PART TWO: Surviving CA Proposition 19 – Losing The Parent to Child Exemption

Surviving California Prop 19

California Prop 19


Let’s be clear.  Critics of property tax relief in California are typically well educated, bright, and articulate… and write awfully convincing Op-Ed’s in the San Francisco Chronicle and the Los Angeles Times. 

Yet, for whatever reason, these critics of property tax relief never produce  examples of how or why Proposition 13 is “so unfair” – with the exception of shifting sand anecdotal evidence, without genuine case study data or specific historical events to point to.  Other than the rather deceptive Lloyd and Jeff Bridges family tale of their one beach- front property used as a secondary property to rent out to wealthy tenants.

In fact it’s almost laughable that the Bridges family story is approved by supposedly responsible editors repeatedly, in numerous high-profile California newspapers. Always without backup evidence or case study data pointing to other examples of this type of usage of Proposition 13 and Proposition 58, by other wealthy or middle class Californians.  They can’t seem to come up with a credible follow up example, or any example, of this  sort of rental activity. 

Yet critics of property tax relief did manage to come up with Proposition 19, to take down the parent to child exclusion, associated with the parent to child transfer, that is the foundation of property tax relief for home owners in this state.  Those same home owners, and  beneficiaries inheriting property from parents are wondering how this Proposition 19 measure will affect Proposition 58, in terms of establishing a low property tax base, as well as getting a trust loan to buyout siblings inheriting the same property. 

There is a great deal of anxiety in California in terms of how Proposition 58 will stand if Proposition 19  is voted into law, with respect to locking down a long-term, even lifetime, low property tax base when receiving an intra-family trust loan associated with the transfer of property between siblings or  sibling to sibling property transfer.  If Proposition 19 does pass, most current beneficiaries want to know if getting a trust loan to buyout siblings will be the same, in terms of process; or will the process be different, more difficult, or perhaps even easier.  Buying out a siblings’ share of a house, getting a trust loan to buyout siblings post Proposition 19, is an important issue for most residents of  California.

Meanwhile, despite these nuts and bolts details, we’re still forced to listen to these relentless critics of Proposition 13 and Proposition 58, dispensing non fact-based anecdotal narratives to convince the public how “one-sided” and “massively abused” property tax relief is in California. How it’s only for rich, mainly elderly, home owners.  Or for the rich and famous… like the Bridges. 

Yet we still don’t hear any actual names attached to this supposed “long list of abusers of Proposition 13” to back up these claims behind the push to pass Proposition 19.     Obviously, this is a false representation of a proven property tax relief system that benefits more middle class home owners than anyone else in California.  Which makes perfect sense, if you think about it, as there are so many more middle class people in California, and elsewhere, than rich people! 

Although lately, to backup Proposition 15, to take away property tax breaks from business and commercial property owners, we are occasionally hearing about corporations, not people, always trotted out as, “…companies like Chevron and Disneyland…” (never mentioning any other company) “…that sit on valuable property, generating a huge profit every year – yet never paying taxes on their land in terms of present day reassessment”.  OK, we’re willing to listen.  But never with any actual figures or data to backup the claims. 

So even if a few corporations take advantage of Prop 13 tax relief measures that have  been in place in all 58 counties in  California since 1978, millions of middle class home owners will see their rents sky-rocket if Prop 15 passes… and commercial property owners, and apt. landlords just getting by, as well as family-run industrial businesses that own modest income bearing facilities – all use Proposition 13 fairly and properly, and benefit greatly from it.  Just as it should be.  So we’re going to punish these few perhaps greedy companies by crippling all business property owners in California? 

Without these tax breaks from Proposition 13 and Prop 58, without people like Howard Jarvis and Jon Coupal; Kerry Smith and Michael Wyatt who have fought for these tax breaks for California residential and business property owners…  very few middle class Californians, which is most of the state, would have been able to keep inherited property.  Landlords have been able to keep rents at moderately reasonable rates due to low commercial property taxes. So on and so forth. And this business about schools desperately needing funding – is yet again another half-truth.

Sure, some of the revenue from new, accelerated property taxes will go to schools… but nowhere near what is being promised, or rather vaguely indicated. The lion’s share we are told would go to pay for unfunded state-govt. pensions. And probably other state government purposes such as pay raises, generous benefits and vacations, and so on… plus special interest public works and building projects, no doubt.  And schools will pick up what’s left on the table after all that. 

