Part Four: As Attacks on Proposition 13 & Proposition 58 Falter and Weaken, Critics Continue On – Despite Growing Popular Support for Property Tax Relief

Proposition 58 and Proposition 13 in California

Even as property tax transfer increases in popularity, and Californians continue to take advantage of Proposition 13 and Proposition 58, for residential and commercial property tax relief, critics of these property  tax shelters continue to be rabidly, and in many ways irrationally, irate with the same basic tax relief afforded to agricultural and industrial facilities, as well as other commercial properties, throughout California.

Moreover, all tax shelter benefits made possible by California Proposition 58 and Proposition 193 are equally unpopular with critics, with respect to parent to child exclusion (from property tax reassessment, Prop 58) and grandparent to grandchild transfer rights (avoiding  property tax reassessment, Prop 193).

On the other hand, countless property owners across California with different levels of income and property values, all enjoy the same ability to avoid property tax reassessment; so naturally property tax transfer increases in popularity, as Californians never have to pay property taxes based on present day property evaluations.

California home owners and business property owners are equally thrilled with Proposition 13 and 58 tax shelter protection… and frequently take advantage of these tax benefits by engaging with a trust lender, for a trust distribution loan, a trust loan made only possible by this type of tax relief. Loans to trusts, loans to irrevocable trusts in many cases, under protections afforded by Proposition 58, with parent to child, property tax transfer, tax relief; and Proposition 193 tax benefits, covering grandparent to grandchild property tax transfer.

Despite critics working off opinions, bias, and a lack of data other than purely anecdotal evidence,  they frequently claim to the media that property tax relief is the sole cause of state and local government tax revenue shortages, local California  government pension under-funding, the shrinkage of homes being available in the real estate market… and several other related items.

However, economists working off of verified data and statistics have looked this issue from a local and state tax-revenue-to-government perspective, and have stated repeatedly that the reason for any real estate market shrinking is largely due to economic trending; although they also concede that some shrinkage in the home market  is also somewhat affected by property tax shelters, although to a lesser degree.

Analysts and  economists, addressing claims of government revenue shortages, note that California city municipal workers, and state government employees, are actually at a higher salary rate than equivalent government workers in other states are. They say many California government jobs base rates, bonuses, raises and pension plans are way above national averages… and that this is the cause of any under-funding or shortages in government public funding and spending.

Some California economists have said, in compiling studies on the subject, that California government employees are the highest paid state and city employees in the country, with the most comprehensive benefits, as well as retirement benefits, and the most expensive pension plans in the country.

California state budgets, year after year, consistently surpass state spending records – and the California educational system is now enjoying a 66% increase, reportedly over the next six years. Public services are inferior in California, not because of Proposition 13 property tax decreases and tax relief for residential and commercial property owners – but because of political preferences, special interest groups and internal over-spending. Over-spending is the realistic cause of any problems arising from under budgeting and under-funding.

Is Property Tax Transfer Causing CA Real Estate Shrinkage? Or is it a Normal Economic Trend?

Despite what critics say, there is no factual data or compelling case study that supports the frail argument that the main reason for home sales shrinkage, as well as sluggish price gains that have been  consistently hampering the California real estate market, is mainly due to property tax transfer and tax relief provided by Proposition 13, with Proposition 58 and Prop 193 thrown in for good measure.

When, in fact, generic economic statistics and anecdotal data actually tells us that shrinkage in the real estate market in California is clearly an outcome of normal fluctuations, up and down, in the real estate market and more importantly, severe fluctuations in the overall economy in California. Click Here to explore this point of view, which does appear to be logical… factoring in sky-rocketing gas taxes, and the particularly high cost of living overall in California these days. And, as many realtors insist based on nothing more than opinion and bias, not the fault of families keeping their family home “in the family”.

The leveling off of home prices, economists insist, is a national trend. And a 20-city composite index as well as the National Index have been recording the smallest price gains on home sales since 2012. David Blitzer, chairman of the S&P Dow Jones Index Committee, has said, “The patterns seen in the last year or more continue: Year-over-year real property price gains in most cities are consistently shrinking. Double-digit annual gains have vanished…”

For the broad picture, Blitzer says, “The difficulty facing housing may be too-high price increases”.  Not, we must point out, the absurd notion that the blame for California real estate market shrinkage or faltering home sale prices, lies with property tax transfer, avoiding property tax reassessment, or the ability to keep parents property taxes intact, with the ability to transfer parents property taxes when inheriting property taxes associated with real property transfers. This argument simply doesn’t hold up under scrutiny.

Moreover, many of these properties in question are quite old, and, frankly, usually require quite a bit of work involving a great deal of time and money… and would certainly not be selling at the fabulously high prices many investors and other real estate professionals claim they would be. To insist otherwise raises questions regarding the grasp many of these realtors and brokers have on the reality of the residential home market in California.

The bottom line is – California real estate investors would prefer to have as many homes on the market to buy and to sell solely to increase their profits; and the brokers and

realtors that are critics of Prop 13 and Proposition 58, or Proposition 193 (involving grandparents’ property transfers to grandchildren) prefer to have more homes to sell strictly for the additional commissions… Click Here: for more on the critics of these popular tax relief initiatives.

Click Here: for more on the critics of {Not, as they insist in the media, to maintain “fairness for families looking to buy property in California”. The “fairness” argument just isn’t holding water any more… Not that it ever did.

