PART SEVEN: Coronavirus Crisis in California Motivating Certain Politicians to Push Harder for New Proposition 15 “Split-Roll” Property Tax

Property Taxes During the Pandemic

So let’s wrap this discussion up with a brief recap… and summary.  It  is completely obvious to any reasonable person that even though the new, proposed Proposition 15 commercial & industrial property tax on landlords and business property owners is not aimed at consumers per se – at the end of the day, it is consumers who will pay for this new property tax; paying significantly higher prices for normal everyday goods and services. 

Consumers that have for some time already been struggling with the high cost of living in the state of California… as have residents in, for example, other states at the top of the list of “most expensive states” list…  most expensive American states – such as Hawaii, New York, Washington DC, and Oregon.  States that are this costly to live in do not, and we should repeat do not, need property tax hikes, especially at a time like this when state economies are literally crumbling under the weight of a Coronavirus Pandemic, a tsunami of unemployment, now surpassing 51 million jobless claims nationwide and over 13 million looming evictions; plus a host of other related problematic issues. 

These costs, in California, encompass some of the steepest taxes in the country, including some of the highest gas, income, and sales taxes. In fact, the California Legislature just passed policies that have resulted in residents paying 48% more for electricity than the rest of the nation.  Fact, not opinion.

Adding a new property tax on top of these existing costs will only exacerbate the affordability issue for many Californians. The downside (ironically, there is no upside) of the Proposition 15 business property & industrial facility property tax that Secretary of State Padilla and other powerful political critics of property tax relief in California are not looking at.

We suggest they had better remember we are in the throes of a national Pandemic, with California running particularly high infection rates, and they would do well to start looking at a potentially massive downswing of middle class and working class personal income descent if landlords, business and commercial property owners   abruptly lose their ability to use Proposition 13 to avoid property tax reassessment. At the same time, if business properties have been passed down through family members, countless businesses will be impacted in this fashion, losing their ability to keep parents property taxes and parent to child exclusion in California, when  taking advantage of Proposition 13 and Proposition 58, working through a loan to an irrevocable trust… a Prop 58 transfer of property. 

The great fear is that the next step politicians who oppose Proposition 13 and Prop 58 will take, after opening the door to unraveling property tax relief for businesses, will be to go after property owners’  ability to take advantage of property tax transfer, or the transfer of parents property taxes upon inheriting property taxes in general.  The anxiety running through the state concerns fear that critics of 1978 Proposition 13 now pushing a property tax measure called Proposition 15 (formerly entitled Proposition 13 “Split-Roll” tax) will feel free to go after the right to avoid property tax reassessment, or parent to child transfer and parent to child exclusion in California, if Proposition 15 actually passes in November, 2020.         

Obviously, this will impact all Californians, raising rents, throwing prices of goods and services throughout the state completely off the map of normalcy.  If these folks do not begin looking at this issue more realistically, they are going to step into a deep statewide quagmire of economic quicksand, if this property tax passes in November.

Although politicians on the state level claim that their revised version of the true Proposition 13 property tax relief system, they’re calling “The Split-Roll  Proposition 15” property tax, includes a “small business exemption” that will supposedly fix everything. Don’t believe it.  We suggest you don’t drink the Cool-Aid!  This new property tax on commercial property owners in California will be crippling, to most  businesses and commercial entities, including landlords, in California.  The revised measure supposedly expands the “reassessment exemption” to small business owners with property valued at $3 million or less, up from the initial $2 million threshold.  Sounds like double-talk to most of us. 

One of “us” being the talented, courageous Rob Gutierrez, President of California Taxpayers Association. Mr. Gutierrez says that these supposed “protections” for small businesses aren’t even close to being strong enough to allow these folks to survive – with thousands of jobs for Californians not able to survive in the bargain! More people on the Unemployment Line.

“Because so many small businesses rent as opposed to own their commercial space… higher property taxes on the buildings they rent space in will of course result in more expensive rent for them”, says Mr. Gutierrez… “What that translates into is higher prices for consumers and brick-and-mortar stores. Dry cleaners, grocers, companies that cannot move, will have to find a way to pass these costs on.”

