Part Two: Your Source for Timely, Accurate News and Info on Trusts & Estates, for California Proposition 13 & Proposition 58

Proposition 58 Property Tax Transfer

Proposition 58 Property Tax Transfer

Let’s take a quick look at the actual state tax data in the great state of California…  Overall revenue going to local government entities from property taxes throughout California was nearly $5.0 billion in 1978 to 1979… and by 2010 to 2011 real estate tax revenue was at $49 billion per year! An increase that is two and a half times the rate of inflation over the same period, furnishing California local government entities with a very robust stream of real property tax revenue.

On the human side, away from the economics of the issue, folks in California, prior to Proposition 13, before 1978, were seeing elderly neighbors, friends and senior relatives, inheriting property taxes in CA… being forced from their homes as egregious real property tax increases spiraled out of control — and in some areas literally doubled from one year to the next — as older friends and beloved elderly relatives living right next door on fixed incomes, could not meet these unfair tax increases and were cruelly pushed out of homes they had been living in, and raised families in, for over 40 years. neighbors were being forced from their homes.

After Proposition 13 was voted into law, Californians saw right away the benefits of a tax system that would limit annual tax increases to 1% to 2% max, and began to provided a stable system for everyone in California – from government agencies that depend on property taxes, to people like seniors and other various middle class home owners… turning what had become a dreaded system of out of control real property taxes – into a fair, predictable tax system year to year – no longer a financial nightmare for those who happened not to be wealthy, living on modest or fixed incomes.

And of course in 1986 Proposition 58 was passed in California, making Proposition 13 all the more critical and invaluable…  smoothing out property transfer from parent to child into a formal transaction; middle class people  inheriting property taxes in CA now had the ability to avoid property tax reassessment at present-day rates, with the right to keep parents property taxes intact. Naturally, this was a major advancement for Californians, in terms of tax relief.  Not only for residential and commercial property owners – but for renters all across the state as well, since rents remained reasonable as long as landlords were not besieged by increased property taxes.

Nonetheless, those opposing this most popular tax solution called Prop 13 by Californians, still continue dragging the same old tired arguments through the gutters and broken down political avenues used by real estate executives, politicians and newspaper editors to put forth their old, discredited arguments in Op-Eds and widely debunked opinions in Editorials, in the few newspapers that will allow them the space to air out their opinions — despite the fact that everyone knows most Californians favor Proposition 13 & 58.  The critics are tone deaf.

We present these issues objectively in this go-to free resource blog for people interested in Proposition 13 and Proposition 58 property transfers…. For those keenly interested in learning more about how to avoid property tax reassessment, and how to keep parents’ 1% to 2% property tax limits safely in place in California, out of the reach of irrational opponents…

For those of us who want to know more about parent to child transfer and parent to child exclusion; about trust distribution loans, avoiding property tax reassessment, proposition 13 transfer, how to keep parents property taxes… and how to effectively transfer parents property taxes. And for property owners who wish to educate themselves further on the subject of inheriting property taxes, property tax transfer, real property tax transfer or real estate tax transfer.

If these interests, and additionally related topics, describe you – then you’re in the right place. We welcome your opinions and comments, and we’ll add your text comments or audio/video commentary, if you have something new, valuable, or unique to add to the discourse here.

PART TWO: California Proposition 58 and Loans to Trusts ~ Featuring Noted Trust Loan Expert Tanis Alonso from Commercial Loan Corp.

Loans to Irrevocable Trusts for Proposition 58

California Loans to Irrevocable Trusts for Proposition 58 Property Tax Transfers

Our Interview with noted Commercial Loan Corp. Trust Loan and Proposition 58 specialist Tanis Alonso continues…

Property Tax Transfer:  Tanis, let me ask you…  Beneficiaries that call your company, desperate to keep parents property taxes;  for any solution to their property transfer / Proposition 58 issue – is it a safe bet to assume that 99% of the time there are elements that come up again and again?

Tanis Alonso (Commercial Loan Corporation): Well, that’s true, to a point. With beneficiaries that call us, with a trust or estate situation, there is always real property being inherited, going to one or several beneficiaries… and little, if any, cash – and each family always has different dynamics. There are always differences, as regards the people and details involved. But, the one constant you can be sure of is that there is always someone who wants to sell… and always someone who wants to keep the property they are inheriting… dead set against selling.

Property Tax Transfer: And at the end of the tunnel, is it safe to assume that with your company it’s generally a win-win equation, for everyone involved. Everyone involved, more or less, get what they want, right?

