Property Taxes

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

Filed Under: Uncategorized Tagged With: Prop 13, Property Taxes, Supreme Court

There is no loophole in Proposition 13

April 30, 2018 By Jon Coupal and Patricia Bates 2 Comments

For decades, California progressives have complained about a “loophole” in Proposition 13 that unfairly benefits the owners of commercial real estate to the detriment of homeowners. This characterization has been widely accepted by the mainstream media with little critical analysis.

There is no loophole in Prop. 13.

There is, however, an ambiguity in the statute implementing the measure that relates to the “change of ownership” rules. That ambiguity can be easily addressed by a statutory amendment without doing violence to Prop. 13. Both the business community and the state’s preeminent taxpayer organization, Howard Jarvis Taxpayers Association, agree that this change is necessary.

Senate Bill 1237, by state Sen. Patricia Bates, would address this technical tax issue involving fictitious entities such as limited liability corporations and complex partnerships in a way that is wholly consistent with Prop. 13.

Specifically, under Prop. 13, when you sell your home, it is reassessed to the full market value for the new purchaser. Of course, the new buyer still enjoys the 1 percent rate cap and the certainty that the taxable value of the property will not increase more than 2 percent per year. But for properties that have been under the same ownership for decades, the “taxable” value of the property can be just a fraction of the market value. That is why Howard Jarvis and Paul Gann provided in Prop. 13 that upon change of ownership, property would, at least initially, be taxed at market value. After purchase, it receives the same 2 percent limitation on annual increases in taxable value as all other properties.

But some clever tax attorneys have advised clients that they can avoid Prop. 13’s intent to treat commercial transactions the same as homeowners by creating fictitious entities that themselves are transferred in an inappropriate attempt to avoid reassessment. This violates the spirit of Prop. 13 and actually gives the enemies of Prop. 13 a justification for arguing that all of Prop. 13’s protections should be stripped away for commercial property. It also explains why public employee unions continue to oppose bills such as SB1237, because it would deprive them of their best argument in the ongoing fight to remove Prop. 13’s protections for commercial property. Indeed, the enemies of Prop. 13 are already working to qualify this very initiative for the 2020 statewide ballot. …

To read the entire column, please click here.

Filed Under: Top Stories Tagged With: HJTA, Jon Coupal, Prop 13, Property Taxes

Realtors’ ballot initiative could limit property taxes

December 3, 2017 By Steven Greenhut Leave a Comment

SACRAMENTO – Property-tax-limiting Proposition 13 has long been viewed as the “third rail” of California politics given its continued popularity among the home-owning electorate. Public-sector unions occasionally talk about sponsoring an initiative to eliminate its tax limits for commercial properties, but the latest Prop. 13-related proposal would actually expand its scope.

The influential California Association of Realtors is launching a signature drive for a November 2018 ballot measure that would greatly expand the ability of Californians who are at least 55 years old and disabled people to maintain their low-tax assessments even if they move to other counties or purchase more expensive new homes.

Prop. 13 requires counties to tax properties at 1 percent of their value (plus bonds and other special assessments), which is established at the time of sale. The owners maintain that assessment even if values increase, as they typically do in California. The proposition limits tax hikes to no more than 2 percent a year. Prop. 13 passed overwhelmingly because many people – especially seniors – were being taxed out of their homes as assessments soared during a real-estate boom.

Under current rules, people 55 and older may keep their low assessments if they move within the same county or within one of 11 counties that accept these transfers. They may do so only once in a lifetime. It enables retired people, for instance, to downsize from a big family house to a condominium without paying a stiff tax penalty.

For example, if one purchased a home in 2008 for $350,000 and that home is now worth $750,000, they may continue paying taxes at the lower assessed value even after they sell the home and purchase a smaller one. The valuation goes with them. But the newly purchased property must have a market value the same or lower than the house that has been sold.

The Realtors’ proposal would, for seniors and the disabled, tie the assessed value of any newly purchased home to the assessed value of the old home. They would be free to take that assessment with them to any of the state’s 58 counties. They could carry it with them as many times as they choose. The reduced assessments would apply even for people who purchase home with market values above the ones that they sold.