And as usual, who does this get passed on to? That’s right. Us. The consumers.

Faced with higher property taxes, commercial property owners with leases will assuredly be motivated to pass these increased costs on to their tenants.  They’ll have no choice.  For example, the owners of shopping centers or strip-malls, with numerous commercial tenants, if unable to avoid property tax reassessment or parent to child exclusion in California, will without question be compelled to increase rents on their commercial and industrial tenants. Next step, prices on goods and services go up literally overnight.  

So we can only further assume that adding a new property tax to the already heavy burden carried by residents of this great state will only serve to make current economic challenges only more challenging   for regular middle class Californians.  There’s no doubt about it.  Hence the need for California to keep the property tax system as is… Leaving the status quo alone. 

PART TWO: Coronavirus Crisis in California Motivating State Politicians to Push Harder for “Split-Roll” Property Tax

California Property Tax Changes

Even without California’s ill-advised Split-Roll property tax measure looming over every renter and residential as well as commercial property owners’  head throughout the sunshine state — California has already been grappling with lopsided expenditures such as over-spending on state & local government  salary increases, healthcare benefits, and lavish vacation time… Rather than budgeting properly for public works that would actually be beneficial for regular every-day Californians rather than folks with elite government positions.

Residents of this state are already dealing with unusually high taxation (other than property taxes), and other challenging regulations that make it difficult as it is for California businesses to compete effectively in a number of important and popular industrial and commercial playing fields.  

Let’s face facts… an $11 billion Split-Roll property tax increase  on business and commercial property owners would, without question, prevent businesses based in California from hiring new employees;  and would make it more difficult to retain existing employees.  

And you can forget about Christmas bonuses and/or timely raises, not to mention maintaining proper levels of health coverage!  It’s obvious that stability and predictability provided by 1978 Proposition 13 property tax relief has helped businesses in California to compete on a national level regardless of the fact that doing business in California is expensive to begin with!

Even if correctly managed, tax assessments will mirror the ups and downs of  the real estate market in  California— resulting in volatility, the way things were prior to 1978 when Proposition 13 was passed into law.  During low economic times this would most likely end up leading the state into an even more severe loss of revenue. 

If you think back… during the 2008— 2009 recession, commercial property values dropped by over 35%, mainly due to the economic recession.  These abrupt and  unpredictable economic shifts are what motivated unease and unhappiness among California property owners before 1978, and ultimately led to the big win pushed by the Howard Jarvis Taxpayers Association and others, leading ultimately to the passage of  Proposition 13 in the first place. 

Proposition 13 stabilized the property tax revenue system by capping property taxation at 2% plus nailing down property owners’ right to avoid property tax reassessment… with other stabilizing influences,   rules and iron clad regulations favoring the taxpayer for the first time.

Much to most beneficiaries’ surprise, it also became possible for estates to entertain certain options, where none existed previously; such as beneficiaries who were intent on retaining inherited property from parents now being able to buyout siblings that wanted to sell their property shares… Through a loan to an irrevocable trust, working alongside CA Proposition 58. 

Trust loans have become popular throughout California, to resolve heated sibling “inherited-property conflicts”, working in tandem with CA Proposition 58,  once those beneficiaries looking to keep inherited property actually qualified – enabling their co-beneficiaries to buyout siblings’ shares of a home usually… typically called a “beneficiary buyout of sibling property shares”.

While at the same time the siblings keeping the home were now able to legally avoid property tax reassessment, by using a trust loan to buyout a sibling’s share of an inherited house – or, as realtors call it, “a transfer of property between siblings” or “sibling to sibling property transfer” – whereas regular middle class folks simply refer to the process as “getting cash from a trust loan to buyout siblings’ shares in inherited property”.  Most people prefer to keep things simple.  As we do.

It  was unthinkable that the bad old days would even have a remote chance of returning…  Until now. 

