With looming debt from our recent California disasters, we are once again going to have to think outside of the box. Back in 1978, California took matters into its own hands by enacting Proposition 13 without the legislature. At the time the argument that won the public over was that middle class homeowners wouldn’t be pushed from their homes due to high property taxes as home values outpaced earnings.
Good sense in that, but the language didn’t limit the value assessments to individuals. Corporations holding commercial properties in the same LLC title, can trading investors in and out of the ownership pool to avoid a re-assessment of multi-million dollar properties. By limiting property tax increases to the assessed value at the time of sale, it created an incentive to organizations to avoid paying taxes on millions of dollars in real estate holdings.
Californians are a smart bunch, and we’ve been through a lot this year. From the Santa Rosa fire where the city lost 3,000 homes — fully 5% of its housing stock — to the largest wildfire in our states history, it’s clear that we need to fund a recovery. Without a heck of a lot of philanthropists coming forward, or some public money, there is no way to recover from the losses. That money will come from taxpayers, but will they be income, sales or property taxes? And who should pay them?
California Realtors are proposing an expansion of Proposition 13. In front of the people to vote on, would be whether to allow senior homeowners to carry the originally assessed value of a home purchased in the past to a new home in a new county or even a new more expensive home. Currently Prop 60 & 90 give the counties the authority to accept transfers or not. Only nine counties allow transfers into their county and the law only applies to horizontal or downsizing.
In Santa Barbara allowing seniors to stay in their homes, or downsize without a tax hit, makes sense. These seniors have paid and contributed to the community, and moving into a new home shouldn’t (and doesn’t today) spark a new tax rate. But where many service providers: nurses, firefighters, bank tellers, must commute from other more affordable areas, does it make sense to allow residents to move in to our area and pay below market property taxes?
Currently all counties in California including Santa Barbara recognizesProposition 60 and 90 within their counties; our seniors can move into a new home anywhere in the county and keep their property tax rate from an original purchase dating back 40 years. We Santa Barbarans love, appreciate and welcome our transplants, and we need every resident’s property taxes to support the cost of the repairing and rebuilding after the fires of 2017- A toll that is likely to reach well into hundreds of millions of dollars.
The real money is, as always, in the corporations. Proposition 13 have tallied corporations tax avoidance, and California’s income loss, at $9 billion dollars per year in taxes. There will be a lot of talk in the coming months about Proposition 13 reform, the pros and the cons of expanding and reforming. With a lot of money at stake you can bet you’ll see some ads. I’ll keep you updated on my thoughts and please share your comments.