries of the real estate market. Prop. 13 gives new homeowners the predictability of knowing what their tax bill will be years into the future as well as a reasonable 1% rate cap.

And the real surprise of Proposition 13 is how it helps local government. Because Prop. 13 allows increases in assessed value of 2% per year and requires reassessment of property when it changes hands, it provides a stable, predictable and growing source of tax revenue to local governments. Property tax revenue in the Golden State has grown virtually every year since 1978 in percentages that exceed both inflation and population growth. Moreover, Prop. 13 provides a “shock absorber” effect during recessions when market values fall precipitously but assessed values – in the aggregate – fall slightly or not at all.

Click here to read the full article in the OC Register

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Proposition 13 Is Working as Intended

October 4, 2022 By Jon Coupal 1 Comment

We were a bit taken aback with the recent article in the Register by reporter Teri Sforza rhetorically asking if major businesses in Orange County are paying enough property taxes. Only toward the end of the piece was there an acknowledgement that in 2020, California voters rejected the “split roll” proposal by voting against Proposition 15. That measure would not only have imposed the largest property tax increase in California history, but it was also the most serious threat to Proposition 13 since the taxpayer protection measure’s overwhelming approval by voters in 1978.

The same people who have always wanted to destroy Proposition 13 so they can raise taxes even higher are now claiming that Prop. 13 must go because it has caused “inequities.” Actually, Proposition 13 is working precisely as intended to achieve a sustainable balance between tax stability and revenue growth. That’s why for over 40 years Prop. 13 has enjoyed such consistent popularity that it has earned the moniker, “The Third Rail of California Politics.” Even after the costly and long-running campaign against it, polling reveals that 60% of Californians believe that Prop. 13 is “mostly a good thing.”

More importantly, Proposition 13 is also good tax policy. First, it limits the property tax rate to 1 percent of a property’s value. Second, it limits the annual increase in taxable value to 2 percent annually. Under Prop. 13, even if a property doubles in market value in a single year, its “taxable value,” against which the assessor applies the one percent tax rate, can only be increased two percent per year. Third, Prop. 13 requires reassessment of property when it changes hands. This provides a stable and predictable source of tax revenue to local governments which has grown virtually every year since 1978 in percentages that exceed inflation and population growth.

Detractors frequently attempt to assert that voters were unaware that Prop. 13 would apply to commercial property in the same way it protects residential property. That too is false. During the Prop. 13 campaign in 1978, opponents pressed that argument in their campaign ads and literature, and it was specifically mentioned in the official ballot pamphlet itself. Voters considered the claim and enacted Prop. 13 anyway.

Sforza quotes longtime Prop. 13 critic and split-roll advocate, Lenny Goldberg, who claims that commercial property in Orange County is underassessed. Goldberg knows better as he is fully aware that, under Prop. 13, taxable value depends on the market value at the time of acquisition. (Despite continuing his jihad against Proposition 13, Goldberg now resides out of state, avoiding the high tax burden in California).

Goldberg is particularly disingenuous when he argues that two major companies in Orange County are under-assessed because commercial properties are reassessed only when a single buyer assumes at least 50% ownership or there are physical improvements to the property. “So if three purchasers purchase 100% of a property, no change of ownership occurs.”

The definition of “change of ownership” is not in Proposition 13, but in laws passed by the Legislature. The 50% ownership threshold for reassessment could be remedied with a change to the law without changing one word of Proposition 13. In fact, the Howard Jarvis Taxpayers Association and the business community have repeatedly offered to fix this “change of ownership” definition only to have labor organizations, represented by Goldberg, slam the door. Those legislative proposals have been offered by politicians as diverse as former Assemblyman Tom Ammiano, an ultra -progressive from San Francisco, and Orange County’s own Patricia Bates.

California’s taxes are among the highest in every category except for property taxes, and even then, we are in the upper middle among states on per capita property tax collection. Only one thing keeps us from the misery of being at the top of that list: Proposition 13.

Click here to read the full article in these OC Register

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Proposition 13: Same Song, Different Decade

February 23, 2022 By Jon Coupal 4 Comments

More than 42 years ago, California voters overwhelmingly enacted Proposition 13 in response to out-of-control property taxes.

Even with the passage of time, Prop. 13 remains very popular among citizens of all political stripes.

Nonetheless, many politicians and bureaucrats hate Prop. 13 because it prevents them from taking unlimited cash from the taxpaying public.