As the nonpartisan Legislative Analyst’s Office explains, if the new and prior homes have the same market values (based on sales and purchase prices), the new tax valuation would be the same as the old one. A fairly complex formula would determine the tax rate for purchases that were either higher or lower than the sales price of the prior home.

The initiative addresses a problem faced by many empty-nesters. They are living in large homes where they raised their families and would like to downsize – but to do so would mean a huge tax hit given that their new tax rate would be tied to the purchase price of the new property. In the preponderance of situations, the new purchase price for even a smaller house would be far higher than the price that the seniors paid for the homes where they currently live.

The Orange County Register reports that, if passed, the initiative could spur an additional 40,000 home sales a year. Supporters say that could ease up tight housing markets, but foes argue that the Realtors have an interest in spurring more home sales. County governments – backed by LAO projections – say that it eventually will cost them as much as much as $1 billion a year.

“By further reducing the increase in property taxes that typically accompanies home purchases by older homeowners, the measure would reduce property tax revenues for local governments,” according to that LAO analysis. “Additional property taxes created by an increase in home sales would partially offset those losses, but on net property taxes would decrease.”

The Howard Jarvis Taxpayers Association, which defends the legacy of Prop. 13, disputes the idea of large tax losses, given that younger couples would move in to the homes that older people sell, and they would pay property taxes based on the new market value. In other words, an older couple will sell a house and keep their lower tax rate.

“We believe upward portability makes a lot of sense especially as property values across California continue to rebound,” said HJTA president Jon Coupal in a statement. The statement says he believes the measure would “help California alleviate its current housing crisis by removing a financial barrier that keeps many older homeowners from selling their homes, and many millennials from entering the housing market.”

The Realtors’ association had submitted three different potential measures, including one that would expand portability for people of all ages. But the final measure applies only to seniors and disabled persons. As the saying goes, the best defense is a good offense. Supporters of Prop. 13 have learned that the best way to protect it might be by trying to expand it.

Steven Greenhut is Western region director for the R Street Institute. Write to him at sgreenhut@rstreet.org.

This article was originally published by CalWatchdog.com

Filed Under: Top Stories Tagged With: California Association of Realtors, Property Taxes, Steven Greenhut

Dems want to raise property taxes to fund government pensions

October 15, 2017 By Joel Fox 19 Comments

I guess I should use the old vaudeville line: Stop me if you’ve heard this one: the push to increase commercial property taxes is about government pension costs. Returning to this subject at this time (I wrote on the same subject for the Sacramento Bee last April) is prompted by the coming together of a couple of recent events.

There was the League of Women Voters and other groups hosting a meeting in Los Angeles this past weekend to “educate” people and advocate for a split roll property tax seeking to raise billions of tax dollars on the back of businesses. Also last week, Stanford University’s Institute for Policy Research issued a report by professor and former Democratic legislator Joe Nation describing the pension burden that is beginning to strangle state and local governments in California.

The services that are affected by both the split roll rally and the Stanford report are quite similar.

Supporters of the split roll say that raising taxes on commercial property will provide $9 billion a year needed for schools and services provided by local governments. Meanwhile, Joe Nation’s report says that because of pension contributions by employers (i.e. governments) increasing an average of 400% over the past 15 years, educational services, recreation, community services and others are squeezed for lack of money.

Many “core mission services,” as defined by the Stanford report, will be starved of money because of pension demands. The split roll advocates talk about the need for more money for local services. What they don’t tell you is that money for those services is being diverted to cover the pension requirements of state and local governments because these governments made generous promises to workers and accepted revenue projections to cover those promises that did not play out.

Instead of admitting that more money is needed to cover pension costs, split roll advocates create a false argument about business dodging its fair share of property taxes. They claim homeowners now pay a much larger share of the property tax burden than they did prior to Proposition 13. A Legislative Analyst’s Office report undercuts that false claim.

The report states in part, “Homeowners pay a slightly larger share of property taxes today than they did when Proposition 13 passed. Proposition 13 does not appear to have caused this increase. … In part, this may be due to faster growth in the number of residential properties than the number of commercial and industrial properties.”

The so-called grassroots activity seeking support for a split roll is backed by powerful public employee unions who support more revenues to cover the pension costs. Yet, you won’t hear anything from the split roll advocates about the pensions strangling local budgets or pushing some cities toward bankruptcies.