Intended… and unintended… consequences.

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PART ONE: Surviving CA Proposition 19

California Proposition 19 2020 Election

California Proposition 19 2020 Election


Californians are anxiously waiting to see if voters pass or sink CA Proposition 15, affecting business and commercial property owners by specifically removing their ability to legally avoid property tax reassessment; as well as  Proposition 19, which is designed to unravel the “parent to child exemption” or “parent to child exclusion” (from current, reassessed property tax rates).

In fact Californians are wondering right now, if Proposition 19 passes, how much Proposition 58 will be affected; and how they will be able to get a trust loan to buyout siblings who wish to sell mutually inherited property.  Or exactly how they will be able to work with Proposition 58 to lock in a low property tax base rate, if Prop 19 passes. Companies like Michael Wyatt Consulting or Lucas Real Estate, or Commercial Loan Corp, are fielding questions like this as we speak. 

If Prop 19 passes, California can say goodby to any property tax transfer activity from one family member to another… there will be no way to transfer parents property taxes at a nice low base rate, in fact inheriting property taxes from parents to avoid property tax reassessment or the right to keep parents property taxes with a parent to child exemption will, sadly, be a thing of the past. 

If voted into law, as the LAO (Legislative Analyst’s Office) tells us, these  property tax measures will, in effect, repeal popular inter-generational transfer protections guaranteed by Proposition 58’s parent-to-child exclusion and Proposition 193 (grandparent to grandchild exemption) property transfer tax breaks – upending tax relief protections that Californians have depended on for decades.

Proposition 15 removes property tax breaks for landlords and other business  property owners – which, if voted into law, would not only directly affect business and commercial property owners, impacting stores, gas stations, supermarkets, etc., frequented every day by consumers – but will impact everyone in California.  Not only for countless people renting units in apartment buildings all across the state, but also for tenants renting commercial properties and offices in commercial buildings will be paying much higher property tax, and therefore will be forced to raise their prices.  Hence,  the cost of goods and services will go up in all 58 counties in the state. If Prop 15 passes, prepare to pay significantly higher prices, basically for everything – for rent, gas, food, air & ground travel, clothes, electronics, movies and computer entertainment, cel. phones…  you name it!

This leaves us at roughly 50,000 to 60,000 families in California that will be victimized economically by unreasonably high property taxes… in the midst of a Covid-19 pandemic no less.  Obviously, many middle class families will  be unable to keep inherited property due to property tax hikes… and, among other difficulties, will be generally unable to afford decent health coverage that includes preexisting conditions… unless they’re over 65 and have access to Medicare – unless the ACA (“Obamacare”) has been watered down, as Republicans have repeatedly promised to do… and this is on the record.  So people in California are nervous; as are folks nation-wide.   

On top of this crisis for California home owners – if Proposition 15 passes, tenants that don’t  own but pay rent will suffer from increased rents – as Prop 15 will unravel commercial and business property owners’ ability to avoid property tax reassessment at current rates. Business property owners and landlords will no longer be able to retain a low property tax base-rate, such as  home owners supposedly will continue to do – although most of us are not entirely convinced about that. Once the door has been opened, so to speak, do we really believe that the powers that be in California, the Legislature, and their realtor colleagues, are simply going to stop there? 

As far as Proposition 19 is concerned, most middle class beneficiaries and  families inheriting real property from their parents would be forced to sell that  property within the first year, as Prop 19 dictates, plus most beneficiaries or heirs will be unable to cover increased transfer costs and, in particular, yearly hiked up property taxes.  Hence, they are doubly motivated to sell inherited property many would much prefer to keep. 

Opponents of CA Proposition 13 repeatedly offer up the tired tale about the Bridges family using Prop 13 to transfer a pricey luxury beachfront property, paying little tax, and renting out for big bucks.  It’s interesting that this story  is literally the only narrative we hear about that condemns Proposition 13 and Proposition 58 by real-life example. So they raised $58 Million, in part, on this much repeated tale, and other anecdotal non fact-based evidence, to destroy property tax relief in California.

>> Click Here for Part Two…

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

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.