Tanis Alonso (Commercial Loan Corporation): That’s right.  99% of the time. The beneficiary, or beneficiaries, that want cash from the sale of the property that they’re inheriting, get the cash they were looking for, from the trust loan…

Property Tax Transfer: And the beneficiary or beneficiaries that want to keep the house, get to keep that house, and keep parents property taxes…

Tanis Alonso (Commercial Loan Corporation): Yes! And let me say that, typically, this is a really, really big win for them – as the siblings that wanted to sell are usually very vocal, and very aggressive about their desire to do so! That beneficiary that wants to keep that property, that is also able to get the other siblings a large amount of cash for their shares in the inherited real estate – while still being able to keep the home they’re so attached to, and keep parents property taxes; keeping parents property tax rate.  This would be practically impossible, were it not for our trust loan. And there’s your win-win equation!

Property Tax Transfer: And what about the cost factor? Costs involved in the equation… How does everyone benefit on that level, getting cash to the beneficiaries that wanted cash from a house sale? Versus coming up with property buyout cash themselves…
       
Tanis Alonso (Commercial Loan Corporation): OK, so cost involved, selling versus keeping inherited property. I’ll try to keep the equation simple. Costs associated with this property funding process through a trust loan, paying for everything, including beneficiary property shares buyout, taxes, etc. is, on average, 3.5% – So by someone keeping the family property everyone will receive more money than if they were to sell the property at approximately 6.5% in costs. The average trust receives $45,716 more to distribute than if they were to sell the property to some random buyer.  Each beneficiary on average is receiving $16,652 more by someone keeping the property, instead of selling it. And our average annual tax savings is $6,043. We have already saved a combined amount just shy of 1 million dollars for our clients on property taxes. That is a significant benefit for all beneficiaries when someone keeps the property instead of selling it! 

PropertyTax Transfer: So you’re saying those savings would have been completely lost, per beneficiary, if they had sold out to a regular buyer…

Tanis Alonso (Commercial Loan Corporation): That’s right. For example, say it’s you and your sister.  A major conflict. You want to keep the house you’re all inheriting from your parents, plus keep parents property taxes. Why should I let my sister sell? The solution there is because you are going to get more cash in your hands than if you were to sell the property! That’s the bottom line. A trust loan transaction takes 7-10 business days whereas selling will take a few months. Everyone receives more money, more rapidly, then if they were to sell the property on the open market. Everyone benefits from this… it’s win-win all the way around.

PropertyTaxTransfer: So you let your sister sell, so everyone wins – is what you’re saying.

Tanis Alonso: Of course! Let her sell, let her get her way – and you end up getting your way… you get what you wanted, to keep your house with everyone paid off and happy. No more conflict. On a $500,000 property – do you want to spend 6.5% to sell that property, with a realtor, or 3.5% through our trust loan, in keeping with the Proposition 58 tax system? Which number would you want to give away, 6.5% or 3.5%? 

Property Tax Transfer: Naturally. So the long range picture looks like increases in taxes as well, so that’s not as affordable either.

Tanis Alonso (Commercial Loan Corporation): Absolutely right. In certain cases a property tax reassessment can add an extra $700 to $1000 per month to your property taxes. That’s an extra $1,000 per month – not per year! Month after month. That is affordability vs not affordability to many. 

Property Tax Transfer: Going through the Proposition 58 tax system, with the trust loan paying everyone off…  What would property taxes look like going down that road?

Tanis Alonso (Commercial Loan Corporation): OK so the question is, “why do I need a trust loan to buy out beneficiaries who want to sell our inherited house?”  The answer is you can still keep the house you’re inheriting, and not spend any of your own money in the process.  The importance of the trust loan is that you can buy out your siblings and still keep parents property taxes. You keep 100% of the low Proposition 13 property tax base that was originally paid by your parents.  If you were to use your own money to buy out your siblings, the State Board of Equalization would see that as a sibling buying out a sibling – and that would definitely trigger a property tax reassessment. Naturally, the result of that would be higher taxes.  So you need the trust loan to buy out your siblings in order to take advantage of Proposition 58, and keep the low property tax base. 

Property Tax Transfer: Most people don’t have that kind of cash on hand nor do they want to use all of their cash for this just to buy out beneficiaries in an estate setting. Especially if the numbers go higher…

Tanis Alonso (Commercial Loan Corporation):  Beneficiaries who want to keep their inherited property still put a lot more money in their pocket, still save a lot more,  by not using their own funds…  by buying out beneficiaries that want to sell by going the trust loan route.  Staying within the discounted Proposition 13 tax base, being able to keep parents property taxes … taking advantage of the  Proposition 58 property tax system, or tax shelter.  Using this tax shelter  that we looked at before, if you recall – would be around $1,200 per year on a million dollar property.  Saving thousands of dollars annually on property taxes by taking advantage of Proposition 58; keeping their parents low property tax base. 