Meanwhile, the Stanford study makes it clear with numerous examples that pensions are absorbing greater and greater portions of local government budgets. The Stanford study states clearly there is “agreement on one fact: public pension costs are making it harder to provide services that have traditionally been considered part of government’s core mission.”

This piece was originally published by Fox and Hounds Daily

Filed Under: Top Stories Tagged With: Joel Fox, Pension Reform, pensions, Prop 13, Property Taxes, Public pensions, Spilt roll, taxes

Californians Approve $5 Billion per Year in New Taxes

December 8, 2016 By Ed Ring 3 Comments

For the last few years, using data provided by the watchdog organization CalTax, we have summarized the results of local bond and tax proposals appearing on the California ballot. Nearly all of them are approved by voters, and this past November was no exception.

With only a couple of measures still too close to call, as can be seen, 94 percent of the 193 proposed local bonds passed, and 71 percent of the proposed local taxes passed. Two years ago, 81 percent of the local bond proposals passed, and 68 percent of the local tax proposals passed. No encouraging trend there.

Outcome of Local Bond and Tax Proposals – November 2016

A simple extrapolation will provide the following estimate: Californians just increased their local tax burden by roughly $4 billion, in the form of $1.9 billion more in annual interest payments on new bond debt, and $2.1 billion more in annual interest on new local taxes. But that’s not even half the story.

California’s voters also supported state ballot initiatives to issue new bond debt and impose new taxes. Prop. 51 was approved, authorizing the issuance of $9 billion in new bonds for school construction. Prop. 55 extended until 2030 the “temporary” tax increase on personal incomes over $250,000 per year, and Prop. 56 increased the cigarette tax by $2 per pack. The cost to taxpayers to service the annual payments on $9 billion in new bond debt? Another $585 million per year. Even leaving “rich people” and smokers out of the equation, California voters saddled themselves with nearly $5 billion in new annual taxes.

But as they say on the late-night infomercials, there’s more, much more, because California’s state legislators don’t have to ask us anymore if they want to raise taxes. November 2016 will be remembered as the election when a precarious 1/3 minority held by GOP lawmakers was broken. California’s democratic lawmakers, nearly all of them controlled by public sector unions, now hold a two-thirds majority in both the state Assembly and the state Senate. This means they can raise taxes without asking for consent from the voters. If necessary, they can even override a gubernatorial veto.

And they will. Here’s why:

There are three unsustainable policies that are considered sacrosanct by California’s state lawmakers and the government unions who benefit from them. (1) They are proud to have California serve as a magnet for undocumented immigrants and welfare recipients. (2) They are determined to continue to overcompensate state and local government workers, especially with pensions that pay several times what private workers can expect from Social Security. (3) They have adopted an uncritical and extreme approach to resolving environmental challenges that has created artificial scarcity of land, energy and water, an asset bubble, and a neglected infrastructure that lacks the resiliency to withstand large scale natural disasters or civil emergencies.

All three of these policies are extremely expensive. “Urban geographer” Joel Kotkin, writing in the Orange County Register shortly after the Nov. 8 election, had this to say about these financially unsustainable policies:

“This social structure can only work as long as stock and asset prices continue to stay high, allowing the ultra-rich to remain beneficent. Once the inevitable corrections take place, the whole game will be exposed for what it is: a gigantic, phony system that benefits primarily the ruling oligarchs, along with their union and green allies. Only when this becomes clear to the voters, particularly the emerging Latino electorate, can things change. Only a dose of realism can restore competition, both between the parties and within them.”

Despite the increase in consumer confidence since the surprising victory of Donald Trump in the U.S. presidential election, the stock and asset bubble that has been engineered through thirty years of expanding credit and lowering rates of interest is going to pop. The following graphic, using data from Bloomberg, explains just how differently our economy is structured today compared to 1980 when this credit expansion began.

As can be easily seen from their price/earnings ratios today, publicly traded stocks are grossly overvalued. Equally obvious is that interest rates have fallen as low as they can go. For more discussion on how this is going to affect the economy, refer to recent California Policy Center studies “How a Major Market Correction Will Affect Pension Systems, and How to Cope,” and “The Coming Public Pension Apocalypse, and What to Do About It.” Despite healthy new national optimism since Nov. 8th, the economic fundamentals have not changed.