Let us know what your thoughts and opinions are, below.  We   publish viewers’ comments, based on editorial determinations:

California Proposition 58: Combating false claims that Prop 58 causes home sale shortages – benefiting wealthy homeowners

After 24 years, CA Proposition 58 still makes it possible for new property owners to avoid property tax increases when inheriting property from their parents. Or vice versa. And of course, as we just indicted, new homeowner’s pay taxes that are based on established Proposition 13 factored “base year value”, and not on updated, reassessed market value at the time real property is inherited. Just as you may have inherited your parent’s home when they passed away.

Many middle class homeowners in California are receiving incredible value from CA Proposition 58, transferring real property to adult children without tax reassessment throwing them into a financial crunch. And this is particularly meaningful to people in older age ranges, where income is generally stagnant, or at least fixed; and net worth tends to decrease noticeably. Anything like severe tax hikes, or any unexpected fees or debts for that matter, are particularly unwelcome by older middle class Americans.

Moreover, to maintain CA Proposition 58 tax relief for real property that has been transferred to them by parents or other relatives – heirs or beneficiaries will often convert property and/or land to other uses, such as turning a property into a rental, or a vacation home, or they might lease out transferred land for farmland, or other commercial uses. Click here for more information on California Property tax by county…

Occasionally, this creates conflict with other family members who would simply prefer to sell off all their property shares right away for fast cash. However, if they can be convinced, with respect to the benefits associated with holding on to transferred property, and making good use of the Proposition 58 tax break – those heirs or beneficiaries can usually be turned around.

Now, interestingly enough, there are a number of people in California who believe that Prop 58 tax relief is “likely” (that is to say, “probably”) contributing to “a critical” decrease in homes for sale in California – driving an outcome that is supposedly negative for regular folks in California who are looking for a home to purchase – and somehow benefiting the very wealthy; encouraging them to hold on to their properties for ever and ever, and never sell.

According to a small but very vocal number of people in the media who are disseminating this point of view, both home seekers and realtors are soon going to be in “desperate need” in the near future to locate homes for sale… and this somehow is, even now, throwing the normal demographic eco-system into total disarray. While somehow mega-benefiting the ultra rich.

This segment of urgent home-seekers is supposedly being victimized by a critical lack of somewhere between 60,000 and 80,000 homes that are now not in the market, for sale. According to these folks, this phenomena, caused by Proposition 58, is turning the normal state of affairs literally upside down due to the passing of homes between parents and children every year – without standard property value reassessment occurring, to determine “true” property value and the subsequent tax hit. That’s roughly 10% of all property transfers in California.

We encounter this argument consistently, generally from the same media and political sources – yet never with any specific statistics to back up these claims, as far as knowing with some degree of assurance that this issue, although a somewhat manufactured issue, is affecting a considerable number of inherited, sold or gifted properties in California every year…

Yet these dramatic claims, always projecting outcomes in the “near future” are always devoid of any facts or data that actually verifies that 60,000 to 80,000 plus home transfers every year are supposedly throwing the natural order of California real estate into total disarray.

In fact, the people making the argument that CA Proposition 58 is in fact the driving force behind this alarming, shrinking number of homes available for sale in California – causing doom and gloom to descend on California home seekers in 2020 and in years to come. In fact, this point of view goes so far as to suggest that all the thousands of empty handed home seekers on the West Coast are soon to be bereft and practically homeless!

However. No one taking this stand has actually presented, or even attempted to present, any factual data that proves Proposition 58 is actually causing this “shrinking inventory” of houses for sale in California. Articles in newspapers such as the LA Times or the San Francisco Chronicle only print quotes from nervous realtors, or academics merely projecting a personal opinion… based on sketchy anecdotal evidence at best; yet never presenting any convincing data to back these claims up.

Secondly, it is important to note that the same parties cultivating and advancing all of these claims also freely admit that Proposition 58 does, without question, protect the adult children of parents transferring property to them, from steep tax increases on inherited property. Just as Proposition 13 does, in fact, protect homeowners from egregious property tax increases year in, year out.

Thirdly, and this is where the bottom line issue emerges – this “whisper campaign” is quite possibly driven by anxiety and panic experienced by seasoned realtors and brokers that are looking to preserve their golden market, which may be experiencing modest shrinkage right now. A market that is not decreasing based on a few thousand home transfers, but that is experiencing modest shrinkage due mainly to the fact that (regardless of what Cable & Network TV News repeatedly tells us) – the job based economy in the US is not in fact booming, as they would have us believe…

Our job based economy is in itself decreasing slightly, in manufacturing, in electronics and computer sales, in auto sales, and within various other formerly active verticals where white collar and high tech jobs are tightening, not expanding. So therefore fewer white collar folks with disposable income are putting their old home on the market and immediately purchasing a 7-figure home the first chance they get; and instead may simply stay where they are, or possibly even down-size, which many middle class and even upper middle class seniors in their early to late 60s are doing these days, and have been for some time.

So instead of blaming Proposition 58 for the fact that homeowners in California are holding onto their old home for a longer period of time rather than putting their house on the market after 9 or 10 years – folks in the media advancing these theories perhaps should take a closer look at the fact the white collar and upper middle class folks who typically drive or spike the California real estate market, are these days waiting a lot longer in order to feel comfortable enough to put their modest home on the market, and actually plunk down a $75,000 or $100,000 cash down-payment towards a new home purchase in a very nice area, where realtors are struggling to sell $800,000, $1.5M or $2M properties in upscale neighborhoods.

As someone once said, “It’s the economy stupid!” It’s the overall job based economy, not Proposition 58, causing a slow-down, or soon to cause any decrease, in real estate sales throughout the state of California.