Property Tax Transfer: Yes, the difference in the numbers are stunning.

Tanis Alonso (Commercial Loan Corporation):  Yes it is.  So if you use your own money to buy out your siblings you will trigger a reassessment… if that was reassessed normally, without doing the property transfer and beneficiary payoff with our trust loan – you’d be looking at an $11,000 tax hit per year on the same million dollar property!  If reassessed at the current, present day, base rate – that tax hit goes up 10 times. A significant difference in cash back in your pocket after it’s all done and said. Trust loans are a huge benefit for all of these families and that’s how we’re able to really help people in a significant way.  

Property Tax Transfer: The amount of money saved really is remarkable.  And I can see that you genuinely enjoy helping your clients save a great deal of money with these trust loans. Making great use of the low Proposition 13 base rate, and the Proposition 58 property transfer tax shelter… The formula works!

Tanis Alonso: Absolutely. And helping people in this way is what it’s all about! That entire viewpoint is the basis for this whole company, from the top down – starting with the CEO, who is a truly terrific guy, who genuinely loves helping people, with money, memories, and time. And you can’t replace memories and time!

Property Tax Transfer:  You can’t replace memories and time… Very well put!  That is a concept to remember.

Tanis Alonso: It is so important to remember, when you truly care about what happens to the people you’re helping.

Property Tax Transfer: Very true.  Your clients are lucky to have you folks working for them.  Thanks so much for speaking with us today.

Tanis Alonso: Thank you.  It was a great pleasure chatting with you.

PART ONE: California Proposition 58 and Loans to Trusts – Featuring Noted Trust Loan Expert Tanis Alonso from Commercial Loan Corp.

Loans to Trusts for Proposition 58

Loans to Trusts for Proposition 58

We sat in with noted Proposition 58, trust loan expert – Tanis Alonso, at Commercial Loan Corporation in Southern California.  Tanis has a uniquely profound, global understanding of the entire trust loan process; and applies a very human, not simply financial, viewpoint to the process ~ as does the entire team at the cloanc.com organization; with a strong, genuine focus on “helping people” not simply implementing financial transactions…

Property Tax Transfer: Thank you so much for agreeing to chat with us about Proposition 58 and trust loans today…

Tanis Alonso: Of course. It’s my pleasure.

Property Tax Transfer: Great. Tanis, can we take a close look at how the basic trust loan process works in California, from your perspective, as a lender – and from the point of view of your average everyday beneficiary, many who need to keep parents property taxes…  Some who want to sell a property they are inheriting from their parents – and of course the other beneficiaries to a trust or estate that are determined to keep that home, and fight that sale. But first, who is your typical caller? Who in the estate or trust scenario tends to reach out to you first?

Tanis Alonso: Basically, whomever is trying to not sell the inherited property – is generally the initial caller to my office. It might be the trustee, frequently at odds with certain beneficiaries… Or very often it’s a family member, one of the beneficiary’s to the trust that doesn’t want to sell that home.

Property Tax Transfer: Got it. So, what does an average Proposition 58 property transfer and trust loan scenario in California look like, contributing to peace of mind for property owners? There must be similar scenarios, that reflect average  trust or estate outcomes all across the state.

Tanis Alonso: Absolutely. One of the most common scenarios we see, here at Commercial Loan Corp., are elderly parents, for example… who, sadly, pass away, leaving loved ones behind. So, let’s say there is an estate, or perhaps a trust, and there are three beneficiaries involved… And property is the only asset… Let’s say there are no cash accounts. And this is not uncommon these days.

Property Tax Transfer: Yes, we hear that it’s quite common to see a trust inheritance, or probate estate, where there is very little cash left at the end of the road…

Tanis Alonso: Exactly. Parents who pass away in their nineties let’s say, who basically have spent most of their cash assets that were in savings, or in stocks and bonds, and by the time they get into their mid or late nineties, those assets are mostly gone, cashed out or spent –

Property Tax Transfer: You mean, simply spent on living… no frills, no traveling around the world, staying in fancy hotels, eating out in 5-star restaurants…

Tanis Alonso: Oh no, nothing fancy… just simple day to day living. Food, rent, medical expenses – normal expenses that eat up plenty of cash.

Property Tax Transfer: Certainly. Medical expenses can eat up an entire estate… and leave a house, and that’s all that is left in so many trusts, in so many estates, left by decedents. At least it’s usually paid for.