California’s democratic supermajority legislators, and the government unions who control them, are going to have a lot of explaining to do when the bubble bursts. For decades they have successfully fed their unsustainable world view to the media and academia and the entertainment industry. For over a generation they have brainwashed California’s K-12 and college students into militantly endorsing their unsustainable world view. This year they conned California’s taxpayers into approving another $5 billion in new annual taxes. But the entire edifice exists on borrowed time.

Ed Ring is the vice president of research policy at the California Policy Center.

Filed Under: Top Stories Tagged With: California Policy Center, Ed Ring, Joel Kotkin, Property Taxes, Proposition 51, Proposition 55, taxes

How To Ensure You’re Not Over-Charged on Property Taxes

October 11, 2016 By Jon Coupal 4 Comments

As any reader of this column knows, voters will be confronted come election day with billions and billions of new tax hikes and bond measures (which, of course, result in their own tax hikes). But let’s not forget that there is another reason for taxpayer to experience a heightened sense of anxiety over the next few weeks.

For many the real scare this time of year is not the monsters at our doors on Halloween but the property tax bill in the mail box. But, while the “tax and spend” lobby increases its influence in Sacramento, homeowners have still been able to count on Proposition 13 for some degree of protection. Because Proposition 13 limits increases in a property’s assessed value to two percent annually, most property owners have a good idea what their tax bill will be even before opening the envelope. But homeowners still need to examine carefully their property tax bill because mistakes can happen.

Taxpayers should understand the various charges and make certain that they are not being assessed for more than they are legally obligated to pay. The best way to check a tax bill is to have your previous year’s bill handy for reference.

Checking the bill is especially important for those who bought their homes a few years ago at the height of the market. If your home value is actually lower than the assessed value shown on the tax bill, you should consider applying for a reduction in taxes. (Sometimes called a “Prop. 8 reduction”).

For most California counties, the property tax bill will show three categories of charges. They are the General Tax Levy, Voted Indebtedness and Direct Assessments.

General Tax Levy

The General Tax Levy is what most people think of when talking about property taxes. It is based on the assessed value of land, improvements and fixtures. This charge usually makes up the largest part of the tax bill and it is the amount that is limited by Proposition 13.

Proposition 13 passed overwhelmingly by voters in 1978 and it established a statewide uniform tax rate of one percent of assessed value at the time of purchase and limited annual increases in assessed value to no more than two percent. From a practical standpoint, this means that once the base year value of your property is established the General Tax Levy cannot be increased more than two percent each year. This allows all property owners to predict their property tax bills into the future and budget accordingly.

The best way to check to make sure that your current General Levy of Assessment is correct is to compare it with the previous year’s bill. The increase should be no more than two percent unless there have been improvements to the property like adding a room to a house or if you previously received a Prop. 8 “reduction in value.” This bears repeating: Because the real estate market in many parts of California is recovering many homeowners who previously received a temporary reduction in “taxable value” from their assessment may now see an increase in their tax bill more than two percent from last year. But in no case will the taxable value be more than the initial Prop. 13 base year plus two percent annually from the date of purchase. Although that may seem unfair, keep in mind that while the reduction was only temporary, the savings you received when your property was worth less are permanent.

If in doubt about the current value of your property, check sales of comparable homes in your neighborhood. If homes like yours are selling for less than the valuation on your latest bill contact your county assessor and ask that the value and resulting tax be adjusted to reflect true current value.

Voted Indebtedness

Voted Indebtedness charges reflect the repayment cost of bonds approved by the voters. Local general obligation bonds for libraries, parks, police and fire facilities and other capital improvements are repaid exclusively by property owners. Because a minority of the population is required to pay the entire amount, the California Constitution of 1879 established the two-thirds vote for approval of these bonds. This assures a strong community consensus before obligating property owners to repay debt for 20 or 30 years.

Until the year 2000 local school bonds also required a two-thirds vote but the passage of Proposition 39 lowered the vote to 55 percent. (Of course this did very little to improve schools as was promised). Because the 55 percent requirement guarantees that most school bonds will pass regardless of merit many homeowners are seeing a significant increase in the Voted Indebtedness column on their tax bills.

