Prop. 19 Could Be a Huge Tax Increase for Middle Class Californians Inheriting Homes


Property taxes are a hot issue on the ballot in California this November.  Most of the attention has centered around Prop. 15, which would impose a split roll property tax scheme in the state.

Garnering less attention is Prop. 19, which has the potential to have a much bigger negative financial impact for many more Californians.

Millions in TV ads are promoting the fact that Prop. 19, as the state voter information guide notes, “permits homeowners who are over 55, severely disabled, or whose homes were destroyed by wildfire or disaster” to transfer their residence’s property tax base value protected by Prop. 13 to a replacement home anywhere in the state, and of any value.  Other ads champion the fact that most of the revenue generated by Prop. 19’s tax changes would go for fire protection services.

Sounds good, right?

A closer look suggests Prop. 19 would be a terrible deal for Californians who are hoping to keep a home, farm, or property that has been in their family for generations.

Right now, according to the nonpartisan Legislative Analyst, voter-approved state law allows “properties to pass between parents and children without an increase in their property tax bill.”  Prop. 19 would change this in two ways.  First, it would require that the property be used “as a primary home by the child or grandchild” and would also apply the rules to farms.  If you don’t live in the home you inherit, the property would be reassessed to reflect the current market value.

Second, it would require property tax bills to increase if the amount the home or farm could be sold for exceeds the taxable value by more than $1 million.

Proponents say that it “closes unfair tax loopholes used by East Coast investors, celebrities, and wealthy trust fund heirs on vacation homes and rentals.”  Nothing could be further from the truth.  In fact, Prop. 19 could hit many people in the middle class hard, especially those whose parents are currently living in homes that were affordable many years ago.

Opponents, including Howard Jarvis Taxpayers Association President Jon Coupal, Republican State Sen. Patricia Bates and Democratic Assemblyman Ken Cooley, note in their ballot argument that, “children could be forced by higher taxes to sell their family’s property, such as a small business that has provided the family with financial security, and their longtime family home, if they can’t move into it fast enough.”

I’m sure that many in my generation whose parents are in their 70s or 80s, and who bought once affordable, middle class homes many years ago in the Bay Area, or greater Los Angeles area, would face this expensive tax sticker shock. The nonpartisan Legislative Analyst estimates that Prop. 19 could result in a tax increase of several hundred million dollars per year.

Take my parents’ home, for example.  They bought their home in Santa Clara in 1978 for $81,000.  It’s a 1500-square foot, 3 bedroom, standard family home.  The Kardashians do not live next door, nor do the Rockefellers live across the street.

Due to California’s politician-created housing crisis, that home today is worth up to $1.57 million on the real estate market, according to Zillow.  If Prop. 19 passes, my brother and I could face a huge tax bill after my parents pass away – regardless of whether I or my brother choose to live in the house.  And we’d be facing a huge tax bill even though we’re not named Steyer, nor are we out-of-state investors.

It’s not a loophole for parents and grandparents to want to pass down a family home to the next generation and ensure their loved ones have a nest egg or a place to live.  And it would be the height of unfairness to impose yet another tax.

After all, they’ve already paid tens of thousands in taxes over the course of their lifetimes on the income needed to buy the house and pay the mortgage, and the property taxes to remain there.  But that’s not enough for some in Sacramento who never cease trying to find new ways to shake down more from overtaxed Californians.

Tim Anaya is the Pacific Research Institute’s senior director of communications and the Sacramento office.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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