Tanis Alonso: Yes, many older homes being inherited by beneficiaries in these scenarios are not carrying any debt. Which is fortunate. So let’s say in many of these middle class or even upper middle class families there is a house, maybe some land, and possibly a few valuables…

Property Tax Transfer: OK. So there isn’t much money left in many inheritances… So what do beneficiaries do? When do these conflicts we hear so much about begin, when a house is being inherited by several beneficiaries… some who wish to sell, and some who prefer to keep the property, and to keep parents property taxes?

Tanis Alonso: Well, here is a typical middle class inherited real estate scenario – let’s say, for example, there are three beneficiaries and no other assets being inherited except an older home. One beneficiary wants to keep the house, to keep parents property taxes; while the other two siblings prefer to get cash from an immediate house sale, probably through a nearby realtor. But – instead of selling to a buyer, here is where Proposition 58 and a trust loan comes into play, providing liquidity and compliance with the Proposition 58 tax system – furnishing the two siblings who prefer to sell, with enough cash liquidity as if they had sold their shares in the inherited property to a buyer…

Property Tax Transfer: So why not sell? Why the trust loan?

Tanis Alonso: Because with a loan to a trust there is the upside of less expense. Frequently, we’re talking about ten times less of an expense than would normally be involved in a house sale. Again, a process compensating beneficiaries through a trust loan, instead of a house sale or coming up with the cash yourself… versus a formal house sale through a realtor that would cost approximately ten times the amount to process the entire scenario, a house sale, with realtor commission and fees, taxes, ancillary costs, etc…

Property Tax Transfer: Paying off the beneficiaries who wanted the cash from a house sale in the first place, right?

Tanis Alonso: Exactly. And so the rest of the trust loan goes to pay for 100% of parents Proposition 13 tax base – and the Proposition 58 tax system makes it possible to transfer the property to the beneficiary or beneficiaries that did not want to sell – to keep parents property taxes at the low Proposition 13 tax rate – or involving Proposition 193 if it is real property,  not left by the parents, but by grandparents.  

Property Tax Transfer: You say ten times less on expenses versus paying for it yourself?

Tanis Alonso: Absolutely. It costs the families we help far less to get a trust loan from us, believe it or not, then it does if they were to dig into their own savings to complete the Proposition 58 property transfer process.

Property Tax Transfer: How does that translate in terms of real numbers?

Tanis Alonso:  Let’s say a property value is currently one million dollars and the current tax base is $1,200. If they were to get reassessed at current value that would be around $11,000 annually.  By someone keeping the property and obtaining a trust loan to properly buy out their siblings that allows the beneficiary that is keeping the property to keep parents property taxes, to retain 100% of the Proposition 13 tax base that was paid by their parents and keep that low property tax base of $1,200. This of course creates much greater affordability than if they were to improperly buy out their siblings and have that property reassessed. The loan to trust goes hand in hand with the Proposition 58 property tax transfer system, creating enough liquidity to equalize distributions, not sell, and allow a beneficiary to keep their parents property with their low property tax base. 

Property Tax Transfer: It sounds counter intuitive, doesn’t it.

Tanis Alonso: I know, it does sound counter intuitive – yet it’s true. All you have to do is run the numbers yourself, and you’ll see what I’m talking about. It’s a better way to be able to keep an inherited house in the family, and to keep parents property taxes, when there is a dispute going on that pits the beneficiary who wants to keep a house against the beneficiaries that want to sell that home. A home that a family has so many memories associated with; with such strong emotional attachments to. There are so many wonderful family memories that are attached to each home. And every home is unique and different in that sense, just as every family member is different and unique.

Property Tax Transfer: You mean emotional memories you can’t replace with cash, in fact you can’t buy for any amount of money.

Tanis Alonso: That’s right. Anyway, this process allows families to keep that home in the family. And that’s the most important point!

Property Tax Transfer: It is the crucial point.

Tanis Alonso: Absolutely. And as a person on the front lines for this firm, neither I or Commercial Loan Corp. view each trust loan scenario as simply a “financial transaction”. Nor do we see the home they’ve lived in for decades as just a “piece of real property”. To us, this a “piece of family history” in the making. And the process a family decision, not a “transaction”. We see our clients as real families that we’re helping, financially and emotionally, not just as clients signing a contract for a trust loan. For us it’s much more than that.

Property Tax Transfer: It’s very obvious that you really enjoy helping people… getting them money when they really need it – and saving them on the cost side in the bargain, with trust loans.