In some counties, parcel taxes may appear under this second category of property exactions even though parcel taxes are rarely used to repay debt. Parcel taxes are taxes on property ownership but are not imposed as a percentage of taxable value. Although there is no upper limit to amount of parcel taxes you have to pay (HJTA is working to change that) the good news is that under Proposition 13 they still require a two-thirds vote.

Direct Assessments

The third type of levy one finds on the typical property tax bill is for direct assessments for services related to property such as street lighting, regional sanitation, flood control, etc. Because of Proposition 218 — the Right to Vote on Taxes Act placed on the ballot by the Howard Jarvis Taxpayers Association in 1996 — property owners must be given a meaningful say in approving new assessments. Before an assessment can be imposed or increased property owners must be informed in writing and be given the opportunity to cast a protest vote on the new assessment or assessment increase.

For more information regarding your property tax bill go to HJTA.org and click on Frequently Asked Questions then scroll down to “About Property Tax Assessments”. If you have a question about your property tax bill you can contact your county assessor, county tax collector or, in many instances, the phone number of the levying agency for each levy that is reflected on your bill. It’s your money and you have a right to be certain that your bill is correct.

Jon Coupal is president of the Howard Jarvis Taxpayers Association — California’s largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights.

Originally published by HJTA.org

Filed Under: Top Stories Tagged With: General Tax Levy, Howard Jarvis Taxpayers Association, Jon Coupal, Prop 13, Prop. 8, Property Taxes

Prop. 13 Report from Legislative Analyst Elicits Mixed Reactions

October 4, 2016 By Jon Coupal 1 Comment

Two weeks ago, the California Legislative Analyst released a report entitled “Common Claims About Proposition 13.” On balance, the report was a (mostly) objective view about California’s landmark property tax reduction measure.

As the title of the report implies, there are many claims about Prop. 13, what it does and what it doesn’t do. In fact, we at Howard Jarvis Taxpayers Association have collected a lengthy list of “myths” about Prop. 13 that are deeply ensconced in urban legend. For example, the monolithic education bureaucracy repeatedly claims that Prop. 13 starved public education in California. But the fact is that we now spend 30 percent more on a per student, inflation adjusted basis than we did just prior to Prop. 13’s passage – a time in which there is broad consensus that education in California was the best in the nation. Whatever it is that caused the decline in the quality of public education, it certainly hasn’t been the lack of revenue.

The release of the LAO report instigated a great deal of reaction, ranging from cheers to jeers depending on one’s pre-conceived opinions about Prop. 13. Every interest group, it seems, has cherry picked the report to confirm what they already believe. But objectively, for Prop. 13 defenders, we see much in the report that supports what we’ve been saying for decades.

Abraham Lincoln is quoted as saying, “We can complain because rose bushes have thorns, or rejoice because thorn bushes have roses.” Here are the “roses” we see in the report:

First, the report says that residential and commercial properties turn over at about the same rate, and that Prop. 13 is not the cause of this. It also says that residential property tax growth is only slightly more than that from business properties, but this is due to greater residential development. This runs directly counter to those who desire to strip Prop. 13 protections from business properties.

Second, the report states that small businesses pay less in property tax because of Proposition 13, and that Prop. 13 does not serve as a disincentive to create small businesses. This busts another bubble floated by Prop. 13’s detractors.

Third, and most importantly for the Jarvis faithful comprised of senior homeowners, the report shows that assessed valuation limits provide greater security to retirees.

About the only item in the report that Prop. 13 haters can point to is the LAO’s conclusion that wealthy Californians, who own higher value properties, have benefited more than those with modest homes. But to this we respond with a resounding “Duh.” Obviously, given that Prop. 13’s rate limits and limits on increases in taxable value apply equally to all property, those with more expensive properties will benefit more. Prop. 13’s protections were never designed to be means tested. It provides the same rules to every property owner in California, from the owners of modest bungalows to mansions and from small mom and pop businesses to corporations. It doesn’t pick winners and losers. Only winners.

As California’s leading defender of Proposition 13, we have only a few of quibbles with the LAO report. Here, we will discuss only one. Specifically, the report makes much of the fact that local governments had the power to reduce tax rates prior to Prop. 13’s enactment in 1978 and that this – it is implied – offset the rapid increases in taxable value that homeowners were experiencing. This is true, but in theory only. In reality, while local governments had that power, they didn’t use it. Reductions in tax rates in no way even closely offset increases in taxable values. How do we know this? Simple. Against every special interest and editorial in California, voters – by a 66 percent margin – launched the modern tax revolt known as Prop. 13. All that was missing were the torches and pitchforks. If tax rates had indeed been reduced, this revolt would never have happened.