>> Click Here: to Continue to Part Three…

Part One: As Attacks on Proposition 13 And Prop 58 Weaken, Critics Continue on with Split-Roll Tax Effort – Featuring Jon Coupal, CEO, Taxpayer’s Association

Property Taxes Proposition 13 and 58

As we all know, for many years, critics of California Proposition 13 have been blaming property tax relief, the right to avoid property tax reassessment, for overall under-funding of public services…

The critics also blame parent to child transfer of a home and/or land, in other words simple parent to child exclusion from present-day property revaluation, however they mainly place the blame on the  1978 California Proposition 13 property tax relief measure, and the 1986 Proposition 58 property transfer tax shelter, for the under-funding and watering down of critical statewide public services – without any believable data or statistics to back up these accusations.

These claims, largely false and overblown, are still bandied about    in the media by critics, even though they have been debunked and discredited countless times – as the facts repeatedly point, again ad again, at state and local government over-spending on high salaries, reportedly extravagant pensions and benefits, as well as ruinous special-interest construction, building projects, and so forth.

Not, as economists and analysts have said repeatedly, property tax shelters made possible by Prop 13 and Prop 58; which merely benefit offspring when it comes time to transfer parents property taxes when inheriting a home from parents, for example,  and inheriting property taxes… Allowing the family to avoid property tax reassessment, enabling any property tax transfer to be less costly.

All things considered, from an objective standpoint, this is brazen misinformation. In fact, there is a mountain of data revealed in various charts and tables, with arrows pointing up, not down, showing us that total inbound revenue from property taxes has gone up since Prop 13 went into affect in 1978 – not down; despite residential and commercial property owners’ ability to avoid property tax reassessment.

In a recent interview with Mr. Jon Coupal, Chief Executive Officer of the Howard Jarvis Taxpayers Association; with offices in Sacramento and Los Angeles.  Their official motto states that, “When illegal taxes are imposed by state or local governments, our legal organization goes to court to protect your taxpayer rights.”

During our brief interview, Mr. Coupal addressed several current, related issues – beginning with the so-called “2020 Proposition 13 Split-Roll Property Tax measure”; the latest public initiative being promoted throughout California by virulent critics of the original 1978 Proposition 13…

 

Property Tax Transfer: Mr. Coupal, thank you so much for taking some time out of your very busy schedule today to speak with us.

Jon Coupal: No problem.

Property Tax Transfer: Can you tell us what you think about the 2020 so-called Split-Roll property tax measure, by coincidence also named Proposition 13, pushed forward by opponents and critics of the original 1978 California Proposition 13 property tax shelter…

Jon Coupal: All of this is confusing, intentionally.  This new  2020 Proposition 13 is more or less tricking voters into thinking that the two   Proposition 13s are related. They’re not. The 2020 Proposition 13 with the Split-Roll Tax is strictly about removing all caps on commercial and industrial properties.

Property Tax Transfer: So how do folks stay on top of all this? How do they figure out what those folks are really up to?

Jon Coupal: This is all designed by opponents of the genuine 1978 Proposition 13 to be confusing and tricky. This is an ongoing educational process for Californians. The new Proposition 13 is not related to the original Proposition 13. What it is, is a $15 Billion bond measure to fund local schools, who must provide matching funds. Plain and simple, this is a tax increase that falls on property owners. Bottom line.

Property Tax Transfer: Yes we can see that. It is very tricky. Jon, what do you believe is our greatest threat?

Jon Coupal: Put simply, your greatest threat is realtors trying to end family property transfers. They would like to destroy inter-generational property transfers. Or they intend to at least limit transfers. The school bond affects the local debt caps… but it’s the realtors – they are the real threat to you.

Property Tax Transfer: A certain group of California realtors…

Jon Coupal: Yes. The media and the realtors will keep pounding away at this; and of course continue to use that one example they have of Lloyd Bridges and his sons renting out that property… to try to convince the public of all the things that are wrong with Prop 13 and property tax transfer. That is the one dramatic example they have to convince people of their point of view. That’s all they have. Nothing else.

Property Tax Transfer: The highly exaggerated, perhaps fictitious real estate crisis…

Jon Coupal: Yes. No matter how many times you ask that’s the only supposedly compelling evidence they have ever come up with to support their argument about their countless rich people  taking advantage of Proposition 13 tax shelter, supposedly renting our thousands of non-primary residences all over California, shrinking tax revenue to the government.  This, of course, is utter nonsense.

(Continued in Part Two…)