Tanis Alonso: Correct. We see them as real people that we’re able to help in a time of need. For us it’s so much more than cash and property – we don’t view it that way. We’re talking about family history here. Not just “another deal”.

Continued in Part Two…

Your Source for Timely, Accurate News and Information on Trusts & Estates, for California Proposition 13 and Prop 58

Proposition 58 Property Tax Transfer

Proposition 58 Property Tax Transfer

Most Californians favor Proposition 13 & 58. And it’s worth pointing out that California Proposition 13, also called The People’s Initiative to Limit Property Taxation, voted into law as an amendment of the Constitution of California – is, after 42 years, even more popular today as it was when Californians voted it into law on June 6, 1978. (Interestingly enough, the same date memorializing the Normandy landings, D-Day on June 6, back in 1944.)

As a matter of fact, CA Proposition 13 was championed early on, and driven successfully through numerous political  obstacles, by the famous Howard Jarvis Taxpayers Association… whose  courageous and inspired CEO, Mr. Jon Coupal, took over the Chief Executive reigns in 1999, and is largely responsible for leading the charge for accelerated property tax relief in California… right up to the present.

With financial analysts now telling us that Proposition 13 has saved California taxpayers over $528 billion saving the average middle class California family more than $60,000 to-date… and counting – it’s no wonder at all that most Californians favor Proposition 13 & 58!  In fact, as Mr. Coupal and his Taxpayers Association tells us, Prop 13 has made everyone’s property tax in California more reasonable.  Click here to learn more more…

Yet even though a majority of home owners in California still support Proposition 13, and Proposition 58 – which has, since 1986, enabled home owners to transfer real property from parent to child, and vice versa, without beneficiaries being reassessed for present day tax rate increases, discussed here, in various posts, within this blog. Or, click here for more info and Q & A on Proposition 58 (and 193)… there is still a stubborn minority that opposes it… such as special interest politicos in the pocket of certain powerful people in the real estate business or public employee union bosses, some independent realtors, several ill-informed academics, and a few mainstream newspapers like the SF Chronicle and LA Times with an interest in big-bucks real estate advertising.

Generally, the opponents of Proposition 13, and Proposition 58 home transfers avoiding property tax reassessment… typically are after more cash from tax payers in California, especially some folks in the real estate business, and are still laboring under the long-held, dragged through the mud misconception that there would be more cash coming into the real estate business, and into state coffers, were it not for the lack of present-day real property value reassessment associated with Proposition 13 and Prop 58… directly affecting California tax revenue. Even though accurate data shows us that the California state government benefits from Proposition 13 just as much as tax-paying homeowners do from the lack of tax reassessment, allowing them to never pay more than a 2% increase in property taxes.

Let’s take a quick look at the actual state tax data. Overall revenue going to local government entities from property taxes throughout California was nearly $5.0 billion in 1978 to 1979… and by 2010 to 2011 real estate tax revenue was at $49 billion per year! An increase that is two and a half times the rate of inflation over the same period, furnishing California local government entities with a very robust stream of real property tax revenue.

On the human side, away from the economics of the issue, folks in California, prior to Proposition 13, before 1978, were seeing elderly neighbors, friends and senior relatives, being forced from their homes as egregious real property tax increases spiraled out of control — and in some areas literally doubled from one year to the next — as older friends and beloved elderly relatives living right next door on fixed incomes, could not meet these unfair tax increases and were cruelly pushed out of homes they had been living in, and raised families in, for over 40 years. neighbors were being forced from their homes.

After Proposition 13 was voted into law, Californians saw right away the benefits of a tax system that would limit annual tax increases to 1% to 2% max, and began to provided a stable system for everyone in California – from government agencies that depend on property taxes, to people like seniors and other various middle class home owners… turning what had become a dreaded system of out of control real property taxes – into a fair, predictable tax system year to year – no longer a financial nightmare for those who happened not to be wealthy, living on modest or fixed incomes.

Nonetheless, those opposing this most popular tax solution called Prop 13 by Californians, still continue dragging the same old tired arguments through the gutters and broken down political avenues used by real estate executives, politicians and newspaper editors to put forth their old, discredited arguments in Op-Eds and widely debunked opinions in Editorials, in the few newspapers that will allow them the space to air out their opinions — despite the fact that everyone knows most Californians favor Proposition 13 & 58.  The critics are tone deaf.