This piece was originally published by HJTA.org

Filed Under: Top Stories Tagged With: Howard Jarvis Taxpayers Association, LAO, Legislative Analyst's Office, Prop 13, Property Taxes

Tell Me Again Why We Need Higher Taxes?

July 20, 2016 By Jon Coupal 8 Comments

This November, California voters will face a slew of tax and bond proposals at both the state and local levels. Each of those ballot measures will be supported by the usual pleas from those who benefit from higher taxes – especially well-funded labor organizations.

Special interests will complain about the “cuts” to vital public programs in education, transportation, health care, etc., that they have suffered in the past. But the problem they have is that they run head long into the facts – facts which show California government is now more flush with cash than at any other time in its more than 160 year history.

The California state budget projects spending of $122.6 billion of general fund dollars which is over 5 percent higher than last year and a stunning 42 percent more than when Brown took office in 2011.

As we get closer to the November election, this column will present a host of reasons why most tax increases should be rejected. We do this in full knowledge that our opponents, with tens of millions of dollars in campaign funds, will drown out any competing messages of fiscal responsibility, protections for homeowners and a healthy economic climate to ensure that California remains competitive for businesses both large and small.

For now, let’s focus on property taxes as that is of special concern to many California voters, especially homeowners. The state controller just announced that property taxes are surging in California – up over $3 billion from the previous year. The long-standing urban myth that Proposition 13 has decimated local governments has, once again, been proven false by the data. In short, California is not a low property tax state. Per capita property tax collections in the Golden State are significantly higher than the national average and that has been true for many years now.

This is just one fact of many that voters should consider when confronted with tax hike proposals on the ballot. And this is especially true when local governments are seeking higher property tax levies in the form of “parcel taxes” – property taxes imposed in excess of Proposition 13’s one percent limit.

There are dozens of other reasons to reject tax increases this November including California’s penchant for pursuing massive boondoggle projects and the fact that most tax increases will not be used for new programs or higher levels of service, but rather to shore up failing pension funds.

It is our hope that Californians will not be swayed by the false claims that higher taxes are necessary. If voters are paying attention at all, they will quickly come to that same conclusion.

Filed Under: Top Stories Tagged With: Jon Coupal, Property Taxes, taxes

Property Taxes to Increase by 13 Percent in Coming Year

June 29, 2016 By Jon Coupal 2 Comments

In Chicago, escalating property taxes are headline news. With the average property tax bill due to go up by 13 percent – and more increases in subsequent years virtually guaranteed – home ownership in the Windy City is in deep peril. No one seems happy except the moving companies.

This drastic tax increase is the result of bad decisions by corrupt officials who have caved to city employee pension demands that are unsustainable without massive borrowing. And that borrowing will be paid for by massive property tax hikes. But if homeowners are considering fleeing exorbitant taxation, they may have to travel a good distance. Illinois residents, even without the Chicago pension tax, are already paying the highest effective property tax rate in the nation at 2.67 percent, according to a recent study by CoreLogic, an Irvine, California-based provider of data to the financial and real estate industries.

Nationally, the study shows the median property tax rate is 1.31 percent of value.

In addition to Illinois, states with median property tax rates of greater than 2 percent include New York, New Hampshire, New Jersey, Texas (which some may find surprising considering its reputation as a low tax state), Connecticut and Pennsylvania. On the low end is Hawaii at 0.31 percent.

California, at 1.12 percent, ranks 30th compared to other states. Tax seeking politicians and their special interest allies will likely consider this a failure. After all, thanks to them, California has the highest state sales tax, highest marginal income tax rates and, due to carbon charges, the highest gas levies in the nation. “Why shouldn’t we be number one in every tax category?” they are, no doubt, asking themselves.