Photo courtesy of Wendy McCormac, Flickr

In response to Prop. 13’s passage, these tax-and-spend interests retaliated by trying to create loopholes in Prop. 13 to bypass voter-approved taxpayer protections and provisions enforcing more government accountability. This has necessitated additional taxpayer protection laws to close these loopholes via more recent initiatives such as Proposition 218 (1996), also known as the Right to Vote on Taxes Act, and Proposition 26 (2010) which sought to stop taxes from escaping limitation by calling them “fees.”

In this tug of war between taxpayers and government interests, the latter has been aided by an increasingly progressive California judiciary which, in a number of recent decisions, demonstrates open hostility to taxpayers. As just one example, Prop. 13’s long-standing requirement that a local special tax receive a two-thirds vote of the electorate has been virtually destroyed by the infamous Upland decision which gave tax-and-spend interests a template on how to impose new taxes that, for 40 years, were illegal.

Click here to read the full article at Pasadena Star News

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Defend Proposition 13 And Single-Family Zoned Neighborhoods

January 3, 2022 By Susan Shelley 3 Comments

If you spent your life savings and your life’s earnings to buy a home on a quiet street in a single-family neighborhood in California, you’ve been robbed.

Your camera-enabled doorbell and security system likely failed to record the evidence, because the robbery happened in Sacramento. Worse, it’s not against the law. It is the law.

Single-family zoning has been abolished. The people who profit from that include developers who want to buy the land and put up high-density housing on small parcels, building industry and real estate interests who will see a nice payday from the new construction, and various nonprofit groups run by moist-eyed executives drawing six-figure salaries for “managing” low-income or homeless housing projects.

Against these special interests stand homeowners and local government officials who have battled for years against laws proposed in the state capitol to force cities to accept state-imposed zoning changes.

The special interests won a battle in 2021. The Legislature passed Senate Bills 9 and 10, ending single-family zoning in California, and Gov. Gavin Newsom signed them into law just as soon as he was past the risk of being recalled. The war isn’t over, however, as a bipartisan coalition of local leaders filed an initiative that would prevent those laws from having any effect and would ban any similar state laws in the future.

The local leaders call their initiative “Our Neighborhood Voices,” and the attorney general has given it a circulating title – the title that appears on the official petitions – of “Provides That Local Land-Use and Zoning Laws Override Conflicting State Laws.” It needs nearly 1 million valid signatures of registered voters by mid-April to qualify for the November 2022 ballot. If it passes, cities will once again be empowered to control local zoning and make the decisions about where higher density housing may be built, along with decisions about any requirements for developers to provide off-street parking or traffic mitigation measures.

Does it have a chance?

Some people clearly think so. Another initiative has been introduced that contains a poison pill to kill it.

Initiative 21-0032A1 was filed on November 10 by attorney Stanley R. Apps. The attorney general has given it a circulating title of, “Increases Homeowners’ Property Tax Exemption and Renters’ Tax Credit. Increases Taxes on High-Value Properties. Limits Local Restrictions on Housing Development.”

The Apps initiative is another attack on Proposition 13, cracking the 1% tax rate on property that the 1978 initiative wrote into the state constitution. If this new measure qualifies for the ballot and is approved by voters, properties valued above $4 million would see an increase in their tax rate. This would affect commercial, residential, industrial, mixed-use or vacant land. The measure also changes the law to require cities to approve certain low-income housing projects “ministerially without discretionary review or a hearing.”

The poison pill is in Section 9 of the initiative. It declares that the Our Neighborhood Voices initiative is “deemed to be in conflict with this Act,” and states that if the Apps initiative gets a greater number of votes than the ONV measure, “the provisions of this Act [the Apps measure] shall prevail in their entirety” and “all provisions of the other measure or measures [Our Neighborhood Voices] shall be null and void.”

Now, you may be asking yourself, why would more California voters choose an initiative that both attacks Proposition 13 and cements the abolition of single-family zoning so developers can more easily construct high-density housing in more neighborhoods?

Click here to read the full article at OC Register

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Assembly Bill 133 Can Help Keep Seniors in Their Homes

September 30, 2019 By Jon Coupal and Sharon Quirk-Silva Leave a Comment

Prior to the passage of Proposition 13 in 1978, it was not uncommon for seniors on fixed incomes who had already paid off their mortgages to nonetheless lose their homes because they couldn’t afford to pay their property taxes.