We present these issues objectively in this go-to free resource blog for people interested in Proposition 13 and Proposition 58 property transfers…. For those keenly interested in learning more about how to avoid property tax reassessment, and how to keep parents’ 1% to 2% property tax limits safely in place in California, out of the reach of irrational opponents… For those of us who want to know more about parent to child transfer and parent to child exclusion; about trust distribution loans, avoiding property tax reassessment, proposition 13 transfer, and how to keep parents property taxes and how to effectively transfer parents property taxes. And for those home owners who wish to educate themselves further on the subject of inheriting property taxes, property tax transfer, real property tax transfer or real estate tax transfer.

If these interests, and additionally related topics, describe you – then you’re in the right place. We welcome your opinions and comments, and we’ll add your text comments or audio/video commentary, if you have something new, valuable, or unique to add to the discourse here.

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

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.

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

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…)

Part Six: Why California Proposition 13 and Proposition 58 Important to Californians with Different Incomes, Backgrounds and Property Values

California Proposition 13 and Proposition 58

California Proposition 13 and Proposition 58

Everyone would like life to be forever smooth sailing… Especially in California, where the sun is typically shining most of the time, with most Californians looking to be positive and to have something to smile about every day.  However… life is not always smooth sailing, and even if the sun is shining – and California residents once again have something to worry about… sort of.  The latest political move against Proposition 13, the mega-popular tax shelter that makes avoiding property tax reassessment in CA legal for home owners and businesses,  and prevents taxation over 2% of property value – is called the “split-roll property tax initiative”, and will, if passed, remove this property tax relief from business properties.

Most likely, if the “split-roll tax” succeeds, Proposition 58 and Proposition 193 will also be under fire – i.e., threatening a popular initiative that insures home owners’ ability to keep parents property taxes upon property tax transfer, affecting parent to child transfer of a home and/or land; when inheriting property, and inheriting property taxes. It would also dilute or destroy home owners’ much cherished ability to get access to fast funds through loans to trusts, from a reliable trust lender.

This so-called “Split-Roll Measure” would, if it passes into law, destroy most Proposition 13’s tax shelter protections, such as avoiding property tax reassessment in CA, for commercial properties and industrial facilities across the state… and would raise theses business property taxes by billions annually.

Businesses would be more or less forced, by economic necessity, to pass on these increased costs to California residents. This business and industrial property tax hike would affect all of us in California. It would unfortunately increase prices incrementally on all the items we purchase day to day – i.e., gas, office supplies, groceries, alcohol,  monthly utilities, and healthcare costs.

Regrettably, these anti-Proposition 13 special interest groups are so razor-focused on eliminating Proposition 13, that they will even maintain a very badly written amateurish tax measure on the ballot as backup; in the event they fail to pass their new primary tax initiative. It’s pretty clear that all these tunnel-vision opponents to Prop 13 pushing this so-called split-roll tax measure aren’t one little bit worried about what will help regular Californians! They are apparently fixed on raising property taxes no matter what – beginning with commercial and industrial property taxes increases… flawed measures and all. And from that point, we can only make an educated guess at what their next moves will be… with respect to residential property tax hikes.

And so a new, this time different, anxiety has begun to emerge and grow… affecting large numbers of residential and business property owners, as well as renters, in the great state of California. Home owners, business property owners, industrial facilities, and even renters – are frightened, and not unreasonably so, that once this door has been opened, so to speak… to remove Proposition 13 tax relief protection from commercial and business properties – home owners are very likely next. And it wouldn’t be unreasonable or unrealistic to assume this would happen right away, if this measure passes.

Many movers and shakers in California believe this would be a likely scenario, if split-roll passes… with California property tax payers sliding down the proverbial “slippery slope” back to the bad old days before avoiding property tax reassessment in CA was possible, for a home owner or a business; before Proposition 13 property tax transfer tax relief allowed home owners to keep parents property taxes and actually transfer parents’ property taxes over to themselves, thereby avoiding property tax reassessment associated with inheriting property taxes.

Californians who are frightened of this slipper slope scenario are typically going on the assumption that once you open the door to a counter-effort, to weaken Proposition 13 protections for businesses… how are regular middle class California residents going to stop the new anti-Proposition 13 juggernaut from continuing on in the same direction, until the ability to avoid property tax reassessment has been watered down, and watered down… until you’re right back where you started.

Hence, the vocal and very motivated effort all across California to stop new measures like this, designed to destroy Proposition 13. And it looks like this type of battle will continue to be waged in this state until theses rabid, obsessive opponents to Proposition 13, and Proposition 58 and 193 either “see the light” on this issue – or are stamped out once and for all, with iron clad long-term statutes that lock down these property tax protections, and other protections for Californians as well within the Prop 13 initiative… that stretches 50 years out into the future. With no loopholes these opponents can grab onto, to water anything down.