California property tax rates are reasonable for one reason and one reason only – Proposition 13. Arguably the most famous of all initiatives in the history of the United States, Prop. 13 was the brainchild of the late Howard Jarvis. He led the effort to put the tax limiting measure on the ballot where it was approved by nearly two-thirds of California voters in 1978. By limiting annual property tax hikes to two percent per year, it made tax bills moderate and predictable.

Still, California property taxes are not low. Because of high property values, the median priced home now costs nearly $519,000 according to the California Association of Realtors. Thus, while our effective tax rate ranks 30th of the 50 states, when measuring property tax revenues per capita, we rank 14th. This belies government complaints that California is starved for property tax revenues.

Proposition 13 protections should not be taken for granted. Consider the cities of Stockton, Vallejo and San Bernardino which were driven into bankruptcy by officials who, like Chicago’s aldermen and mayor, agreed to inflated and unsustainable pension benefits for government workers. The difference is that Proposition 13’s tax limiting provisions prevent California cities and counties from arbitrarily increasing property taxes. At least for now.

Filed Under: Top Stories Tagged With: Chicago, Housing, Illinois, Jon Coupal, Prop 13, Property Taxes, San Bernardino, Stockton, taxes, Vallejo

3 Bills in Legislature That Will Actually Benefit Californians

April 26, 2016 By Jon Coupal 2 Comments

Those who value liberty, good government and a reasonable level of taxation have a lot to complain about if they are citizens of California. Not only do we have one of the highest tax burdens in America, we rate very poorly in term of efficient and effective governance as well as transparency. Those of us who point out the state’s shortcomings are labeled as contrarian, “declinists” or pessimists by state politicians, including our governor.

And let’s not forget about corruption. Just a couple of years ago, the California Senate actually had a higher arrest rate than the general population of California. Because of all the negative press, it is no wonder that that the public believes that most of what the California Legislature does is self-serving.

Although there is more than sufficient justification to criticize California’s political system (and especially its Legislature), for the sake of fairness, we should take special notice when our politicians do the right thing. For example, every so often bills are introduced that cut against the stereotype by providing genuine benefit to average folks.

Interestingly, although the California Legislature is fairly left-leaning, sometimes opportunities present themselves for a taxpayer group like Howard Jarvis Taxpayers Association to work with legislators from both sides of the aisle to do good for average citizens. This year, HJTA has sponsored three separate legislative proposals in 2016 that have been well received in the Capitol.

The first, Assembly Bill 1891, would provide property tax relief for seniors. Currently, seniors over the age of 65 in most school districts can file for an exemption from education parcel taxes. However, many school districts require an application for exemption to be filed every year. AB1891 simply states that seniors only need to fill out the opt-out paperwork one time to be permanently exempt from paying a parcel tax.

HJTA is also the co-sponsor of Assembly Constitutional Amendment 6, by Assemblywoman Cheryl Brown. Among its numerous positive provisions, ACA 6 will provide property tax savings for seniors in their retirement years. The law today allows married seniors over the age of 55 to transfer the Proposition 13 base value of their home to a property of equal or lesser value in the same county once in retirement. As good as this law is, it needs to be expanded. For instance, if a spouse were to divorce and remarry, that property owner would not be able to use their base value transfer exemption. Property owners are also out of luck if they do a base value transfer, then decide to move again a few years later. They would be forced to pay the full market value property taxes on a new home. ACA 6 allows for married couples to transfer their base value twice. This will provide couples increased flexibility to sell their home to move closer to children or grandchildren. If approved out of the Legislature, ACA 6 will go to the statewide ballot for voters to approve in November.

Assemblyman James Gallagher has introduced the third HJTA sponsored bill, AB2801. This bill increases transparency for purposes of Proposition 218 protests. Approved by voters in 1996, Proposition 218 allows for water, sewer and refuse rate increases to be approved or rejected via a written protest process. Protests can either be mailed in, or announced at the public hearing. AB2801 simply requires that protests will be retained for two years so taxpayers can review them after the hearing.

As may be apparent, these three bills do not reflect huge policy shifts, such as a large tax cut or a complete reorganization of state government. However, they do make California a better place for homeowners and taxpayers. And for that we can be grateful.

Originally published by the Howard Jarvis Taxpayers Association

Filed Under: Top Stories Tagged With: Cheryl Brown, HJTA, Howard Jarvis, James Gallagher, Jon Coupal, Legislature, Prop 13, Property Taxes