While Proposition 13 continues to protect millions of older Californians by providing reasonable and predictable property tax liability, for low-income seniors it may not be enough.

Voter approved local bonds and parcel taxes that are added to property tax bills above and beyond Proposition 13’s one percent cap have typically added hundreds of dollars a year to individual property tax bills across the state.

One of the state programs meant to help seniors over age 65, the blind, and the disabled stay in their homes is the Property Tax Postponement program or PTP.

The concept behind the Tax Postponement program is simple. A lien is placed against the home of an eligible individual and all property taxes are deferred.

Later, when the homeowner moves, the taxes are paid out of the sale of the home plus simple interest.

The program worked perfectly for 40 years. Beyond paying for itself, 6,000 homeowners from across California benefit from the Property Tax Postponement program.

To read the entire column, please click here.

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Changing Prop. 13 Could Worsen Housing Crisis

February 3, 2019 By Joel Fox 4 Comments

property taxFor four decades, Proposition 13, the property tax reform that passed in 1978, has been blamed for many of the ills that have befallen California.

Working with Howard Jarvis, a Proposition 13 co-author, and later running his taxpayers association, I have followed the multiple attacks on the measure, many silly and outrageous. Now the attacks are amped up along with a supposed, but flawed remedy.

In discussions of where new money would come from to solve the Los Angeles Unified School District labor dispute and teacher’s strike, a ballot measure designated for the 2020 statewide ballot to change to Proposition 13 often is mentioned.

The initiative promises to split the property tax roll between commercial and residential properties.

If approved, the split roll initiative would come with long-term problems and exacerbate issues that were raised during the teachers’ strike that would affect all of California.

Implementing a split roll would mean that commercial property would be taxed at market value. That would bring in more revenue to schools and local governments. But supporters of the split roll stop the discussion at that point, and fail to discuss the far-reaching consequences of undoing Proposition 13.

High housing costs were a constant refrain during the teachers strike. The lack of housing makes it more difficult for teachers to live near where they work, a curse for many middle class Californians.

Imagine what would happen if split roll were a reality. What do you think would happen when local governments would choose between green-lighting a commercial venture that would bring in gobs of new revenue for government as opposed to approving a housing project?

Just as taxpayers make adjustments to reduce their taxes, government officials embrace projects that will increase revenue. There are many examples of such behavior on both sides of the tax equation such as the infamous window tax of the 18th and 19th centuries in Europe.

In response, homeowners boarded up windows to avoid the tax. Tax collectors have similar reactions in the opposite direction. They will certainly okay revenue-producing developments ahead of housing projects.

Apparently there was no concession by the teachers’ union in the strike settlement to control pensions and health costs, two items that are driving the district toward insolvency, according to the Los Angeles County Board of Education and Los Angeles Unified School District Superintendent Austin Beutner.

Pension and heath costs are a big problem for local and state governments, just as they are for schools. The alternative is to turn to taxpayers to fund these generous benefits while taxpayers themselves struggle with their own retirement and health care situations.

But there is an element to the troubled pension situation that could be further damaged by a split roll. Many pensions rely on commercial properties to increase portfolios. With raised property taxes, commercial properties will be devalued and another debilitating weight would be added to government pensions holding business properties.

Under Proposition 13, property tax revenues have increased well beyond inflation and population growth. The property tax under Proposition 13 is the steadiest tax in the state because during economic downturns only recently purchased property is re-evaluated downward.

Under Proposition 13, most property taxpayers continue to pay the expected taxes due while both sales and income taxes reduce sharply in a recession.

If all commercial property tax rates are pegged at market value, and a recession hits, commercial property would be reassessed downward and local and school budgets will take a huge hit.

In addition to these problems, business owners forced to pay higher property taxes would pass those costs onto consumers, and that would diminish the state’s economy.

For residential property taxpayers there is another thing to keep an eye on. Is the move toward a split roll the first step to taking away Proposition 13 protections from homeowners?

At a recent speech to the Palos Verdes Chamber of Commerce, noted Los Angeles area economist Christopher Thornberg raised the issue saying he would flip the split roll, keeping Proposition 13 on commercial property and getting rid of it on residential property to help local governments fund services related to homes.

You can bet the idea of eliminating all of Proposition 13 is on the mind of those advocating more and more government spending and the split roll ballot fight will be the first test.

This article was originally published by Fox and Hounds Daily

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