If this new split-roll measure is defeated, Proposition 13 will need to be re-established as rock solid and rock steady, for the next 50 years, before these rabid critics will simple throw up their hands and “give up the ghost”.

Part Five: Why is Proposition 13 so Important to so Many Californians with Different Incomes & Property Values?

California Proposition 13

California Proposition 13

It was a decisive majority that voted in California Proposition 13 on June 6, 1978. The joy and relief sweeping through the state, they say, was palpable. You could cut it with a knife. The anxiety over property tax instability and arbitrarily increasing financial demands on property owners had reached a genuine tipping point by that time, and voters knew that a change was needed, and on the horizon. Instability and anxiety was about to be replaced with the ability to avoid property tax reassessment in California… and a host of other tax relief benefits.

With Howard Jarvis and his mega-motivated colleagues leading the charge, this modern day tax revolt was one of the very few in American history that wasn’t a thinly disguised “tax cut” for top conglomerates and the wealthiest Americans, falsely entitled “tax reform”. It was a genuinely revolutionary “tax reform” initiative, passed by nearly 66% of the voting public in California. Beneficiaries and heirs inheriting land and homes, and naturally inheriting property taxes, were now able to keep parents’ property taxes and avoid property tax reassessment in California.  Parent to child transfer of a house and/or land had become legal parent to child exclusion from present day property value assessment, or property tax reassessment. And the numbers added up for home owners all across California.

Both businesses and residents were pleased with the money they would be saving every year. Naturally, the wealthier the property owner the larger the savings by having the ability to avoid property tax reassessment every year, year in, year out. And most likely the stark difference between the savings experienced by families in the six-figure range, for example, and families with homes in the seven-figure range, started the ball rolling on the conspiracy theory that Proposition 13 was all about savings for the rich, and no one else.

Naturally this was, and is, a misrepresentation of the benefits all Californians enjoy from Proposition 13, and Proposition 58, tax relief.  Certainly, the wealthy were saving more, in aggregate numbers, however 2% maximum tax rate forced property taxes become predictable, and manageable, for all Californians who owned their own home. The numbers affected by property tax transfer are simply relative. The rich pay more and save more, while the middle class pays less and therefore saves a little less.

Bringing us all the way up into the present, there in now a new threat to Proposition 13, egged on by the same critics that have been spouting false conspiracy theories and rumor campaigns since Prop 13 passed in 1978, and other special interest groups. It is called a “split-roll” property tax initiative, backed by some of the most powerful public employee unions in California, including Service Employees International Union, the California Teachers Assn. and the California Federation of Teachers. And it is now threatening to limit, and destroy, various tax relief benefits for a variety of business owners.

This 2020 ballot initiative has a misleading name, which supporters and critics of Prop 13 call “The California Schools and Local Communities Funding Act of 2020” Better known as the “split-roll tax initiative”, this plan would reassess and wage a tax hike war on all commercial and industrial properties – including retail stores, manufacturing plants, and popular malls all over the state. This so-called split-roll property tax measure would also remove Proposition 13 benefits protecting farmers, and return to the hated, dreaded yearly present-day tax reassessments measured by present-day market value – targeting all agriculture-related facilities.

Supporters of Proposition 13, Proposition 58, involving parent to child property transfer; and Proposition 193, supporting grandparent to grandchild property transfer… are afraid that this new “split-roll” ballot measure is likely to open the door to unwanted special interest backed tax hikes… and create a rather negative slippery slope affect. In other words, people are frightened that once you open the bottle, you can‘t put the genie back in again!  And that all the folks who want property taxes to return to the bad old days will have a foothold again. This is what nearly ¾ of the state does not want.

Most people are hoping the majority of the state will remember the bad old days before the 1978 ballot initiative to cap property tax increases for both residential and business properties began providing the public with a sense of security and consistency, insuring that property owners would not be literally taxed out of their homes and businesses ever again.  Proposition 13 has consistently provided middle class home owners in California, of all ages, with real tax relief. However, it is true  that before this initiative was passed, many elderly and senior Californians that were living on a fixed income were actually pushed out of their homes due to out of control property tax rate hikes. And most people in California are voicing their opinions telling their representatives that they never want to see this type of tragedy ever occurring again in their state.

Part Five: California Proposition 58, How to avoid property tax reassessment on an inherited home.

Bringing us up into the present, critics such as Assemblyman  David Chiu, of the San Francisco Assembly’s housing committee, continue to ignore how wildly popular avoiding property tax reassessment is in California… and  they are still repeating the same litany that is echoed by a thin minority throughout the state, insisting that, “The inheritance tax break has exacerbated [wealth] inequality and is symbolic of that inequality. The idea of the American Dream of everyday people being able to make it is completely impacted when the haves get more, and the have-nots have no chance of benefiting from property investment windfalls.”

We hear this litany all the time… indicating that wealthy Californians are the only people in the state that benefit from the Prop 13 tax break, avoiding property tax reassessment.

This misinformation is, of course, nonsense…. twisting the truth to fit a certain point of view; which in itself is, essentially, untrue on the face of it. All those people Mr. Chiu is actually referring to are renters not owners… and yet – without knowing it he is actually making the point that needs to be made – that, bottom line, most landlords are able to save on property taxes, thanks to Prop 13, and in turn this allows them to keep rents low for renters. However, that’s the part of the equation that folks like Mr. Chiu forget!

And if indeed property owners, i.e., landlords, throughout California, did not have the Proposition 13 tax break, obviously they would be motivated to raise their rents. So, in fact, without knowing it, Mr. Chiu and others voicing the same opinions are surfacing the critical point that proponents of these tax shelters have been trying to make – since you could avoid property tax reassessment with Proposition 13, after it was passed overwhelmingly by nearly 66% by voters in 1978, and subsequently, in 1986, when the popular Proposition 58 parent to child transfer of property taxes passed, providing parent to child exclusion from property tax reassessment; plus Proposition 193, a constitutional amendment approved by voters on March 27, 1996, which allows grandparents to transfer property to grandchildren – with the ability to avoid property tax reassessment all on their own as grandparents and grandchildren.

The main point being, it’s not only property owners that are benefiting financially from Proposition 13 tax relief – we have also found Prop 13 and Proposition 58 benefits strengthening family bonding and overall net worth, providing an enormous blanket of peace of mind for home owners of all stripes, cultures, ages and incomes…. as well as those expecting to inherit CA property, or looking to become happy home owners. Moreover, renters are paying far less in rent, thanks to the property owners they pay rent to being able to continue avoiding property tax reassessment, and therefore spending less every year on property taxes that they would otherwise be passing on to their renters. Clearly, this savings trickles down from owner to renter for thousands of renters in California. Whether the David Chiu’s of this world care to admit it, or not.

Part Three: Why is Proposition 13 & Prop 58, Avoiding Property Tax Reassessment & Property Tax Transfer Relief, Attractive to so Many Californians?

There was so much instability within the real estate tax system in California before Proposition 13 and Proposition 58, that it had become downright dangerous and unhealthy – with severe anxiety spreading throughout the state, with home owners worrying constantly about losing their home, and with some people actually losing their beloved home. This was pre-1978, before Proposition 13 and Proposition 58 revised tax law so that Californians can keep parents property taxes.

Consider if this was you.  What do you do if state tax collectors put a lien on your home, or actually take your home? Your life spirals downward, you go and live with relatives, which is typically not an attractive direction to go in – or, worse, you become homeless… or reside in some other circumstances that are not to your liking.

This property tax relief called Proposition 13 finally brought a close to the chronic instability, fear and terrible yearly financial pressure on residential and commercial property owners throughout the state that was causing California property owners to literally buckle under. It was affecting peoples’ health… especially older folks – as severe stress tends to be more difficult to handle  as people grow older. The most obvious financial benefit Californians could see, and experience right away, was “property tax transfer” – that is, consistently eliminating property tax increases from present-value property tax reassessment.

All of a sudden, Californians had (and still have) a reliable and predictable system in place, serving them not the tax collectors. Californians finally had the ability to avoid present-day property   tax reassessment, directly after Proposition 13 was in effect. And   a decade later after Proposition 58 and Proposition 193 came on board, property owners had a tax shelter with Proposition 58 – protecting property transfers, for parent to child transfer, with parent to child exclusion of tax reassessment… as well as grandparent to grandchild exclusion  of tax reassessment from Proposition 193.  All of these tax benefits were suddenly in effect for all Californians – regardless of income, age or total property value.

As we all know,  with these remarkable changes in effect, Californians can keep parents property taxes, and can transfer parents property taxes when inheriting property of any type  (commercial or residential) or value – legally avoiding property tax reassessment… which is where all the trouble stemmed from in the first place.

As residents recall, you could actually see the relief in peoples’ faces, all over California, from Los Angeles up to San Francisco. Even renters, who don’t own property, noticed that their rents remained low – and can see the same difference now, 24 years later – due to Proposition 13 relieving landlords of tax increases that would otherwise motivate them to raise rents on their tenants.